Guess what? This isn’t a low-wage job recovery. Listen to the media, and you might think that the only kind of jobs being created are in fast-food restaurants and retail chains. It turns out that this is wildly misleading and that the economy’s employment profile — the split between high- and low-paying jobs — hasn’t changed much since the recession or, indeed, the turn of the century.
Put differently, the share of high-wage jobs is just below one-third of all employment, roughly where it was in 2000 and 2007 — the last year before the financial crisis. Similarly, the share of low-paying jobs is about one-quarter of the total, not much different from 2000 and 2007.
The figures come from Elise Gould of the Economic Policy Institute (EPI), a left-leaning research and advocacy group. At my request, she examined whether the recession has shifted the economy’s job distribution.
To do this, she divided businesses into three groups by their pay. Today’s average hourly pay is $25. Low-paying employment is dominated by restaurant and hotel jobs (2015 average hourly rate: $14.12) and retail jobs ($17.21). Midlevel jobs include manufacturing ($23.90), health care and education ($24.97) and construction ($26.91). Finally, high-paying jobs included professional and business services ($29.59), finance ($31.10) and utilities ($36.02).
The table below highlights her results. It shows how jobs were distributed in 2000, 2007 — again, the economy’s pre-financial crisis peak — and in 2015.
Source: Economic Policy Institute
It’s striking how little has changed. There’s been a small and gradual increase in low-paying jobs and a parallel loss of midlevel jobs. Both trends preceded the recession and have continued. Gould characterizes these shifts as “very slight.”
Some economists contend that weak overall wage growth (about 2 percent annually) reflects a large influx of poorly paid workers whose low wages drag down the average. To Gould, the stable low-wage share contradicts that. “The weakness in wage growth is not driven by the mix of jobs being created but rather by labor market slack,” she notes. This justifies, she argues, continued expansionary policies to add jobs and intensify pressure for higher wages.
It’s also true that what constitutes “low pay” depends on how it’s defined. I put similar questions to economist Mark Zandi of Moody’s Analytics. His low-paid sector includes industries with average annual wages up to $42,000, which is about $20 an hour. By this measure, low-wage jobs represent about two-fifths of the total — compared with EPI’s one-quarter — and the increase in low-wage jobs has been somewhat greater. Still, the overall pattern is similar: The distribution of jobs by wage levels shifts slowly.
This gets overlooked. When the economy was regaining the jobs lost to the recession, restaurants were cited as a main job engine (true) and evidence that low-paying work dominated the recovery (less true). From February 2010, when the employment decline was greatest, to May of 2014, when all those jobs had been recovered, the “leisure and hospitality” sector added 1.67 million jobs, recouping almost one-fifth of all lost jobs, according to an analysis by the Bureau of Labor Statistics. But “educational and health services,” with higher wages, also added 1.67 million jobs and “professional and business services” (consultants, accountants, lawyers), with still higher wages, added 2.6 million.
The lesson: the low-wage job recovery is more myth than reality.
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