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Home Publications Blogs Beat the Press The Economy Creates Low Paying Jobs Because It Doesn't Create High-Paying Jobs

The Economy Creates Low Paying Jobs Because It Doesn't Create High-Paying Jobs

Sunday, 27 April 2014 22:02

The NYT had an article reporting the large share of job growth that has taken place in low wage industries. This is readily explained by the fact that the economy is not creating many jobs. When the good jobs are available people do not work at low-paying jobs. However Congress and the president have to decided to run fiscal and trade policies that slow growth and limit job creation. As a result many people who would have decent paying jobs in an economy that was near potential GDP instead have to look for work in fast-food restaurants and other low-paying jobs.

This basic point can be seen in the simple correlation of state unemployment rates and the share of new jobs in restaurants as shown below.


                              Source: Bureau of Labor Statistics and author's calculations.

In other words, people who are unhappy about bad jobs should be yelling at their political leaders to get over their stupid budget deficit fetish, since we know that we could create lots of good jobs tomorrow by spending more money on infrastructure, education, and other good things. They should also yell at their political leaders to take an intro economics class so that they will realize the trade deficit is costing us more than 5 million jobs. And, the only thing we need to do to get the trade deficit down is to lower the value of the dollar.

Unfortunately the simple facts of economics -- straight from any intro textbook -- are considered too far out to enter the political debate.


Note: link added.

Comments (9)Add Comment
These simple facts of intro econ, too far out for news/debate beat any alternatives!
written by jaaaaayceeeee, April 27, 2014 11:29

These simple facts of intro econ, too far out for news/debate beat any alternatives!

I assume that you are commenting on Annie Lowrey's 4/28/14 nyt article, "The Recovery Has Created Far More Low Wage Jobs Than Better Paid Ones, at http://www.nytimes.com/2014/04...es.html?hp

It has gotten to the point where a reporter writes that 'Recoveries' create jobs (or entrepreneurs, masters of the universe, etc.). Voters must be protected from such commie words as "demand" "full employment policy" "trade deficit" "IP reform" "stimulus spending" and generally public policies that worked in the past (but would cost our wealthiest welfare queens some actual taxation, make dining and dashing less easy, and bring back representation and accountability to our democracy).

Meanwhile, Supreme Court Justice John Roberts tells us that racism, political corruption, and bribery not only aren't his problem, but don't exist, and News media Personalities do their best to obsfucate the policy choices that have unnecessarily immiserated millions for years, and avoid informing voters of what public policy proposals are proven solutions, for tax, regulatory, and electoral reform.

Today's inequality op-ed was as clueless as it was earnest and interesting, blaming voters for not being skilled enough accountants (who could presumably prevent financial crises, force predatory capitalists to become accountable morally, keep reforms from failing, and demand solutions to our "complex financial problems"). http://opinionator.blogs.nytim...ef=opinion

Where Are The Future Private Sector Middle Class Jobs Coming From?
written by jerseycityjoan, April 28, 2014 6:43
Where are we going to get the tens of millions of additional jobs we need in the private sector, unconnected to government and healthcare (which is largely paid for by government)?

This is what I have been wondering about since 2009 and I do not see any answers out there. People in academia, business or government will mention "middle class jobs" in the private sector but never specify what jobs will require many millions of new workers in the near future and in what industries.

I am starting to think there is no real answer. I have seen two coping mechanisms mentioned could work but many will not want. One is to turn many if not most of our low paying jobs into mid-level paying jobs. The other is requiring that many low and middle level exempt jobs have restricted hours, forcing companies to hire many more people who work much shorter workweeks. These sorts of huge changes would be greatly resisted by employers, stockholders and politicians.

I don't see how our future middle class jobs can be mostly limited to those who work in government, healthcare and those who supervise low-wage workers in hotels, stores and restaurants, etc.

Our economy and government are set up assuming there will be a vast and dependable working class and middle class that pay a lot of taxes and don't usually need government social welfare benefits.

We will be in big trouble if we don't fill up the enormous and growing empty space where the good paying private sector jobs used to be.
written by djb, April 28, 2014 7:27

The trade deficit is created by American corporations and rich to increase their personal wealth .......they don't care about american workers or America.....they like the trade deficit
Substantial reform and renewal are the sine qua non
written by Jesse, April 28, 2014 10:19
Without reforms, even stimulus will only propagate the problem, while perhaps masking some individual pain which is good, but not sustainable in the longer term.

The same mechanisms that caused the financial crisis part deux are still in place, and are working to create the next one.
written by Samuel, April 28, 2014 10:58
Thanks Dean for the comment on this NY Times article. There isn't any mystery here! The article is written if, gee whiz, why are we only getting low-pay jobs in this economy? Why can't the "job creators" create more high-paying jobs? The implication is that job seekers don't have the right skill set.

Such articles play to the vested interests of the 0.01% that are currently running our economy. just Thanks for setting the record straight.
written by Jim, April 28, 2014 11:30
"Unfortunately the simple facts of economics -- straight from any intro textbook -- are considered too far out to enter the political debate."

I could not disagree more. While I am sure that the majority may not understand economics as we do, I am the more certain that the GOP is not at all interested in the economic health of the nation--nor even the deficit. The policies they pursue have two purposes: 1) To keep the money flowing in from wealthy donors; and 2) To regain hegemony.
All those restaurants, ...
written by Ronald Pires, April 28, 2014 12:26
... and no one left to eat in them.

I must be missing something here. As people become more financially distressed, they dine out less often. As people dine out less often, restaurants should need fewer workers. So where are these restaurant jobs coming from?
written by bananaguard, April 28, 2014 2:33
Would you identify the outliers, please? I might need to look for a job, and I might want to send my kids to college in states other than that one sticking out on the end, there.
written by bananaguard, April 28, 2014 2:38
One possible reason there are more restaurant workers in high unemployment states is that restaurant managers in those states can avoid giving full-time jobs. You can insist that your employees learn their "craft" off the clock, kick them out when the grease starts to build up on their uniform (and skin and hair), have them fresh and shiny - all for less than a tired, greasy full-time worker.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.