Tuesday, 26 of September of 2017

Economics. Explained.  

Lots of Jobs — And Most Are Good

August 25, 2017

The economic pessimists grudgingly admit that the economy has produced a significant number of jobs thus far in the expansion, although at a slower pace than in other business cycles.  However they also claim that they are not “good” jobs.  They are part-time jobs rather than full-time positions.  They are low-paying jobs in the leisure and hospitality industry or in retail trade rather than higher paying positions.  Our sense is that these claims are grossly misleading.  The labor market is healthy, a steady stream of new jobs is being created each month with no end in sight.  They are all full-time positions.  And jobs being created in low paying industries are only a small part of overall job growth.

Since the expansion began in July 2009 the economy has produced 15.6 million new jobs.  That works out to 1.95 million jobs per year or 162 thousand jobs per month.  Yes, that is a slower pace than in other business cycles.  However, with the unemployment rate at a 17-year low of 4.3% it is hard to argue that the economy has not been creating enough jobs.

The current expansion has continued for eight years and one month – 97 months – which makes it the third longest expansion on record.  Remarkably, the economy has created jobs every single month since September 2010.  So while job creation has been relatively slow, it has been extremely steady.

A while back the boo-birds suggested that the jobs being created were part-time positions or temps.  That is simply not the case.  They are full-time positions.  Of the 15.6 million jobs created since the expansion virtually all are full time jobs.  Less than 0.1 million jobs are part time.

Aren’t most of those jobs “low-paying”?  No.   First, let’s define what jobs should be counted as “low-paying”.  In July average hourly earnings were $26.36 with hourly wages ranging from a low of $14.43 per hour to a high of $39.13.  For purposes of this discussion we categorized low-paying jobs as ones which pay less than $20.00 per hour.  High-paying jobs are ones where hourly earnings are in excess of $30.00 per hour.

When economists talk about low-paying positions (less than $20 per hour) the categories that typically come to mind are ones in the leisure and hospitality industry ($15.46) and ones in retail trade ($18.14).  But there are other types of jobs in this category – for example, janitorial services ($14.43), security guards ($17.21), landscaping ($18.64) and office clerks ($19.79).  Of 146.6 million total jobs, 43.4 million or 30% can be categorized as low-paying.

High paying jobs (in excess of $30 per hour) include utility workers ($39.13), information industry ($38.44), financial ($33.09), mining ($33.08), and the very broad “professional and business services” category $31.63).  Included in this latter category are legal services, tax preparation, accounting, architectural firms, engineering, computer system design, management, scientific research, advertising, supervisors, and operations managers.  There are 21.6 million “high-paying” jobs in the economy which represents 15% of the total.

Everything else falls into the $20-30 per hour range which we categorize as “middle-paying” jobs.  There are 81.6 million jobs in this category or 55% of the total.  So while the discussion seems to focus on whether jobs are low- or high-paying in nature, the bulk of the jobs in our economy are in the $20-30 per hour, middle category.  Remember, average hourly earnings are currently $26.36.

But what about job growth since the recession began.  Which categories have produced the largest number of new jobs?  As noted earlier the economy has generated 15.6 million new jobs since the expansion began in July 2009.  Of those, 6.8 million or 44% are low-paying positions, 6.5 million or 41% are medium paying jobs, and the remaining 2.3 million or 15% are high paying occupations.  So while a significant number of low paying positions have been created in the past eight years, two-thirds of the hiring (41% plus 15%) has been done for medium- and high-paying positions.

 

It would be nice to create more high-paying jobs.  But those jobs typically require some sort of advanced degree or a specific skill to attain – which is why they are high-paying jobs in the first place.  Certainly the economy is moving in the direction of providing the requisite education.  Technical colleges are working closely with employers to train workers with exactly the skillset that they need.  Here in the Charleston area we see Trident Tech working with Boeing, Bosch, Mercedes and Volvo on just such programs.

Apprenticeship programs are becoming increasingly available.  Typically, high school kids go to school four days a work and work at an employer such as the ones above the other day of the week to learn exactly what they need to know.  Once they graduate from high school there is a good, high-paying job awaiting them.  Employers might also want to think about in-house apprenticeship programs for workers who have been out of a job for a long period of time.  Educating workers is a lengthy process but the nation as a whole is responding quickly.

The point of all this is that the economy is not just cranking out a large number of “low-paying” positions.  Two-thirds of all jobs created since the recession ended are in the middle and high paying categories.  It is an egregious distortion of the facts to suggest otherwise.

Stephen Slifer

NumberNomics

Charleston, S.C.


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