Mar
23
Class 16 – Job Creation – Mohd Sakib
March 23, 2015 | Leave a Comment
Wage gap and sluggish employment growth within the United States have been significant underlying drivers to income inequality within the past few decades. Wage gap specifically definitely supports the phrase that the rich get richer and the poor either stay the same or get poorer. The report made by The United States Conference of Mayors (USCM) provides surprising analysis on how wage gap has increased from recent recessions in addition to how annual wage for new jobs post-2008 recession has decreased relative to the jobs lost during that same period. According to the report, the annual wage of those lost jobs were $61,637, whereas the average wages of new jobs are $47,171; leading to a whopping $93 billion in lost wages. Moreover, the top 5% of incomes gained a shocking $490 billion or 27.6% in 2012 income whereas; the bottom 40% received just 6.6%. It seems that any way you slice the statistics on annual wage trends, there is a disappointing and inequitable picture of America’s population.
Unfortunately, there haven’t been extensive federal legislations passed due to conflicting point of views within congress. This standstill has put millions of families and individuals at a disadvantage, as it is argued that new opportunities must be carved out by the government for the low-middle income public. I was pleasantly surprised to read that even though there hasn’t been progress on the federal level, there has been movement within the state level. I definitely believe that the new USCM Cities of Opportunity Task Force is a fantastic organization and initiative put forth by the various mayors from the different states in the United States. Bringing together mayors to brainstorm new agendas that combat the drivers of income inequality is collusion that should be present on the national level as well. The organization also aligns well with Mayor Bill de Blasio’s plans to attack income inequality within NY. The report mentions how the Task Force has “identified three areas in which many of us believe there can be short-term, meaningful impact” but doesn’t actually elaborate on what these focal points are, and what proposals the group has actually come up with. I would like to know what plans they propose in the future, and I believe this partnership is a step in the right direction.
Sluggish job growth is another negative factor that influences both wage gap and income inequality, making a very detrimental combination that hurts the economy as a whole. The New York Times article “Job Growth Is Sluggish, Raising Fear of Malaise” by Nelson D. Schwartz delves into the underlying factors as to why there is still economic discontent within the US even though there are some signs of recovery via certain metrics. Surprisingly, the article explains how the labor participation rate fell to 62.8%; the lowest level since the late 1970s. This fact corroborates the fact that the unemployment rate fell to 6.1% primarily due to Americans dropping out of the labor force rather than obtaining work. I was also surprised to learn that even though there are more job opportunities now than previously in the years following the 2008 recession, it is very difficult to draw people back into the work force. The fact that some individuals do prefer to stick with government benefits is also unexpected as well.
I was not so surprised however, by the fact that the services sector fared much better than blue-collar sectors, due to the noticeable shift to various services industries from industrial ones. I definitely agree that there is also a dichotomy between skilled and unskilled workers as there is a need to place these unskilled workers in more jobs. Even though the article does a good job on illustrating how job growth has been slowing down and affecting other parts of the economy, I feel like the author has a relatively short-term view on this subject. He is basing his discussion on slow job growth solely on the data corresponding to the month of August in 2014. If the same conclusions and data were based on yearly trends than it would have been much more alarming and a better representative of how our job market has been performing post-recession. Economic metrics fluctuate quarter to quarter and so, I don’t think it’s accurate to say that the US’ job market is completely dismal, even if it is not as strong as it should be.
The article “2014 Job Creation Faster in States that Raised the Minimum Wage” by CEPR presents an analysis that centers on a possible initiative that may improve sluggish employment growth. Surprisingly, the 13 states that have increased their minimum wage in 2014 have enjoyed faster employment growth compared to other states where the minimum wage stayed at its 2013 level. This positive growth may not be a direct outcome of the increased minimum wage exactly however; it shows that the supposedly negative employment effects of minimum-wage increases aren’t necessarily true. I think there should be further analyses on why employment growth increased in these states to possibly establish a causality effect from minimum-wage increases.
