Is the new economy creating good jobs?
Erik Olin Wright and Rachel Dwyer
In February 2000, when the current American economic expansion
passed its 107th month, President Clinton proudly announced that this
expansion was the most sustained in US history, surpassing even the
"golden age" of the 1960s. Praise for American economic performance
extends well beyond our borders. Throughout the developed world, the
American economy now serves as a model of dynamic growth and job creation.
European politicians envy the low rate of unemployment herehalf
the official levels in many European countriesand marvel at all
the new jobs.
To be sure, American
economic performance has its critics. Some analysts argue that American
and European unemployment rates are not so different, once one takes
into consideration the vastly higher rate of imprisonment here.1
Incarceration rates in the United States rose dramatically in the 1990s,
and prisoners are drawn from a segment of the population with high rates
of unemployment. Adjusting the unemployment rate in the United States
for incarceration rates could add as much as two percentage points to
the unemployment rate, which would push the US rate above that of a
number of European countries.
A more common criticism points to the costs of the American
strategy of employment growth. American success is founded on "flexible"
labor markets, which allow employersespecially in the context
of globalization, NAFTA, and the WTOto hire and fire employees
relatively easily, reorganize employment structures in response to market
conditions, and adjust wages as needed, especially in a downward direction.
As a result, job growth is accompanied by persistent poverty, continuing
high levels of inequality, and the growth of poorly paid, dead-end service
sector jobs. While these critics acknowledge the recent American success
at creating jobs, they also argue that the jobs are "lousy"with
low pay and little chance for improvement.
Are the critics right? Is the American "jobs miracle"
based on the expansion of lousy jobs? More precisely, what is the distribution
of job qualitythe balance of good and badin the current
expansion, and how does this distribution compare to earlier job expansions?
Before celebrating the American model, and urging its emulation elsewhere,
we need answers to these questions.
An advertisement in the Economist by the Pfizer
company in 1999 reports one line of response:
But what about
the quality of the new jobs created? The figures about the American
labour market tell us a quite different story from the "trash-job-and-working-poor"
litany that we so often hear. Since 1983 about 50 percent of the new
net jobs created in the US economyabout 15 millionwere
in the managerial and professional sector, and adding the medium-skilled
occupations, the figure rises to over 80 percent. Furthermore, around
70 percent of the new net jobs were in occupations remunerated above
the median income for all full-time employees.2
The assertions in
Pfizers ad are based on a widely cited report on the topic prepared
by Joseph Stiglitz when he was chairman of the Presidents Council
of Economic Advisors.3
The report is based on a study of the 1994-1996 expansion. Using Current
Population Survey data provided by the US Census Bureau, Stiglitz constructed
an "occupation-by-sector matrix": in effect, a table listing
22 different sectors of the economy and 45 occupations in each sector.
Typical examples of sectors are "durable goods manufacturing,"
"educational services," and "wholesale trade"; typical
examples of occupations include "machine operators,"
"teachers (except college and university)," "secretaries,"
and "engineers." This dissection of the labor market yielded
a total of 990 potential kinds of "jobs" (cells in the matrix).
After eliminating empty and small cells, some 250 or so jobs, accounting
for roughly 95 percent of total employment, remained. Stiglitz and his
colleagues then calculated the median weekly earnings of full-time employees
in each of the 250 cells and defined "job quality" by the
distribution of these cell medians. Intuitively, good jobs were the
jobs in above-average categories and lousy jobs were in the below-average
categories. More precisely, "good jobs" were defined as all
cells in this job matrix with median earnings above that of the median
cell for the whole matrix, and "bad jobs" were defined as
cells with median earnings below the median cell.
The final step
in the analysis was to calculate the change in the number of people
in each cell between 1994 and 1996. The central finding was striking:
roughly 68 percent of all net job growth was among the good jobs, and
roughly 50 percent of all net job growth was in jobs in the top three
deciles of the earnings distribution.4
The conclusion offered in the report, and summarized in the Pfizer ad,
was that the job expansion was strongly weighted towards the creation
of good jobs.
