Last month, I mentioned that 71 percent of the new jobs created so far this year were part-time jobs. The release of the latest job numbers on Friday shows a slight drop to 67 percent. This under-employment of the labor force is visible not only in the lower-than-desired hours people are working, but also in the kinds of jobs they are getting. Bloomberg News has an article by Ian Katz and Alex Tanzi this morning showing that while women have seen some advances on the job front, the gains have been in lower-skill and lower-paying industries.
Unemployment data appear to reflect big advances for women. The jobless rate in August for females 20 years and older was 6.3 percent, the lowest since December 2008, compared with 7.1 percent for men. As recently as January, the rate was 7.3 percent for both genders, according to the Bureau of Labor Statistics.
The downside is that the gains have been largely in lower-paying industries such as waitresses, in-home health care, food preparation and housekeeping. About 60 percent of the increase in employment for women from 2009 to 2012 was in jobs that pay less than $10.10 an hour, compared with 20 percent for men, according to a study by the National Women’s Law Center using data from the Bureau of Labor Statistics. . . .
Of the 125,000 jobs women gained last month, 54,000 were in retail, leisure and hospitality, and just 24,000 in professional and business services. Many of those are part-time, 34 hours or less a week.
This is not the only data pointing to a record low workweek in low-wage industries. The fact that under-employment is becoming a salient aspect of the labor market is very disconcerting, since it can have serious long-term effects.
Making things worse, of course, is the fact that workers, and women in particular, are dropping out of the labor force:
While students and recent graduates are taking low-wage jobs to get started, other women are turning them down. About 2 million married women have dropped out of the work force since 2008.
“If they’re in a two-income house they’re more willing to drop out and take care of the children because it costs too much for day care,” Swonk said.
This trend in the labor market is unlikely to stop under the current government policies. Economists have shown that as the government grows and hands out more and more benefits, the incentives to work can diminish. Read, for instance, this piece from Ed Lazear called “The Hidden Jobless Disaster,” which mentions the work of University of Chicago economist Casey Mulligan on this issue. Here is the relevant part:
Why have so many workers dropped out of the labor force and stopped actively seeking work? Partly this is due to sluggish economic growth. But research by the University of Chicago’s Casey Mulligan has suggested that because government benefits are lost when income rises, some people forgo poor jobs in lieu of government benefits — unemployment insurance, food stamps and disability benefits among the most obvious. The disability rolls have grown by 13% and the number receiving food stamps by 39% since 2009.
As I have explained in the past, Mulligan’s findings are consistent with the work of other economists, such as Nobel laureate Ed Prescott. Prescott’s work looks at the question of labor supply and incentive to work in a different context, but it remains useful to explain some of what’s going on here. In his famous 2004 paper “Why Do Americans Work So Much More Than Europeans?,” he shows that workers spend considerably more hours working when marginal tax rates on their incomes are lower. So basically, over time, people reduce the number of hours they work, economic growth slows down, and less revenue is collected. But Prescott’s other big insight is that a generous redistributive system makes it easier to reduce the labor supply.
No matter how you look at it, the labor market is not doing well. That being said, the artificial creation of jobs by the government isn’t the solution to our problem. The Bloomberg article is here.