Friday, July 29, 2011

High Wage Job Losses; Low Wage Job Gains – More Explanation of What Has Gone Wrong with the Recovery

No Explanation of How to Fix It

The Great Recession, circa Jan. 2008 to ??? should be in recovery phase at this time.  Recovery in the average post World War II Recession has taken place in far shorter time than this recession.  The explanation is that The Great Recession has been unique in two ways, a collapse of the financial system and a collapse of asset (housing) prices.

A third reason why the Great Recession and its so-called recovery are different has been developed by The National Employment Law Project, a liberal leaning think tank.  This group has issued a report and found that 

Net change in occupational employment during and after the Great Recession.During the Great Recession, employment losses occurred across the board, but were concentrated in mid-wage occupations. Of the net losses during this period, 21.3 percent were in lower-wage occupations, 60.0 percent were in mid-wage occupations, and 18.7 percent were in higher-wage occupations. But in the weak recovery to date, employment growth has been concentrated in lower-wage occupations, with minimal growth in mid-wage occupations and net losses in higher-wage occupations.

In short, job losses were in relatively high paying positions, job gains have been in relatively low paying positions.
From an economic policy point of view this is very bad news.  It means that the income of those returning to employment is less than their previous employment, which means their consumption is less which means aggregate demand is less.  The U.S. economy simply cannot fully recover without increases in income over current level to low and middle income workers. 

Nope, Can't happen, won’t happen.

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