Why you should care
Because the job market has changed, maybe forever. And changing it for the better will take hard political choices.
Remember when you could graduate from a decent college with a degree in English or economics, and get an offer for an entry-level job at an ad agency or a bank, or maybe even a manufacturing company?
No skills? No problem. They’d train you and get you started up the corporate ladder.
OK. Maybe it wasn’t quite that easy — especially if you were a woman or your skin wasn’t white (or both). But in our heads, that’s the job market we miss and hope will come back someday.
Five years after the trough of the Great Recession, a few facts:
The Part-Time Picture
Part-time employment: In 1968, when the Labor Department started measuring part-time labor (fewer than 35 hours per week), it amounted to 13.5 percent of the workforce. Since then it’s been on a slow climb before spiking to 20.1 percent after the Great Recession in January 2010 and falling back to only 19.2 percent in June 2014. That’s a huge jump that points to a major structural change in the economy.
The period of stable employment … and steady growth that the U.S. enjoyed after WWII was a historical anomaly.
So while it’s heartening to see the unemployment rate fall from a peak of 9.9 percent in March 2010 to 6.1 percent in June this year, millions are not working as much as they’d like or earning as much as their skills once demanded. Will more part-timers find full-time work as the economy continues to recover? Probably, but the long-term trend suggests that the steep rise in part-time employment could be a persistent or even permanent feature of the economy. And many of the full-time jobs added since the recession have tended to be low-wage positions — flipping burgers and the like.
Housing: The housing market’s recovery has been slow and uneven partly because so many young people can’t find jobs or earn too little, so they decide to bunk with Mom and Dad. That saps demand and puts the brakes on the contruction industry, which otherwise would employ many more people.
Are we looking for too much too soon? Five years seems like plenty of time to recover from a downturn, but as Kenneth Rogoff and Carmen Reinhardt argue in their seminal book This Time Is Different, economic downturns caused by financial crises take many years to work themselves out. Still, while we patiently wait for the long-term picture to take shape, it’s hard not to conclude that the future, even a blurry snapshot, looks troubling.
Evidence is accumulating that the period of stable employment, relative equality of income and steady growth that the United States enjoyed after World War II was a historical anomaly.
Here’s the argument, as outlined by Thomas Piketty in his bestselling Capital in the Twenty-First Century: The Great Depression and World War II were great levelers, destroying fortunes, bringing in wage and price controls, and launching a generation of educated young men through the GI Bill. These developments suppressed powerful underlying forces of market capitalism which, by themselves, lead to rising inequality of wages and ownership of capital (everything from land and houses to stocks and bonds and patents — just about anything that can be bought or sold).
The distribution of wage income in the U.S. is probably more unequal today than at any other time in history, anywhere in the world.
The postwar equilibrium gave out around 1980, when conservatives Margaret Thatcher (the British prime minister) and President Ronald Reagan came to office. Since then, income inequality has exploded. In the U.S., 60 percent of the total increase in income has gone to the richest 1 percent of the population, while the bottom 90 percent made do with an annual increase of 0.5 percent.
Where exactly has it gone? To superstar corporate managers, who rake in tens of millions of dollars — per year.
Piketty says that the distribution of wage income in the U.S. is probably more unequal today than at any other time in history, anywhere in the world.
America may be the extreme case, but it’s a global phenomenon. University of Chicago economists Loukas Karabarbounis and Brent Nieman argue that the worldwide shift of income from labor to capital results in large part from the declining cost of information technology that, in essence, replaces labor.
Should we care — when it’s mathematically possible that the rich could get much richer while everyone else continues to make reasonable progress?
Moreover, according to economists at the IMF, societies with highly unequal distributions of income may grow more slowly, but efforts to redistribute income toward the less well-off generally do not harm growth. In other words, there’s a political solution: Taking from the rich and giving to the poor could potentially help the economy.
Picketty recommends a highly progressive tax on capital that even he admits is “utopian.” Other measures might include lifting the minimum wage and imposing heftier income and inheritance taxes.
But won’t the ultrawealthy simply steer the political process in their favor? Recent Supreme Court decisions permit big spenders to spend even more on politics, but they also free labor unions to shell out bigger bucks.
So where does that leave ordinary folks who just want a steady paycheck and decent benefits? Well, there’s sure to be a political fight worth watching and maybe joining. In the meantime, you might want to stop dreaming of your grandfather’s job market and, instead, learn a little computer coding on the side.