Employment gap between rich, poor widest on record

Middle-income workers are increasingly pushed into lower-wage jobs
Associated Press
Sep 17, 2013

The gap in employment rates between America's highest- and lowest-income families has stretched to its widest levels since officials began tracking the data a decade ago, according to an analysis of government data conducted for The Associated Press.

Rates of unemployment for the lowest-income families — those earning less than $20,000 — have topped 21 percent, nearly matching the rate for all workers during the 1930s Great Depression.

U.S. households with income of more than $150,000 a year have an unemployment rate of 3.2 percent, a level traditionally defined as full employment. At the same time, middle-income workers are increasingly pushed into lower-wage jobs. Many of them in turn are displacing lower-skilled, low-income workers, who become unemployed or are forced to work fewer hours, the analysis shows.

"This was no 'equal opportunity' recession or an 'equal opportunity' recovery," said Andrew Sum, director of the Center for Labor Market Studies at Northeastern University. "One part of America is in depression, while another part is in full employment."

The findings follow the government's tepid jobs report this month that showed a steep decline in the share of Americans working or looking for work. On Monday, President Barack Obama stressed the need to address widening inequality after decades of a "winner-take-all economy, where a few do better and better and better, while everybody else just treads water or loses ground."

"We have to make the investments necessary to attract good jobs that pay good wages and offer high standards of living," he said.

While the link between income and joblessness may seem apparent, the data are the first to establish how this factor has contributed to the erosion of the middle class, a traditional strength of the U.S. economy.

Based on employment-to-population ratios, which are seen as a reliable gauge of the labor market, the employment disparity between rich and poor households remains at the highest levels in more than a decade, the period for which comparable data are available.

"It's pretty frustrating," says Annette Guerra, 33, of San Antonio, who has been looking for a full-time job since she finished nursing school more than a year ago. During her search, she found that employers had become increasingly picky about an applicant's qualifications in the tight job market, often turning her away because she lacked previous nursing experience or because she wasn't certified in more areas.

Guerra says she now gets by doing "odds and ends" jobs such as a pastry chef, bringing in $500 to $1,000 a month, but she says daily living can be challenging as she cares for her mother, who has end-stage kidney disease.

"For those trying to get ahead, there should be some help from government or companies to boost the economy and provide people with the necessary job training," says Guerra, who hasn't ruled out returning to college to get a business degree once her financial situation is more stable. "I'm optimistic that things will start to look up, but it's hard."

Last year the average length of unemployment for U.S. workers reached 39.5 weeks, the highest level since World War II. The duration of unemployment has since edged lower to 36.5 weeks based on data from January to July, still relatively high historically.

Economists call this a "bumping down" or "crowding out" in the labor market, a domino effect that pushes out lower-income workers, pushes median income downward and contributes to income inequality. Because many mid-skill jobs are being lost to globalization and automation, recent U.S. growth in low-wage jobs has not come fast enough to absorb displaced workers at the bottom.

Low-wage workers are now older and better educated than ever, with especially large jumps in those with at least some college-level training.

"The people at the bottom are going to be continually squeezed, and I don't see this ending anytime soon," said Harvard economist Richard Freeman. "If the economy were growing enough or unions were stronger, it would be possible for the less educated to do better and for the lower income to improve. But in our current world, where we are still adjusting to globalization, that is not very likely to happen."

The figures are based on an analysis of the Census Bureau's Current Population Survey by Sum and Northeastern University economist Ishwar Khatiwada. They are supplemented with material from the Massachusetts Institute of Technology's David Autor, an economics professor known for his research on the disappearance of mid-skill positions, as well as John Schmitt, a senior economist at the Center for Economic and Policy Research, a Washington think tank. Mark Rank, a professor at Washington University in St. Louis, analyzed data on poverty.

The overall rise in both the unemployment rate and low-wage jobs due to the recent recession accounts for the record number of people who were stuck in poverty in 2011: 46.2 million, or 15 percent of the population. When the Census Bureau releases new 2012 poverty figures on Tuesday, most experts believe the numbers will show only slight improvement, if any, due to the slow pace of the recovery.

