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Good Are the New Jobs?

by Tim Kane, Ph.D.

Backgrounder #1773

June 30, 2004 | | |

Economic pessimists have changed their tune. After years of trumpeting a "jobless recovery," the skeptics are admitting that America is in the midst of a jobs boom, with 1.4 million new jobs over nine straight months of payroll growth. Now the pessimists insist that the new jobs are no good.

But if the jobs being created are not any good, what is? Since January 2001, American incomes have risen by 7.5 percent, wages have risen by 2.4 percent, and the government projects 21 million good job opportunities over the 2002-2012 decade.1

The charge that low-quality service jobs--often dubbed "McJobs"--are proliferating is inaccurate. The McJobs argument has two primary implications. The first is that wages are declining, and the second is that the new jobs are unfulfilling. Empirical data on American pay, incomes, and quality of life make the case that American jobs are better today and getting better every year.

Yet the real story is not in the spinning political duel over data, but in a much broader understanding of the new economy. Put simply, the modern workplace is empowering individuals to work for themselves, enjoy flexible hours, and pursue dreams rather than survival, all while shattering the traditional definitions of employment.

Highlights

Average real earnings for "production and nonsupervisory" workers are 2.4 percent higher today than in January 2001.

The vast majority of U.S. jobs are in service sectors (83.3 percent), and most future growth will be in the health, education, retail, and technology subsectors.

There will be zero growth in "burger-flipper jobs" relative to the overall labor force, according to U.S. Department of Labor projections for 2002-2012.

Argument #1: American Pay is Higher Today Than During the Dot-Com Boom

Multiple indicators show big pay gains in recent years. Real disposable income per capita is 7.5 percent higher than it was in January 2001. Annual real income per capita--a broader measure of quality of life--is up 5.2 percent ($1,819) in the United States over the same period. That is real money, after inflation, that would pay for an extra 900 gallons of gas for every American.

In May, average hourly earnings rose by 0.3 percent, but prices of consumer goods rose by even more, meaning that real earnings declined by 0.4 percent. This decline was driven mainly by the spike in gasoline prices, which is already fading.2

Real hourly earnings are up by 1.61 percent since March 2001, when the recession began; up 2.37 percent since President George W. Bush was inaugurated; and up 8.87 percent over the past 10 years. One advantage of earnings data is that they count only "production or nonsupervisory jobs," so they are not skewed by rich incomes, but the downside is that they are also limited to traditional payroll jobs since the source is the Current Employment Statistics (CES) survey.

The CES, commonly known as the payroll survey, completely neglects the increasing number of Americans who work for themselves and has also suffered from an illusion of joblessness in 2001-2003 due to declining job turnover. Indeed, the explanatory note accompanying the monthly "Real Earnings" reports notes that many factors "tend to result in weekly earnings averages significantly lower than corresponding numbers" partly caused by "turnover and layoffs." The point is that, regardless of which statistics--even non-inclusive CES figures--one uses, American jobs are higher-paying now than they were during the dot-com boom or, more technically, the pre-recession peak of the first quarter of 2001.

Argument #2: New Jobs Are Quality Jobs

The number of payroll jobs has increased for nine straight months according to the CES, especially in the service-providing sector. In May, service businesses paid 109.3 million--or 83.3 percent--of all 131.2 million paychecks, including millions of doctors, nurses, and teachers. What the payrolls ignore are the extra 7.55 million non-payroll American workers counted in the Census Bureau's monthly household survey. Should these non-payroll workers be considered underpaid or unsatisfied? Probably not. National polls routinely report that one of the most popular aspirations of Americans is to be their own boss.

It would also be an error to imagine that labor data are being interpreted along partisan lines. Thoughtful Democrats and Republicans agree that the emergence of a new workforce is a net positive, while protectionists of both parties dislike change. Daniel Pink, who once worked as Al Gore's speechwriter, is a good example of a thoughtful Democrat. Pink's book Free Agent Nation goes into great detail in discussing and celebrating self-employment and microbusinesses.

Pink argues that several factors, including improvements in information technology, are driving a "broad shift in power from the organization to the individual"3 in America. Data from the household survey of employment reflect this rapid change, even though the survey's vague definition of "self-employed" suggests that this number may be a significant underestimate.

"Do You Want Fries with That?"

A common joke about the future is that all our kids will be burger-flippers--a joke that plays on misinformed fears that most jobs in the service industry are low-skilled. Services include teachers, artists, athletes, and even cooks. Every economy in history is based on trade and consumption, with merchant retailers who operate the "invisible hand" of commerce. In modern America, they are sales staff in shopping malls, gourmet chefs, and Home Depot shelf stockers.

In 2002, there were almost 3 million "chefs, cooks, and food preparation workers" in the U.S. The spring 2004 Occupational Outlook Quarterly anticipates 12 percent growth in food-related work in the decade ahead. The real joke here is that 12 percent is exactly the projected growth rate of the overall labor force as well.4 That means there will be literally zero growth in "burger-flipper jobs" relative to the overall labor force.

Jobs in what some might call high-quality sectors are a different story. In management fields, the computer and information

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