The unemployment rate is at a 50-year low. But that doesn’t mean that workers are thriving. According to a recent analysis from The Brookings Institution, over half of U.S. workers hold low-paying jobs.
Per the report: “…53 million Americans between the ages of 18 to 64—accounting for 44% of all workers—qualify as ‘low-wage.’ Their median hourly wages are $10.22, and median annual earnings are about $18,000.”
Further, the analysis says, over half of those low-wage workers seem likely to stay in low-paying jobs, based on their levels of education.
Unemployment versus low-paying jobs
Before digging into the topic of low-wage work and how it’s impacting the economy, it’s helpful to understand the state of the job market.
According to the latest data from the Department of Labor, the unemployment rate is currently 3.5%. To give some perspective on what that number means:
- The average unemployment rate in the U.S. (calculated using data for the years 1948 and 2019) is 5.73%. Today’s rate is markedly lower than that.
- The lowest recorded rate was 2.5% in May of 1953. The highest unemployment rate, recorded in November of 1982, was 10.8%.
- The current unemployment rate has been hovering at around 3.5% since the fall of 2019. It first hit the mark in September. It hadn’t been that low since 1969.
There are many ways to measure the strength of the economy. The unemployment rate matters, but it’s not the only critical factor. Pay has a big impact, too.
Per Martha Ross and Nicole Bateman at Brookings:
The data presented in this analysis highlight the scale of the issue: Nearly half of all workers earn wages that are not enough, on their own, to promote economic security. As policymakers and leaders of the private, social, and civic sectors seek to promote more inclusive economic growth, they need to keep these workers in mind.
The prevalence of low-wage work
Given the low unemployment rate, the prevalence of low-wage jobs might surprise you. Generally, you’d expect pay to rise as unemployment declines. It’s only logical that employers would want to sweeten the deal to attract talent in a tight job market. However, this doesn’t seem to be happening that way for many workers.
According to the Brookings analysis, approximately 53 million working Americans between the ages of 18 and 64 can be qualified as “low-wage” earners. They account for 44% of all workers. Their median hourly earning are $10.22. And, their median annual earnings fall at about $18,000.
This group is too large to be explained away by the fact that a percentage of workers are just starting their careers. Recent or current students don’t add up to 44% of the population. These aren’t just people who are working for extra spending money. Low-wage workers are primarily adults who work to support themselves and their families.
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Wage stagnation persists
Despite low unemployment, wage stagnation persists.
The PayScale Index, which tracks the changes in wages for employed workers in the U.S., shows that nominal wages increased 2.6% year-over-year for Q3 2019. However, real wages — the value of workers’ pay with inflation taken into account — have declined 9.8% since 2006. So, while workers may technically be earning slightly more than they did a decade and a half ago, their money doesn’t get them as far.
While wage stagnation remains a persistent problem for millions of U.S. workers, it’s not an issue for everyone. Those at the top have actually experienced powerful wage growth despite what’s been going on with low-wage workers’ earnings. CEO pay is rising much faster than worker salaries in recent years. And that only contributes to the economic disparity and the problem of wage stagnation itself.
Low-wage workers are economically vulnerable
Full-time employment doesn’t necessarily equal security. In fact, more than half of families earn less than the $66,465 median household income. It’s not easy to cover even basic survival needs with these kinds of wages. And, it’s nearly impossible to put anything into savings. As a result, 40% of Americans report that they would struggle to cover an unexpected $400 expense. This is the definition of economic vulnerability. In these circumstances, one unexpected illness, or car repair, as examples, can spell financial crisis.
These kinds of wages also make is terribly difficult to “train in new skills” — a frequently touted strategy for upward mobility that often tends to fall pretty flat in the real world. Plus, Ross and Bateman note that education alone won’t solve this problem:
Imagine that all working-age adults had bachelor’s degrees—the jobs paying low wages would not disappear, nor would wages automatically increase. Dani Rodrik and Charles Sabel capture the urgency and uncertainty of the current discourse on jobs and economic growth when they write, “’Where will the good jobs come from?’ is perhaps the defining question of our contemporary political economy.”
Where Low-Paying Jobs Concentrate
Not all regions of the U.S. are equal when it comes to job opportunities. Some areas offer more “good jobs” than others. However, the low-wage workforce is a part of every regional economy.
According to this report, low-wage earners make up the highest share of the working population in smaller cities in the southern and western parts of the United States. In Las Cruces, New Mexico and Jacksonville, North Carolina, for example, low-wage workers make up 62% of the workforce. The jobs in these areas are more concentrated in the industries of agriculture, real estate and hospitality than in other regions.
Ross and Bateman write:
No region wants an economy dominated by low-wage jobs. The economic development challenge in these places is clear (which is not to say it is easy): attract and grow more high-wage jobs by drawing new companies in and helping existing companies grow and increase their productivity. Indeed, recent rounds of research and policy analysis focus on helping these types of “left behind” places.
However, they note that other metro areas have work to do, too. Nearly 1 million workers hold low-paying jobs in Washington, D.C., while Boston and San Francisco are home to 700,000 low-earning workers, respectively. The challenge in these cities, say the authors, is to address two challenges: high housing prices and low wages.
Why It Matters: Low-wage workers support families
Low-wage workers aren’t just bringing in extra money. Most are attempting to support themselves, and often dependents, on their wages, too. Researchers found that 26% of low-wage workers (that’s about 14 million people) are the sole earners in their families. These families are currently attempting to survive on median pay of about $20,000 per year.
A quarter of low-wage workers — about 13 million people — live in families in which all employed persons hold low-paying jobs. These families have a median income of about $42,000 per year.
In short, low unemployment doesn’t equal economic prosperity, especially for workers with less in-demand skills and fewer options to retrain for better jobs. But, the researchers note, changing the situation will be challenging:
We already know a great deal about how to expand and improve education and training options, although—again—that is not to say it is easy. …We need additional funds, a commitment to change the status quo, political will to reallocate funding toward evidence-based programs, and greater employer involvement.
Learn more and download the full report at The Brookings Institution.
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