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

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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.

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                              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.