Boosted by holiday hiring and resolution of the GM strike, today’s Bureau of Labor Statistics’ November jobs report signals 126 months of growth, a new record for an economic expansion. And, as expected, there was a tweet about how the U.S. labor market is great again. But while this continued growth is good news, we are not witnessing the “best” economy ever, and even the good numbers are masking some real problems for today’s workers and their families.
Today’s Job Growth Still Lags the 1990s Boom
Today’s job creation still lags 1990s job growth. Over 24.2 million jobs were created in the 1990s expansion, while only 21.2 million have been generated in the current one. Using the 2019 average monthly growth of 167,000, eighteen more months of expansion are needed to reach the 1990s record. To achieve the private sector record of 21.7 million will take four months.
Considerable Labor Market Slack Remains
For the last thirty months of the 1990s boom, the jobless rate was at or below 4.5 percent. The comparable statistic for the current expansion is thirty-three months. Yet, despite that comparatively better record, there is actually now a larger “untapped” pool of available workers—the unemployed, people working part-time but they want full-time employment, and people who have stopped searching for a job, but if offered would take it.
At the 1990s expansion’s peak, there were 10.5 million American workers in this untapped pool: 6.1 million were actively searching for a job, 3.3 million were working part-time but wanted full-time work, and another 1.1 million had stopped searching but if offered a job, they would take it. As of November, the untapped pool is 11.4 million Americans.
The labor force participation rate of prime-age adults contains slack. It peaked at 84.1 percent during the 1990s boom. After 126 months of economic expansion, it currently sits at 82.8 percent.
U.S. Income Inequality Has Reached a Record Level
Most problematic for our economy is that income inequality, which narrowed during the 1990s, has grown to a record level. What is particularly distressing is that this income inequality is increasingly occurring along racial lines.
Valerie Rawlston and I find that the relative earnings of blacks are where they were in 1979. Further, a more recent study finds that, when incarceration is accounted for, black–white earnings inequality is like it was in 1950.
Many Americans not at the top of the income ladder—even fully employed ones—have good reason to feel like they are in economic distress:
- 39 percent of adults don’t have enough savings to cover a $400 emergency expense;
- 30 percent of people either can’t pay their bills or are one modest financial emergency from serious trouble; and
- 24 percent of adults skipped necessary medical care last year because they couldn’t afford it.
This continued distress drives workers—and voters—to demand substantive change, but there doesn’t seem to be any real solutions in the policy pipeline.
A Better and More Positive Path
In a recent op-ed, economists Erica Groshen and Harry Holzer, editors of a new volume by the Russell Sage Foundation, warn Americans not to think that the “silver bullet” solutions being touted in the 2020 presidential election cycle are going to fix the economy for American workers. These policies only tinker with the edges, and worse yet, some could do more harm than good.
Holzer and Groshen assert that, to truly improve the economic security of all Americans, especially those who have been bullied by today’s job market, we must acknowledge that no single cause explains everyone’s distress, and then create and we must commit to a combination of evidence-based policies.
The causes are well known. Workers have been affected by technological change, globalization, and skills shortages. Displacement due to robotics and AI will only accelerate. Weakened unions, an erosion in worker “voice,” and outsourcing are contributors. Failure to fully support public colleges and universities will not prepare the next generation for future jobs. Federal wage and hour laws continue to shift in a direction that will lead to more bullying.
If unchecked, these practices will keep the historical link between a company’s profitability and its employees’ earnings severed.
The evidence in Holzer and Groshen supports the following approaches:
- more funds for higher education and workforce services that provide middle pathways for non-college Americans;
- protect workers’ rights to collectively bargain or express their “voice”;
- update federal wage and hours laws;
- provide paid family leave and quality childcare options;
- provide opportunities for better youth training and work experience;
- assist workers who face barriers such as criminal records or substance abuse; and
- reform the criminal justice system.
All of these steps must have as their foundation improved labor market information, experimentation, and ongoing policy evaluations.
Alluring presidential tweets and candidate soundbites will continue to rouse bases, but they will be devoid of the thoughtful and comprehensive framework needed to improve the lives of American workers and address today’s dangerous level of income inequality.