Overall, more than 16 percent of adults ages 16 and older are now "underutilized" in the labor market — that is, they are unemployed, "underemployed" in part-time jobs when full-time work is desired or among the "hidden unemployed" who are not actively job hunting but express a desire for immediate work.

Among households making less than $20,000 a year, the share of underutilized workers jumps to about 40 percent. For those in the $20,000-to-$39,999 category, it's just over 21 percent and about 15 percent for those earning $40,000 to $59,999. At the top of the scale, underutilization affects just 7.2 percent of those in households earning more than $150,000.

By race and ethnicity, black workers in households earning less than $20,000 were the most likely to be underutilized, at 48.4 percent. Low-income Hispanics and whites were almost equally as likely to be underutilized, at 38 percent and 36.8 percent, respectively, compared to 31.8 percent for low-income Asian-Americans.

Loss of jobs in the recent recession has hit younger, less-educated workers especially hard. Fewer teenagers are taking on low-wage jobs as older adults pushed out of disappearing mid-skill jobs, such as bank teller or administrative assistant, move down the ladder.

Recent analysis by the Associated Press-NORC Center for Public Affairs Research shows that whites and older workers are more pessimistic about their opportunities to advance compared to other groups in the lower-wage workforce.

Eric Reichert, 45, of West Milford, N.J. Reichert, who holds a master's degree in library science, is among the longer-term job seekers. He had hoped to find work as a legal librarian or in a similar research position after he was laid off from a title insurance company in 2008. Reichert now works in a lower-wage administrative records position, also helping to care for his 8-year-old son while his wife works full-time at a pharmaceutical company.

"I'm still looking, and I wish I could say that I will find a better job, but I can no longer say that with confidence," he said. "At this point, I'm reconsidering what I'm going do, but it's not like I'm 24 years old anymore."

 

Comments

Nemesis

Supply and demand, gg. If you're worth more than you're getting, PROVE it by finding someone willing to pay it. The owner pays as much as he has to in order to get what he needs. You do the same - if you see two gas stations, one charging $3.50/gal and one charging $4/gal, which one do you go to?

grandmasgirl

Boy, what is this? Gang up on grandma day? As to your question, believe it or not, I asked around and found out which station is locally owned. Thank goodness I was employed when pay was good and benefits were good. Now I can afford to try and support others locally. If I can buy it from a local resident I do. EVEN if it costs more. That is my way of giving back.

Nemesis

Because people who live outside your neighborhood are not also fellow human beings who have kids to feed? So nice to know you only support your little enclave and dismiss the outside world as being beyond the pale (look up the origin of that term.)

LadyC

I think a problem with some of these smaller businesses whose owners did work hard to build it, is that they expect the same dedication and sacrifice from the employees as they had to make, but on low wages, no chance for moving up, and "on call" type sporadic hours. They don't understand that we have lives, too, and may need to fit the job we do for them in with another one to make it. I don't have a burning need to be rich, I am not jealous of anyone, but if I am to be available all the time, multi-tasking, doing double duty, and making minimum wage, of course I'm going to go elsewhere. And as per supply and demand, no big deal to them, they will just keep getting newbies that don't care either. And people wonder what has happened to the work ethic in this country. And don't get me started on the big corporations.

Nemesis

LadyC, most of those owners made those same sacrifices when starting out, often not paying themselves at all.

LadyC

Nemesis, I get that, and I do hand it to those who have taken the risks and made the sacrifices to start businesses on their own. I have worked for the small family-owned businesses and taken the bitter with the sweet. I don't expect a full benefits package, etc. and neither do most people. However, the fact is, most of these places are not paying enough as a single job for us to get by, so we are in need of a second or third job. In order to do this, hours need to be coordinated. If someone is managing their business well, they can at least tell their employees when they are needed and for how long. And not threaten and fuss every time they pay them, or put out ads seeking new employees. Job seeking is a job in itself anymore, and a lot of us get our hopes up when we see a job appear, go through an application process, etc. only to find out they are not really hiring. And many of us simply don't have the capital to start something of our own.

Nemesis

"If someone is managing their business well, they can at least tell their employees when they are needed and for how long."

Sure, but that level of management isn't free. Why spend money on it if there are plenty of people willing to work for them under the current conditions? AGAIN - supply and demand.

