The Exchange

Where Have All the ‘Good’ Jobs Gone?

The Exchange

The U.S. workforce today is older and better-educated than it was in the 1970s. In 2010 more than a third (34%) of workers had a four-year college degree compared with one-fifth (19%) of workers in 1979.

Logic might dictate that better-educated workers would generally be compensated with higher pay and superior benefits, and that the share of good jobs in the economy would have increased in line with a higher-quality labor force.

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But sadly, that's not the case, according to a paper out today from the Center for Economic and Policy Research, a left-leaning think tank. In fact, the report found, the economy isn't generating as many of these so-called good jobs (more on those below) as it did 30 years ago.

What's Considered a Good Job?

How do you define a good job? The authors, John Schmitt, a senior economist at CEPR, and Janelle Jones, a research assistant, base it on three factors: earnings, health insurance and retirement. (The authors use the Census Bureau's Current Population Survey data about household earnings, health coverage and retirement plan participation.) First, the job must pay at least $18.50 an hour, or about $37,000 annually. (That was the median hourly pay, in inflation-adjusted 2010 dollars, for men in 1979.) In 2010, about 47% of workers were above that $18.50-an-hour threshold, up from 40.6% in 1979 — a slight improvement.

The second component of a good job is employer-sponsored health insurance, in which the employer pays at least some portion of the premium. The authors note that, between 1979 and 2010, employer-provided coverage dropped sharply; the share of covered workers fell nearly 13 percentage points. The third requirement is participation in an employer-sponsored retirement plan (pension and 401(k) plan).

Based on those three criteria, Schmitt and Jones found that just 24.6% of all jobs in 2010 qualified as good jobs — down from 27.4% in 1979. So despite a more qualified workforce and a 63% increase in per-person GDP, the share of good jobs in the economy fell 2.8 percentage points over the past three decades, the report says.

Worse Off Than in 1979

What's holding back the economy's ability to generate good jobs? One common explanation floated around of late points to a skills gap. We've got an 8.2% unemployment rate but companies are reporting trouble filling open positions because of a lack of qualified applicants.

Schmitt disputes that argument with simple supply-and-demand theory: "If that were true and widespread, we'd see wages of workers rising, because employers would try to steal away qualified workers from other employers. We're not seeing that in the data — we're not seeing an increase in wages relative to last year, or the year before, or before that."

The drop-off, he says, has been a long time coming. He attributes it to a "deterioration in the bargaining power of workers, especially those at the middle and the bottom of the income scale." The main cause of the loss in bargaining power is the restructuring of the labor market that began in the late 1970s and continues today: the number of unionized workers has fallen; large industries were deregulated; many state and local government jobs were privatized; and the inflation-adjusted value of the minimum wage rate today is 15% below what it was in 1979.

"The recession hurt, but the trends were longstanding," Schmitt says.

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