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Prevalence of Low-Wage Jobs Could Be Economy’s Next Problem
 

By Joseph Coombs  5/2/2014

The argument can be made that, in a period of heightened unemployment, any work is good work. But a new government report on the labor market shows a post-recession prevalence of low-wage, low-skill jobs, and it could present trouble in the future for the U.S. economy.

The U.S. Bureau of Labor Statistics’ (BLS) annual report on occupational employment and wages showed that most of the 10 biggest U.S. occupations are on the low end of the wage scale. The list includes the two largest professions in the labor force—retail salespersons and cashiers—as well as food prep workers, waiters and waitresses, and customer service representatives.

Of the top 10, only registered nurses, with an annual mean wage of $68,910, had an average wage above the U.S. all-occupations mean of $22.33 per hour, or $46,440 annually. The report also says that annual mean wages for the rest of the 10 largest occupations ranged from $18,880 for combined food preparation and serving workers to $34,000 for secretaries and administrative assistants (except those in the legal, medical and executive fields).

This is not a knock against low-wage jobs or an effort to marginalize the importance of those positions. But the BLS report echoes a recent trend of “growth on the edges” of the U.S. labor force and the gradual diminishing of middle-class jobs, which will reduce consumers’ overall spending power and weaken future economic growth.

This movement was already in place before the Great Recession of 2007-09, but the massive economic downturn exacerbated its progression, said Stephen Fuller, economist and director of the Center for Regional Analysis at George Mason University in Fairfax, Va.

Regarding job growth in the Washington, D.C., region, which, until lately, created tens of thousands of high-paying jobs in most years, even during the recession, Fuller said “Our top end stopped growing after 2012, the low end kept going and the middle just disappeared.”

Uneven job growth is occurring not only in highly populated metro areas like the nation’s capital. Recent data from the Oklahoma Employment Security Commission are “very similar” to that in the BLS report, said Monty Evans, a senior economist with the agency.

“The 10 largest occupations in Oklahoma accounted for more than 24 percent of total employment,” Evans said in an e-mail, “and most of these, with the exception of registered nurses and general and operations managers, were low-paying and didn’t require education of more than a high school diploma or less.”

Fuller said the private sector and higher education industry need to pay closer attention to reports like the BLS’s occupational and wage study. HR professionals have a role as well, and can serve as liaisons between businesses and the schools that provide training for in-demand jobs.

“There are significant educational and training implications with this, and it seems like nobody is talking about it,” Fuller said. “Two-thirds of these jobs [highlighted in the BLS report] don’t even require a college degree. There should be renewed focus on vocational education.”

Evans conceded there may not be a “solution” to this issue since there is clear demand for these positions in the labor market. But he added that the jobs must offer opportunities for future career growth to be of true benefit to the broader economy.

“It may not be a bad thing if there’s a chance of advancement through a career path,” he said. “As salespersons gain experience, training and seniority, they can move to positions of greater responsibility with higher potential earnings. Think of a cashier who could move to retail salesperson and then on to a first-line supervisor and on to sales manager.”

The recession, Fuller said, forced many companies to compensate for fewer employees.  Law firms, for example, learned to operate without as many associates, and other companies embraced technological upgrades to handle administrative functions.

“When things get tight, you learn to be efficient,” he said. “There are very few ‘backup workers’ any more, the ones in the $50,000-$60,000 salary range. Right now, there’s no reason for companies to fill the middle section. I think the middle has been lost for the next 10 or 15 years, or at least the foreseeable future. I’m not sure what’s going to bring it back.”

The plethora of low-paying jobs, meanwhile, has enormous long-term implications for the U.S. economy. The retail sector could see the biggest changes, Fuller said, as well as the housing market.

“When there’s not enough wealth accumulation to own a house, you rent,” Fuller said. “We’ll probably need more Ford Focus dealers rather than BMW dealers, as another example. This is a dynamic process, and I don’t see it being short-lived.”

Demographics are also at play, he said.

“What’s accelerating this trend is the growing percentage of departures from the workforce that are associated with retirements,” Fuller said. “Older workers won’t be replaced by old people. They’ll be replaced by young people at much lower salaries. We’re essentially skipping a generation, because Generation X is not as large. Here at our university, for example, we’re hiring assistant professors at half the salary of those who retired.”

One possible avenue for “middle workers,” Fuller said, is entrepreneurship. More people may shift into consulting roles or work as sole proprietors, which would lend itself well to a service-based economy.

“That may be the new middle America,” he said.

Joseph Coombs is a senior analyst for workforce trends at SHRM.

 
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