"And not ... put out ads seeking new employees."

So now it's a crime to see if you can do better? What they are doing is no different from you looking in the Sunday paper to see which store has something you want on sale this week.

LadyC

Putting the ads out can't be free either. And the process of screening, HR, background checks, etc. Or a lot of them pay an employment agency to take care of that. I just wish they would be a bit more straightforward. We shop for jobs, they shop for employees, I get it. But it is a waste of time and money for both parties if they don't even identify themselves, describe the job honestly, or show a rate of pay or hours you must be available. If I already have one part time job and need a second one, that's all I need to know--what hours do you need me? Really, is that so hard to determine?

Nemesis

All those costs you mention clearly don't outweigh the benefits to the company of doing so - there's a simple metric for determining the wisdom of a business owner's decisions - is he still in business? is he making a profit? Well, then, he's making sound choices.

donutshopguy

grandmasgirl,

Not picking on you personally. Your socialistic view of the workplace rubs some of us who have become a success on our own without government intervention.

I was a common man. Working menial labor jobs. But through education, hard work and sacrifice I lifted myself above that lot in life. You can too.

Start your own company and pay your employees what ever you wish. No one is stopping you.

Sounds like a smart person who developed something that can clear $100 dollars after the sale. Would you accept your employees telling you how much you can make after you did all the hard work to develop the idea?

A person receives whatever value the employer deems acceptable for the work performed. If you don't like the pay, move on. No one is forcing you to stay at that job. It's your job to improve your lot in life through education or experience which improves your value and compensation.

It takes hard work and sacrifice. Most people aren't will to do both and take a chance.

grumpy

grandmasgirl,

If it is a knicknack and you clear $100 you did real good (but no one will pay that much for a knicknack), if it is a car or airplane or some such it isn't good, depends on the scope of you product. Even percentages don't work when it comes to profit. Cars may be sold for 10% profit where small knicknacks may require 25% profit. It just depends on all the various things involved.

LadyC

Maybe Grandmasgirl doesn't want to start her own company. A lot of us don't. It doesn't mean we are lazy, stupid, jealous, uneducated, or any other insult you care to toss. Some of us actually like working, and don't mind the grunt jobs IF there is anything good about them at all. There are trade-offs. IF the bills are being paid by this job, but it's dirty, boring, long hours, etc. OK, cool, I'll do it. If it's low-paying but reasonably pleasant and I am treated nicely, OK, fine, I'll do it, and supplement my income with another gig. Trouble is, there are few trade-offs left. They seem to want it all and pay nothing for it. Pretty soon a lot of us will be too broke to buy their products or use their services anyway. Big mess. And by the way, many don't place "value" on employees at all. They only worry about how much they will cost.

grandmasgirl

LadyC: Thank you for understanding what I am saying. I never did want to own my own business. My pleasure came from doing a good job. I took pride in that. When the place of business that I worked for closed (making $9.00 an hour in the 80's) I went to work for another employer making $3.50 an hour. I worked every bit as hard if not harder at the lower wage. I quit when I went to my employer with a complaint about a customer who keep making off color remarks to me. He laughed and said I should be flattered. That's what I mean about mutual respect. It isn't always the lower paid person who has the less intelligence.

LadyC

Sad but very true...

Nemesis

"I never did want to own my own business."

No, you just want to second-guess the decisions of those who do.

So, you're willing to dictate how they should run their business, but not to walk so much as a single step in their shoes first.

arnmcrmn

Have to love those who have no business experience, nor the mindset to run one, nor have the burden of taking work home with them and managing their business.....yet want to tell their employer what they should pay people.

Taxes, inspections, bills, wages, upkeep, maintenance, workers comp, overhead......THIS IS WHY YOU MAKE WHAT YOU MAKE.

Simple solution to the whiners, if you do not like what you make, change jobs, go back to school, quit....who cares, just don't tell people like me how to run my business.

nonconformist

Very well aware of what it takes to run a business. I am also aware of the needless spending by owners on other aspects. Of which, could be spent better on making employees happy. We're not all ignorant. Get a grip. So you go ahead and complain about everything you signed up for; including high turnaround and time spent training new employees. Seems cost effective to me!

