By Jonathan Yee
Today, economists are heralding the promising signs of the beginning of the end of the recession.
Job losses for the month of July were at 247,000, down from 443,000 job losses in June. The national unemployment rate even decreased! From its previous 9.5 percent to, wait for it, 9.4 percent! People are celebrating the fact that the financial system has been saved and is no longer on the verge of collapse. People are excited that U.S. business investment has bottomed out. For economists, it’s a signal that things in the economy will pick up again.
But before we start breaking out the bubbly, let’s pause a second. First, the numbers of the long-term unemployed (those who’ve been out of work for over 15 weeks) are at an all-time high. And some argue that the tiny dip in the unemployment rate is due more to the fact that people have just given up on looking for work.
But there is more to note here. Let’s take a moment to review the economic principles that undergird our nation’s economy.
Our understanding of the job structure of our economy is that poor people need more skills and more education in order to get the right jobs to find a pathway out of poverty. But this assumes there are an infinite amount of high paying jobs to go around.
The economy is comprised of basically three types of jobs – symbolic analysts, service workers, and routine workers. Symbolic analysts are “engineers, attorneys, scientists, professors, executives, journalists, consultants and other “mind workers” who engage in processing information and symbols for a living” which comprise of 20% of the workforce. Service workers are “waitresses, janitors, hospital attendants, and child care workers.” Routine workers are “those who perform repetitive tasks — assembly line workers, data processors, foremen, and supervisors”.
Poverty therefore becomes not a question of skills, but a question of job structure since people are always needed to fill a certain job type.
Studies have shown as technology becomes more advanced routine occupations become replaced. Traditionally these jobs provided enough for a family to be comfortably middle class. But technological advances (and globalization) have eliminated these positions. This slowed down the potential upward mobility of lower-income families. It also increased the vulnerability of the working class in their attempts to find a higher standard of living.
There are economists who believe the solution to poverty depends on increasing competition among workers. This reasoning is inherently unjust because it demands the constant presence of a “low skilled” population who are standing at the ready to fill low-wage jobs. And they deserve to be there, so the logic goes! In economics lingo, this is called “deficient demand.”
Historically, and oh-so-coincidentally, it’s immigrants and people of color who disproportionately fill the ranks of this bottom rung of the jobs ladder. What does this mean in the context of the current recession?
“Race and Recession: How Inequity Rigged the Economy and How to Change the Rules,” released by ARC earlier this year, has some answers:
The Applied Research Center analyzed statistics from the Current Population Survey over a 37-year period and found that unemployment for people of color rarely fell below even the highest, recession-level rates of white unemployment. In this 37-year period, white unemployment hit its peak in 1983 at 9.3%. By comparison, the lowest rate of Black unemployment was 7.7% in 2001, with a 37-year median rate of 12.05%. The median for Latinos, 8.95%, was only slightly lower than the high for whites.
The finding reveals that people of color are consistently facing the crisis of recessionary levels of unemployment. Unemployed people cannot contribute to the economy in essential ways like taxes and consumption. Black unemployment was at least double that of whites for all but five of the last 37 years. Latinos were 1.5 times more likely to be unemployed than whites for 28 out of 37 years.
So, not only is the premise of the job skills gap theory and social hierarchy suspect, it’s also unclear today whether businesses will even be able to rehire the so-called “low skilled workforce” who are currently out of work when the economy picks up again.
Gordon Lafer, a political economist at the University of Oregon, in a study for the 90s and the early new millennium references these limitations in the job structure. He estimates the lack of good jobs by basically calculating the difference needed to overcome the poverty gap for families and individuals below the poverty line.
His numbers show that the United States lacks 25 million good jobs to bridge the poverty gap (based on the Orshansky poverty thresholds, which is much higher than the current official poverty thresholds). Based on the official poverty thresholds Lafer estimated that the United States lacks 16 million good jobs to bridge the poverty gap. Then he compared those numbers with Bureau of Labor Statistics numbers that states that during the 90s only 1.5 million to 3.2 million jobs would be created.
Today’s news is good news. But it’s not great. And when it’s obvious that the numbers, and government reaction, don’t reflect our lived realities, it makes it all the more frustrating.
Jonathan Yee is a research intern with the Applied Research Center, and a fourth year economics major at UC Berkeley.