The case of the missing jobs
What's going on here? Well, clearly international competition and outsourcing have hit some sectors hard. In the past decade, China became the world's workshop. In this decade, India is becoming the world's back office. Cheap bandwidth and the Internet permit companies to tap into a huge supply of English-speaking, educated, and dedicated workers, happy to take knowledge-based jobs for 10 to 20 percent of what American employees receive. "Offshoring" is moving up the food chain of services to include professions like engineering, design, accounting, legal work, actuarial and insurance work, medical services, and financial analysis. The result is that at a time when information technology is more widespread than a decade ago, jobs are down in this sector by 1 percent two years after the upturn began, compared with an increase of nearly 4 percent after the upturn in the early 1990s.
That's why virtually all the new jobs created in the latter part of 2003 were concentrated in the most sheltered segments of the workforce. It also explains why some 80 percent of the 2.5 million manufacturing jobs lost are gone for good. Factory jobs are vanishing all over the world. According to an Alliance Capital Management study, between 1995 and 2002, 22 million factory jobs disappeared worldwide. The Japanese lost 16 percent, Brazil 20 percent. Even China lost 15 percent. All of this when global industrial output has risen more than 30 percent.
Jobs in this recovery are also shifting from higher to lower paying. Less educated, older workers and middle managers have been replaced by cheaper contingent labor (if they've been replaced at all), and at an average salary reduction of 21 percent. In 48 of the 50 states, lower- paying industries have replaced higher-paying industries like manufacturing, retail, financial, and information services. The result is that too many of America's jobs today simply cannot support a full household, at least at the level that most people feel appropriate to a middle-class lifestyle.
This has profound consequences for America's politics. They are outlined clearly in a new book, Downsizing in America, by William Baumol, Alan Blinder, and Edward Wolff. Of the 100 million men and women with full-time employment in 2001, the authors note, more than half earned less than $35,000; 84 percent earned under $65,000; 10 percent made between $65,000 and $100,000; while only 5.7 percent made above $100,000. Overall median earnings were a mere $33,636. Most middle-class families would feel that $65,000 is needed to maintain a family in a middle-class lifestyle. If you lower the bar, only 32.8 percent of jobs paid over $45,000 annually.
How are people coping? Not easily. The authors report that in two thirds of households with wage earners, the workers now hold two or more jobs. Even for families with children, two thirds of the mothers work, although fewer than half these households have adults holding two full-time jobs. The median paycheck for wives who worked in 2001 was less than $18,000, close to the low-wage category. Of the 46 million Americans in 2001 who were not yet married, median earnings were roughly $17,000; that is, 50 percent earned below the median. For women who had households of their own in 2001, their median income was $18,472. Meanwhile, the number of people working part time broke 25 million for the first time this past November. Of these, 4.9 million are classified as "involuntary part time," meaning they would rather be working full time. This number alone has increased 600,000 from a year ago and 1.6 million since the recession began in 2001. And more of these jobs offer no benefits, little opportunity for mobility, and slim prospects for long-term security.
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