Nemesis

They've either successfully accounted for turnover and training costs, or they are out of business. You can bloviate all you want, but you can't legitimately argue that the owner of a business is making bad business decisions if the business is thriving.

Supply and demand, will not be denied, any more than gravity.

LadyC

Grndmasgirl and I both said that we LIKED working. No one is trying to dictate anything on our end, but you seem to be one of those people who does not value feedback of any kind from anyone, because you have all the answers, because you are a business owner. Good for you. And how do you know where our shoes have taken us? Some people can be excellent at numbers, but piss-poor when it comes to human relations. Enjoy this ride while it lasts, because it may not last for long.

deertracker

@LadyC
Agreed!

Nemesis

"Maybe Grandmasgirl doesn't want to start her own company. A lot of us don't."

Fine, but then quit whining about the consequences of that choice.

donutshopguy

LadyC,

Cost is a measurement of value by the way.

If the general public is to broke to buy product or services than those products and services will go under. It's the evolution of the capitalistic marketplace. If the general public cannot pay taxes anymore than the government as you know it will not exist. That's been going on since the beginning of time.

If you want a socialist society lets look at the whole world first. People on welfare and government entitlement make more money and have more free services than 95% of the world population. Are the American welfare recipients willing to share their spoils with the rest of the world? Are you willing to give up your meaningless pay to support the rest of the world?

Now, when you want the rich to share with you, are you willing first to share with the rest of the world? Just a thought.

Love these philosophical discussions.

nonconformist

I have to agree with just about everything LadyC has said. It's not about the rich "sharing" anything. It's about paying dedicated employees what they are worth. These days, it appears employers have the mindset that everyone is dispensable; lose one good employee because they don't pay well? Ah well, another one right around the corner willing to do the work (may not be as good) for maybe even less. Seriously, that is how most employers think. There is no more rewarding good workers for their hard work, loyalty, or time. It's BS and you and everyone else knows it. I don't want my own business and I don't want to get paid like I do. I do want to be paid what I'm worth as do most people. It's pretty sad that people in manufacturing (no education required) jobs in this area get paid more than I do, have benefits, and vacation. I can't even pay my student loan. By the way, my schooling totally relates to my current job. You want to tell all of us there is nothing wrong with that picture? Unfortunately, this area sucks for my field. So no, it's not that easy to just "move on."

donutshopguy

nonconformist,

"this area sucks for my field." Are there better opportunities somewhere else? What is holding you back from "moving on" to those areas?

A good employer rewards "good workers" for hard work and loyalty. The owner has to make those decisions every day. What is the value of a "good worker" ? Can I live without them? Can I afford to keep them? What will it cost to replace them?

It's not a simple decision in some cases. In other cases, some employees are dispensable.

nonconformist

Did you really just ask me that question? I can barley afford to pay my student loan so you tell me what is holding me back from moving on. Wow. Watch the bouncing ball . * . *...

donutshopguy

nonconformist,

Get a backbone and grow up.

How long must we hold your hand.

nonconformist

Hold my hand? LOL! I assure you no one has held my hand since my mother, once I learned to walk. Get OVER yourself. Yet another problem with certain frames of mind. Just can't stand the fact when someone points out the obvious things that you've missed? You're mouth is as big as your head. Stick a 'donut' in it.

arnmcrmn

Sounds like you picked a cupcake degree and now have a hard time finding a good job. I always tell college students, pick a degree that gives you the flexibility to move, that allows you to not work your soul to the bone and that is known to have a solid starting pay base.

Most do not listen. They think their fashion design degree is really going to pan out. They think that dime a dozen business degree is going to reward them with riches right out of the gate. It doesn't 99% of the time.

nonconformist

Ok, since everyone keeps asking... My education is in the legal field, far from "cupcake" as you say. A cupcake degree is a BA in Liberal Studies ie. I really have NO direction what-so-ever and just thought I'd wing it since my parents are paying for it! Fashion? Not a bad degree if you're willing to move to NY or Europe. These days, my friend, every degree out there is a dime a dozen; doesn't matter what your major is.

Nemesis

Majoring in a "legal field" (again, very vague) is a waste of time if you don't have the chops to get a JD.

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