IE 11 is not supported. For an optimal experience visit our site on another browser.

Quality of new jobs a matter of debate

A political ad, and a furious counteroffensive by President Bush's reelection campaign, are crystallizing a burgeoning election-year debate over the quality of jobs being added to the nation's payrolls.
/ Source: a href="" linktype="External" resizable="true" status="true" scrollbars="true">The Washington Post</a

On television screens across Ohio this week, a dejected middle-aged worker will slip on a white paper cap and prepare to flip burgers as an announcer intones, "After a year, you finally land another job. And you wonder, is this what you worked your whole life for?"

The political ad, and a furious counteroffensive by President Bush's reelection campaign, are crystallizing a burgeoning election-year debate over the quality of jobs being added to the nation's payrolls. One key measure is wages.

MoveOn intends the humble burger flipper to play on worker anxiety about the loss of relatively high-paying jobs, forcing breadwinners to accept lower-wage service jobs.

The Bush administration says that is a misleading picture. Most of the jobs created last month were in industries that pay above-average wages, including health care, construction and financial services, the campaign says. "These are areas where people get paid well, and that has a big impact on kitchen-table issues," said Bush campaign spokesman Terry Holt.

The debate over job quality comes at a critical time. The Bush campaign is seeking to boost the president's approval ratings on the economy, while Democrats are trying to deny him the political benefits of the recent upturn in U.S. job creation.

Employers have added 1.2 million jobs this year, and average weekly earnings rose 0.3 percent in May and 2.5 percent in the 12 months that ended in May, seasonally adjusted, the Labor Department reported.

But Democrats say paychecks are failing to keep up with the cost of living. After adjusting for inflation, average weekly earnings fell 0.4 percent last month and 0.5 percent in the 12-month period.

"I believe we can do better than rising costs and shrinking incomes," Sen. John F. Kerry (Mass.), the likely Democratic presidential candidate, told an AFL-CIO convention last week.

Some economists also point to stagnant wages and eroding job quality as dark clouds looming over the economic recovery.

"Despite the well-advertised pick-up of job growth, recent trends in real wage income remain very disappointing," lamented Stephen S. Roach, chief economist at Morgan Stanley, in a June 7 memo to clients. "This, in my view, underscores one of the most serious shortcomings of this recovery -- an unprecedented shortfall of the most important piece of personal income growth," wages and salaries.

Battle of numbers
Over the first 29 months of the economic recovery, total wages and salaries have risen less than 3 percent after adjusting for inflation -- a fraction of the 9 percent gains of the previous six upturns, Roach said. That works out to a $280 billion income gap between where workers are and where they should be, he concluded.

CIBC World Markets, a Toronto-based investment banking firm, reached a similar conclusion in a report issued Monday. That study found that U.S. job creation since late 2001 has been concentrated in low-paying industries such as hospitality, education and personal services, while job losses have hit higher-wage sectors such as transportation, manufacturing, utilities and natural resources.

"The message is clear: The vast majority of the jobs that evaporated during the job-loss recovery were high-quality jobs," the CIBC study concluded.

The Bush campaign has countered with a different base for comparison. Average hourly earnings, adjusted for inflation, have risen 2.4 percent since Bush took office. But, the campaign adds, at this point in President Bill Clinton's first term, average hourly earnings had risen just 0.1 percent.

When benefits are included, total compensation rose 1.1 percent from December 2003 to March 2004, and is up more than 13 percent since Bush's inauguration, the campaign says. At this point in Clinton's first term, total compensation was up 10.5 percent.

Most important, campaign officials say, is that real disposable personal income -- the amount of money in people's pockets after taxes -- is up 10 percent since 2001, compared with a 7 percent increase under Clinton. That measure, which is adjusted for inflation, includes wages and salaries, rental income, interest and dividend payments and the proceeds from the president's tax cuts.

Neither side really knows much about the quality of the 1.2 million new jobs added this year because of the way the data are collected. While many more jobs were created in the service sector than at manufacturing firms, the Labor Department does not know whether a lost manufacturing job was a well-paid assembly line position or a minimum-wage janitor. Likewise, statisticians cannot be sure whether a new employee at McDonald's Corp. is flipping burgers or cutting deals in an air-conditioned office.

'Dirty little secret'
"The dirty little secret is that no one is really looking at the quality of new jobs created," said Lawrence F. Katz, a labor economist at Harvard University who has advised Kerry. "We don't know within these broad occupational categories what the new jobs actually are."

Federal Reserve Chairman Alan Greenspan made a similar point during a Capitol Hill hearing last week when he said that the recent wage gains appear to be spread broadly across industries, but the Fed does not know yet how the gains are distributed within industries. He repeated his concern about a growing earnings gap between highly educated skilled workers and those workers with less education and fewer skills.

The result, he said, has been that inflation-adjusted wages have been "flat to declining" for the lower half of income earners, and rising for the highest-paid quarter of the workforce.

"It's a problem caused basically by our skill mix not keeping up with the technology that our capital stock requires," the Republican Fed chairman said, calling it a structural problem "that can be and must be addressed, because I think that it's creating an increasing concentration of incomes in this country and, for a democratic society, that is not a very desirable thing to allow to happen."

Benjamin Tal, senior economist at CIBC World Markets, said that when the Labor Department's industry trends are compared with much finer occupational trends tracked by the Census Bureau, the pattern is clear: The average wage in industries that gained jobs over the past three years was 30 percent lower than the average wage in industries that lost jobs -- a sharp reversal from the previous five years.

Given the broader trends in the global labor market, that makes sense. Much of the political focus has been on the outsourcing of service and manufacturing jobs to low-wage countries, but the real issue is not the flow of jobs abroad but the impact of those labor markets at home, Tal said. The threat of labor competition in China and India is preventing workers in the United States from bargaining up wages, even as the economy begins growing in earnest.

"Job losses to globalization is the wrong focus," he said. "It really should be these deflationary forces."