The Stiglitz report received a great deal of press at
the time of its release. Unfortunately, its political influence is greater
than its analytical insight, in two principal ways. First, while it
is true that many of the newly created jobs are good, it is also true
that lots are lousy and there has been little expansion in between.
In short, the true story is one of job polarization, and not
simply growth at the top. Second, while job growth for white
Americans has been concentrated at the good end of the spectrum, job
growth for blacks and Hispanics has been concentrated at the lousy end.
The full story then is also one of racial division in the labor
Strategy of Analysis
To evaluate the quality
of newly-created jobs in the current economic expansion, we examined
the entire period of expansion in the 1990s (recall that Stiglitz only
studied 1994-96), compared the recent period with the "Golden Age"of
the 1960s, and studied the role of gender and race in each period.5
The two pivotal tasks for exploring the distribution of job quality
during these expansions are to categorize jobs, and to figure out how
to measure the "quality" of different categories of jobs.
we classified jobs on the basis of occupation-by-sector matrices, using
data from the Current Population Survey (CPS)45 occupations by
22 sectors in the 1990s (the identical categories as those used by Stiglitz)
and, because of limitations in the available data, 32 occupations by
21 sectors in the 1960s.6
In principle there would be 990 jobs (45 x 22) within this matrix in
the 1990s data and 672 jobs (32 x 21) in the 1960s data, but not all
of these cells had any CPS survey respondents in them at both the beginning
and end of the expansion.7
Our analysis, therefore, is based on changes in the number of people
in those cells in which there were sample cases in both the first year
of the expansion and the last: 746 job categories for the 1990s, and
296 in the 1960s.
On the measurement
of job quality: ideally we would like to rank job categories from best
to worst on the basis of an index of job properties, including wages,
job security, working conditions, fringe benefits, and career potentials.
In practice, however, the only consistent indicator of job quality available
is the earnings of people in these jobs. Moreover, while many other
job attributes are obviously important to people, most desirable features
of jobs are correlated with earnings. So, again following Stiglitzs
general method, we measured job quality by the median hourly earnings
of full-time employees in the job categories derived from the occupation-by-sector
In 1992, the best of the 746 jobs was lawyers in wholesale trade with
median hourly earnings of $43.23, while the worst was the occupational
category "fabricators, assemblers, inspectors, and samplers"
in the "social services" sector with median earnings of $4.32.
(For jobs with large numbers of people in them, the best job was "health
diagnosing" in the "other medical services" sector, with
median hourly earnings of $30.75; the worst was "private household
service workers" in the "private household services"
sector, with median hourly earnings of $5.32).
Our goal, then, is to measure the relative contributions
to the job expansion of jobs of differential quality defined by the
median hourly earnings of job categories. In doing this, we face a methodological
problem: the cells in our job matrix are of vastly different sizes.
For example, "engineers" (occupation) in "social services"
(sector) is quite small, with roughly 750 people in that job across
the United States in 1999, whereas "teachers except college and
university" (occupation) in "educational services" (sector)
includes 3.6 million people in that year. It makes little sense, therefore,
to simply chart the contribution of each cell to the overall expansion
of jobs, since the large categories will tend to contribute more to
job growth simply because they are bigger. We could correct for these
differences in the number of people in different jobs by shifting to
an analysis of the rates of growth of different jobsthat is, the
change in employment in a cell divided by the size at the beginning
of a period. But the cells with the highest growth rates might be small
cells that do not contribute much to the overall expansion of jobs.
A massive expansion in a tiny, well-paid job celltripling the
number of engineers in social services, for examplewould not imply
a large contribution to overall job growth.
Instead, we grouped
jobs of similar earnings-defined quality into larger categories with
more or less equal numbers of people at the beginning of a job expansion.
