Economy Creating Mostly Low-Paying Jobs

Over the next four years, Moody’s projects the creation of 12 million mostly low-paying jobs.

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Over the past six months, the economy has added about 90,000 jobs per month. That's barely enough to keep up with population growth, and not nearly enough to put a noticeable dent in the 9 percent unemployment rate. The jobs deficit in the United States, which is made up of jobs lost during and after the recession and not yet recovered plus new jobs needed to keep up with population growth, is currently more than 11 million, according to the National Employment Law Project (NELP). Another, and some say even bigger, problem is that the jobs that have been created so far have been relatively low-paying compared with jobs that were lost during the recession.

The bulk of the job losses during the recession were in mid-wage occupations. Of the net employment losses between the first quarter of 2008 and the first quarter of 2010, 60 percent were in mid-wage occupations, 21.3 percent were in low-wage occupations, and 18.7 percent were in high-wage occupations, according to a recent NELP report, The Good Jobs Deficit. (NELP defines low-wage occupations as those that pay a median hourly wage between $7.51 to $13.52, mid-wage as those that pay between $13.53 and $20.66 per hour, and high-wage as those that pay between $20.67 and $53.32 hourly.)

Coming out of the recession, from the first quarter of 2010 through the first quarter of 2011, low-wage occupations, such as retail sales and office clerks, grew by 3.2 percent, while mid-wage occupations grew by only 1.2 percent. At the same time, growth in high-wage occupations declined by 1.2 percent.

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That means the current jobs deficit is weighted toward higher-paying jobs that have yet to return. As of July, the share of the deficit represented by mid-wage occupations was the largest, at 8.4 percent below pre-recession employment, compared with high-wage jobs (4.1 percent) and low-wage jobs (0.3 percent).

In addition, wages have taken a hit. A recent study from the Economic Policy Institute found that the median working-age household saw an income decline of $2,700 from 2007 to 2009, and brought in roughly $5,000 less in 2009 than it did in 2000.

Even more worrisome is the fact that low-wage workers are being hit the hardest, says Annette Bernhardt, policy co-director at NELP and author of the report. From the start of the recession through July, real median wages for all occupations have shown a slight decrease of 0.6 percent. But among lower-wage occupations, real median wages have fallen by a staggering 2.3 percent. "That's a significant decline," Bernhardt says. "It doesn't happen that often that wages actually decline. Wages often stagnate and maybe they don't grow as fast, but that level of decline is a really bad red flag about what's going on in the labor market. And it's really the workers in those low-wage occupations that have borne the brunt of it, and those, of course, are the occupations that are growing the most." At the same time, real median wages for mid-wage occupations have fallen by 0.9 percent, and wages for high-wage occupations have risen by 0.9 percent.

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The lopsided growth of low-paying jobs is expected to continue. Economic forecasting firm Moody's Analytics projects that between the fourth quarter of 2011 and the fourth quarter of 2015, the economy will create 12.1 million jobs, but they will be disproportionately low-paying ones. Of those jobs, 42 percent are expected to be low-wage jobs, 39 percent are expected to be mid-wage jobs, and only 19 percent are expected to be high-wage jobs. (Moody's classifies jobs by the average salary of each group: $25,000 for low-wage jobs, $50,000 for mid-wage jobs, and $94,000 for high-wage jobs.)

"It's mostly driven by demographics," says Marisa DiNatale, director at Moody's Analytics. "And that's probably going to continue with the aging of the baby boomers."

Expect a lot of employment growth in consumer-oriented industries like restaurants as well as healthcare jobs, DiNatale says. Consumer-oriented jobs generally pay relatively low wages, while jobs in the healthcare industry pay a mix of high and low wages, depending on the job.