Early on in the financial crisis there was talk of this finally being the Wall Street recession. Investment bankers, CEOs and other high paid types would be thrown out of their jobs or see they paychecks cut. Manufacturing and other sectors that employ middle class workers would see a comeback. But, according to a new study from National Employment Law Project, that’s not how things worked out. Recessions often narrow the income gap. This recession has done the opposite.
The study, which was authored by NELP’s Annette Bernhardt, found that by far the bulk of the jobs lost, 60%, were in the middle range of the income scale. That compares to 21.3% for workers in high income jobs, and 18.7% for low-wage workers. Given the job loss, you would expect middle-income jobs to have rebounded the most in the past two years. But that’s not the case. In fact, 73% of the jobs that have been added since the beginning of the recession have been in what the study calls low wage jobs. The middle class squeeze is still on.
The study looked at 366 professions and broke them into three groups with an equal number of workers in each. That makes it possible to compare the job loss, but it means that the income numbers for middle and low end workers are perhaps lower than you would expect. Jobs that paid roughly more than $43,000 were deemed to be relatively high wage professions. Income in the $28,000 to $43,000 were categorized as middle-income job. Anyone below that was in the low-income category.
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Based on those categories the study found that 73% of the jobs added by employers since the end of the recession were in the low range category. Worse, those low wage jobs are becoming even more low wage. The study found that average salaries in the lowest income bracket have dropped 2.3% since the beginning of the recession. Workers at the high end of the income scale have actually on average seen their pay rise since the beginning of the recession, up around 1%.
The good news if there is any in the report is that middle-income jobs have seen somewhat of a rebound in the recovery. Workers in the high-end of income scale, like housing, have yet to reach the depth of their recession. Employers are continuing to cut at the high end.
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Still, that’s not enough to reverse the trend that this recession, despite its origins in the world of high finance, is hitting the middle class the worst. Even with the recent uptick, there are still 8.4% fewer middle income jobs than there were at the beginning of the recession. That’s more than twice 4.1% drop in high-earning jobs. Remarkably given the really weak jobs numbers, the number of low wage jobs in the economy are roughly equal to the number we had before the recession. Of course, you would expect employers in a recovery to add lower wage jobs first. But NELP’s Bernhardt says the rehiring has been even more lopsided than usual.
What does this mean for the U.S. economy? The study does seem to argue that the problem with employment in the economy is more structural than cyclical. If it was just cyclical you would expect jobs to come back equally among sectors. If that is the case, then the government needs to do more to boost industries that provide middle class jobs. But you could also argue that the lack of middle class jobs is a result of weak growth. If the recovery had been faster, we would have seen an up tick in middle class employment. And that may happen once the recovery accelerates. The one thing you can say for sure is that at least so far the recovery has been just as unhealthy as the boom and bust that lead up to it.