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Recipe for Recovery: Better Jobs, Not Just More Jobs

J. Mijin Cha

As unemployment rates continue to decline, not enough attention is being paid to the kinds of jobs that are being created. A new report from the Working Poor Families Project shows exactly why we need to consider job quality, not just job creation. Analyzing Census Bureau data, the report finds that while unemployment rates are decreasing, the number of working poor families is increasing. Overall, more than 70 percent of low-income families and half of all poor families were working by 2011. Yet, these families are not earning enough money to live. The number of low-income working families rose to 10.4 million in 2011, which means that nearly one-third of all working families do not make enough money to meet basic needs.

The fundamental problem here is that the jobs being created are not good jobs that pay decent wages and provide benefits, such as health care coverage and pension contributions. Thirty-two percent of working families earned salaries that put them below double the poverty line, up from 28 percent in 2007. A recent report from the National Employment Law Project found while most of the jobs that were lost during the recession were mid-wage jobs, most of the jobs created during the recovery were lower-wage. Mid-wage jobs accounted for 60 percent of recession losses, but only 22 percent of recovery growth. In contrast, lower-wage jobs accounted for 21 percent of recession losses, but 58 percent of recovery growth. The replacement of middle class wage jobs by poverty-wage jobs has left working families struggling just to make ends mean.

These reports highlight just how much inequality has grown since the Great Recession. The Working Poor Families report found that the richest 20 percent of working families took home nearly half of all income, while those in the bottom 20 percent took home less than 5 percent of total income in 2011. My colleague David Callahan pointed out last year that the top 1 percent saw their incomes increase by 11.6 percent in 2010, while incomes for the bottom 99 percent grew only 0.2 percent. The top 1 percent captured 93 percent of all income growth in 2010.

Yet, it doesn’t have to be this way. As a recent Demos report found, the retail industry-- one of the largest sectors with notoriously low wages— could afford to pay its workers a living wage of $25,000 per year at minimal cost to both the industry and the consumer. The wage increase would amount to just 1 percent of total annual sales by large retailers and cost as little 15 cents per trip for the average household. While the costs would be minimal, the economic benefit would be substantial. The increased purchasing power of low-wage workers would alone generate $4 to $5 billion in additional annual sales for the sector.

Apart from the moral issue, tolerating wages so low that families can work full time and still be in poverty is bad economic policy. For a strong recovery, we need to focus on job quality, not just job creation.