To do this we first rank-ordered the cells in the matrix from best to
worst: that is, from the highest median weekly earnings to the lowest.
We then grouped this ranked-ordered set of cells into ten ordered categories,
each containing close to 10 percent of the labor force at the beginning
of a job expansion.9
We refer to these aggregated categories of jobs as "job-quality
deciles." The bottom decile contains the roughly 10 percent of
the labor force in jobs with the lowest median earnings; the highest
decile contains the roughly 10 percent of the labor force in jobs with
the highest median weekly earnings; and so on. These job-quality deciles
are the primary categories we will use in assessing what jobs have contributed
the most to the expansion of jobs in the American economy. To convey
a sense of what sorts of jobs fall within each of the deciles, the three
largest job categories within each decile in the 1990s are given in
Not everyone will find this way of classifying jobs and
job quality satisfactory. Even though we have divided the job structure
into hundreds of job categories, many of these categories remain quite
heterogeneous. For example, the category "college and university
teachers in the educational services sector" includes community
college faculty earning $30,000 per year and professors in elite law
schools earning over $250,000 per year. Similarly, "other executives,
administrators, and managers" in "finance, insurance, and
real estate" comprises CEOs of multinational insurance corporations
and executives in local real estate companies. So, while 20 percent
of the net job expansion in the 1990s was generated by the highest job-quality
decile, this increase might not reflect an expansion of high-paying
jobs: a big expansion in "college and university teachers in the
educational services sector" might have occurred principally because
community colleges were hiring new faculty.
An alternative strategy, therefore, would be to ignore
occupation and sector entirely and simply treat jobs as earnings-generating
employment contracts. We could then study how this job-earnings distribution
changes during job expansions. Much recent research on growth of earnings
inequality does precisely this. But while direct analyses of the earnings
distribution are certainly important, it is also important to have a
clear idea of how jobs are changing. Employers do not simply make employment
offers at a specified earnings level; they make job offers to do particular
kinds of things (occupations) within particular kinds of firms (sectors)
at particular levels of earnings. Jobs within the occupation-by-sector
matrix are a rough proxy for types of jobs created by firms. We want
to know whether or not the occupations and sectors with the highest
paying jobsdefined by median earningsare the ones that are
growing the most rapidly.
Patterns of Job Growth
Consider, then, the
distribution of job quality in the net job expansion during the long,
sustained employment boom of the 1990s. Figure
1 [Acrobat Reader required for all figures] presents the contribution
of each of the job-quality deciles (defined at the beginning of the
employment expansion in 1992) to the growth of jobs between 1992 and
1999. The results are striking. The biggest contributor to the job expansion
was the highest decile: over 20 percent of the net expansion of jobs
during the 1990s came from these jobs. So far, the results seem consistent
with the Stiglitz study.
The second biggest contributor, however, was the worst
decile, which contributed about 17 percent of the net job expansion.
Nearly 40 percent of the total net job expansion occurred among the
very best and the very worst kinds of jobs in the American economy.
The jobs that contributed least to the job expansion occur in the second
through fifth deciles of job quality. In 1992, these accounted for almost
40 percent of the labor force, but only 14 percent of the net expansion
of jobs came from these categories.
Overall, then, the 1990s job expansion was dominated by
the net expansion of employment among relatively good jobsthe
top three deciles accounted for almost 50 percent of job expansion.
But it was also marked by strong polarization in the pattern of employment
growth: strong expansion at the tails of the job-quality distribution,
combined with weak growth among average to just-below-average jobs.
So the skeptics who emphasize lousy jobs also have a point.
