We're Number One!? US Leads World in Employees Doing Low Wage Work

Let's be really specific. The US has the highest percentage of employees receiving less than two-thirds of the median wage for the work that they do.

In the grand scheme of economic cycles, some might claim that this means the US is becoming more competitive and that advantages will eventually accrue as a result of this. Others might argue that the costs of this degradation of the work force will have social and economic costs that could affect productivity, competence and commitment which could, in turn, provide a drag on future growth.

As the allied articles make clear, whatever may result in the future, it seems apparent that these forces have had an impact on the recession and the slow recovery that has followed. JL

Mark Thoma and Eileen Applebaum comment in Economist's Review:

Mark Thoma begins: I used this as part of a talk with Dean Baker about what caused the recession. I followed with what is likely to come next and how policymakers might help the economy in the short-run and long-run.

In his talk, Dean Baker argued it was the housing bubble that caused the recession, not the collapse of the financial sector -- he argues that if the financial crash had not occurred, we still would have had a severe recession. I agree that the housing bubble was the primary cause, but I also think the financial sector played a role in making things worse, e.g. through the unwinding of high, under-regulated leverage ratios. I talked about both short-run and long-run problems and what we might so about them. The graph above was part of a discussion of how we might improve things for labor (the graph is from Tim Taylor. The percentage of workers earning less than 2/3 of the median wage has increased from 22% in 1979 to 28% in 2009.]
Eileen Applebaum on low wage jobs and the economic recovery: Slower-than-expected employment growth in March 2012 has brought the halting pace of economic recovery into sharp focus again. Nearly three years since the recession officially ended in June of 2009, 12.7 million people are still out of work and unable to find a job—a figure that rises to 22.8 million if workers who have given up looking but still want to work and those employed part-time because of the poor economy are included. Demand for goods and services has been slow to recover—consumer spending has been hampered by a loss of housing wealth, continued high unemployment, and economic insecurity while government spending has been hamstrung by political infighting in Washington. The job growth that has occurred has been largely concentrated in very low wage occupations. Economic theory—and common sense—tells us that high unemployment will persist until demand picks up. Businesses are not going to increase the pace at which they hire workers until the pace of spending increases.

Despite the obvious employment gap that results from the shortfall in spending, some observers contend that it is a mismatch between the skills of unemployed workers and the skills employers require that is responsible for the continuing high unemployment. Many of the ills of the labor market have been attributed to a supposed hollowing out of the job distribution—to "job polarization." Indeed, the claim that middle-skill/middle-income jobs in the United States are disappearing while jobs at the top and bottom of the occupational ladder are growing has been put forward as the explanation for four decades of wage stagnation for men. Today, the claim that employers have good jobs but can't find workers with the right skills to fill them has gained currency in the popular press. Yet such an imbalance between supply and demand would cause wages to rise in those occupations, and no such increase in pay can be observed.

Now a new study attributes the jobless recoveries following recent recessions to such job polarization....