To understand the
polarization of job growth in the 1990s, consider the contrast (see
2) between the pattern for the 1990s and the pattern for the
1960s. In the 1960s, lowest decile contributed the least to job creation:
less than 2 percent of the net job growth came from this category of
jobs. The bottom four deciles, in fact, collectively generated less
than 20 percent of job expansion. (In the 1990s, the bottom decile alone
generated 17 percent of net job expansion.) In addition, while job expansion
at the top of the job structure was strong in the 1960s, the top deciles
did not generate quite as high a proportion of total job expansion as
in the 1990s. In the earlier decade, just over 40 percent of the job
expansion came from the top three job-quality deciles, whereas in the
1990s these categories generated nearly 50 percent of the job expansion.
Finally, in the 1960s the two middle deciles of the job structure generated
30 percent of the job expansion, compared to only 12 percent in the
1990s. Overall, then, the 1960s were a period of strong employment growth
in the middle and upper segments of the job distribution, whereas the
1990s were characterized by much more polarized job expansion with particularly
robust expansion among high-end job categories.10
These claims about job polarization in the 1990s might
be challenged in either of two ways: by reference to problems of youth
employment or numbers of part-time workers.
As has frequently been noted, the past several decades
have seen a fairly steady decline of employment in manufacturing and
growth of employment in services, including substantial growth in low-end
service jobs. One of the iconic images of deindustrialization is the
replacement of well-paid, high-skill industrial jobs with hamburger-flipping
jobs. Because these low-end service jobs, especially in food services,
are disproportionately filled by teenagers and young adults, it is possible
that the rapid expansion of the lowest-paid job categories in the 1990s
was largely the result of more jobs for young workers. The polarization
shown in Figure 1 might not matter much if the rapid growth of
jobs in the bottom decile was mainly an expansion of opportunity for
early employment experience for teenagers.
To assess this objection,
consider what happens when we confine our attention to full-time employees
between the ages of thirty and 55.111
3 shows, the pattern is virtually identical to the pattern for
all full-time workers in both the 1990s and the 1960s. The polarization
of job expansion in the 1990s cannot be attributed to the expansion
of employment opportunities for young workers.
A second objection is that the restriction of our analysis
to full-time workers could also affect the results. A central theme
in contemporary discussions of changes in labor markets and employment
relations is the growth of various forms of nonstandard and "flexible"
work. While Figure 1 shows very strong expansion of employment
in the top three deciles of the employment structure, these results
could be misleading if there was a massive growth in part-time employment
in jobs in the lowest deciles.
4 indicates that this, too, was not the case in the 1990s.12
Broadly, we see the same kind of polarization in the net job expansion
among part-time employees as among full-time employees. If anything,
the contribution to net job expansion of the top deciles for part-time
work is even greater than for full-time work: nearly two-thirds of the
net job expansion in part-time work was generated by the jobs in the
top three job-quality deciles.13
The pattern in Figure 1, therefore, cannot be attributed to the
restriction to full-time jobs.
Race and Gender
So, in both the "Golden
Age" of the 1960s and the "new economy" of the 1990s,
the job categories at the high end of the job distribution contributed
disproportionately to job expansion. In the 1990s, but not the 1960s,
the very bottom of the job structure also contributed substantially
to job expansion, and the middle of the distribution made only a marginal
contribution. The net result is a polarized job expansion.
Taking race and
gender into account sharpens the contrasts between the two expansions
and clarifies the nature of the polarization. Consider the contributions
of each job-quality decile to the net expansion of employment in the
1960s and the 1990s within each of the race-gender categories. Because
of data limitations, in the 1960s we can only distinguish four categories:
white males, white females, black males, and black females. In the 1990s
we can divide the white racial group into Hispanic and non-Hispanic
whites. The results, presented in Figure
5 and Figure
6, reveal quite dramatic variations, both over time and across
In the 1960s, gender differences in the patterns of job
expansion were much sharper than racial differences. Virtually none
of the job expansion for white men or black men in the 1960s occurred
in the bottom four job-quality deciles: these four deciles accounted
for -2.6 percent of the net job expansion for white men and -23.1 percent
of the net job expansion for black men. In contrast, for women of both
races job expansion was heavily concentrated in the bottom deciles of
the job-quality distribution: fully 48 percent of the net job expansion
for white women and 52 percent for black women occurred in the bottom
four deciles. At the other end of the job-quality distribution, 67 percent
of the net job expansion for white men and 44 percent of the job expansion
for black men occurred in the top three deciles, compared to 12 percent
of the net expansion for black women and 13 percent for white women.
Although racial differences in patterns of job expansion among men were
not negligible in the 1960s, they were relatively muted compared to
the dramatic difference between men and women.
In contrast, in the 1990s (see Figure 6), the racial
differences in patterns of net job expansion are bigger than the gender
differences. Among non-Hispanic whitesmen and womenjob expansion
is heavily concentrated in the top deciles: in the 1990s, 62 percent
of the net job expansion for white men and nearly 90 percent for white
women occurred in the top three job-quality deciles. The polarization
we observed for the labor force as a whole is completely absent
among white men (only 6 percent of the net job expansion for white men
occurred in the lowest decile of the job structure), and present only
in a muted way among white women, for whom 13.4 percent of the net job
expansion occurred in the bottom decile of jobs.
The patterns for non-white men and women in the 1990s
differ sharply from the pattern for whites. For all four non-white race-gender
categories, job expansion was concentrated in the lower deciles of the
job-quality distribution. The bottom two deciles accounted for 50 percent
of the net job expansion for Hispanic women, 35 percent for Hispanic
men, 25 percent for black women and 28 percent for black men (compared
to 15 percent of the net job expansion for white women and only 4 percent
for white men). Polarization of job expansion is also present among
blacks and Hispanic men, although not among Hispanic women.
The pattern of polarized
job expansion in the 1990s we observed in Figure 2, therefore,
has a very strong racial character. This is illustrated in Figure
7, where the contributions of each job-quality decile to net
employment expansion in the 1990s is broken down into the racial categories.15
In 1992, at the outset of the 1990s job expansion, 30 percent of those
in jobs below the median were black or Hispanic. If no process of racial
polarization existed in the employment expansion then roughly 30 percent
of the net expansion of jobs in these categories would also have been
filled by blacks and Hispanics. The actual figure is over 95 percent.
In 1992, 70 percent of employees in jobs below the median were white,
yet less than 5 percent of the net expansion of these job categories
in the 1990s was filled by whites. At the other end of the job-quality
spectrum, 77.9 percent of the job expansion in the top two deciles was
filled by whites.
Putting these various observations together, we can safely
1. The pattern of job expansion among white men is virtually
the same in both the 1960s and 1990s: it is heavily weighted at the
high end of the job structure with little polarization of employment
2. The pattern of job expansion for white women changes
dramatically across the two periods. In the 1960s, this expansion was
concentrated in the middle and bottom of the employment structure; in
the 1990s, it has been heavily concentrated at the top. In the 1960s
the profile of job expansion among white men differed sharply from that
among white women; in the 1990s, the two patterns have substantially
3. Racial differences in patterns of employment expansion
have increased to the point that the 1990s can be characterized as a
period of racially polarized job expansion. The net expansion
of jobs at the bottom of the employment distribution is overwhelmingly
dominated by minorities whereas the expansion of employment at the top
is strongly dominated by whites.
Does it Matter?
Does the sustained
expansion of employment in the United States in the 1990s conform, then,
to the rosy picture of the "jobs miracle" touted at home and
abroad? It is certainly true that many new jobs have been created in
the United States during this period. And if one dichotomizes jobs into
two simple categoriesgood jobs (above the median) and bad jobs
(below it)then most of the American jobs expansion in the 1990s
occurred among "good jobs": about two-thirds of the net expansion
was among jobs in the sixth to tenth deciles of the job-quality distribution.
So the evidence does not support a simple summary judgment that crummy
jobs dominate the job expansion.
But it should now be clear that this summary judgment
tells only part of the story. In the 1960s, the sustained job expansion
was unequivocally a process of upgrading the employment structure. The
1990s expansion was characterized by a polarization of employment opportunities,
albeit a polarization weighted toward the high end of the job structure.
Moreover, this polarized pattern of job expansion was highly racialized.
Employment for whitesboth men and womenexpanded sharply
among the better jobs in the employment structure, whereas new jobs
for blacks and Hispanics concentrated at the bottom of the employment
This pattern of employment expansion has deep implications
for the nature of social inequality in the United States. First, it
suggests that the problem of poverty in the United States increasingly
concerns the working poor rather than primarily people marginalized
from the system of employment altogether. This is not to say that the
link between poverty and unemployment and exclusion from the labor force
has disappeared, but rather that an increasing proportion of poor people
are working full-time in jobs that pay below poverty-level wages. To
seriously tackle poverty in America today requires more than just getting
poor people into jobs; it requires changing the quality of jobs available
Second, the very slow rate of growth of jobs in the lower-middle
range of job quality suggests that it will become increasingly difficult
for people working in the very worst jobs to move up in the employment
structure. Most upward job mobility is to jobs that are only modestly
better than the job one holds. People in the bottom decile of employment
are unlikely to make a jump directly to jobs in the sixth to tenth deciles.
Since jobs in the second through fifth deciles of the employment structure
have been growing at about a third of the rate of the labor force as
a whole, people employed in the rapidly expanding bottom job decile
face limited opportunities for improvements in employment.
Third, the pattern of job expansion in the 1990s suggests
significant transformations in the structure of racial stratification.
Since the 1960s, there has been a considerable expansion of employment
of African Americans and other racial minorities in what are loosely
described as middle-class jobs. The proportion of doctors, lawyers,
professors, managers, and executives who are African American has increased
significantly. Among these higher-level jobs, therefore, there has been
a gradual deracialization. Among jobs at the bottom of the employment
structure, on the other hand, the 1990s witnessed a process of deepening
racialization. Only 2 percent of the expansion of jobs among non-Hispanic
whites occurred in the jobs below the median job category, compared
to nearly 60 percent of net job expansion among blacks and Hispanics
So, what is to be done? What sorts of public policies
are suggested in light of these trends in the American employment structure?
Of course, any thorough analysis of policy alternatives would have to
consider many more issues in current labor market trends than simply
the macro-patterns of job expansion studied here:the patterns of inequalities
within these jobs categories; the problem of contingent and part-time
work; the patterns of mobility across these job categories for different
demographic groups; the relationship between patterns of job creation
and things like firm size, technical change, and linkages to the global
economy; and so on. Still, we think our analysis has something to say
about current debates about government policy. What we offer here, therefore,
is a short discussion of a range of policy directions that bear on the
specific problem of the polarized pattern of job expansion rather than
a comprehensive discussion of government policies, labor markets, and
If one agrees that the patterns we have documented of
polarized job expansion in the 1990sparticularly the racialized
form of that polarizationpresent a problem, then there are two
broad categories of policy response. Option one: Dont worry too
much about job polarization per se. Let the market determine the character
of the jobs that are created, but in various ways ameliorate the impact
of such polarization on the standards of living underwritten by these
jobs. If the expansion of jobs generated by the market is polarized,
this is what the "New Economy" needs. The task of government
is to insure that people in these jobsthe "working poor"nevertheless
live decent lives. Option two: Use public policy to directly affect
the patterns of job growth, encouraging in various ways job growth in
the middle of the employment structure and discouraging it at the bottom.
The pattern of job expansion is not some "natural" result
of the operation of efficient markets, but the inevitable result of
all sorts of public policies: the nature of the tax code, the institutions
of skill formation, the regulation of the employment contract and working
conditions, the minimum wage, and laws regulating unions. The task of
government is to design such policies in such a way as to rebuild social
mobility and expand job opportunities in the middle of the employment
to the economic polarization in the United States have tended to take
the first of these policy directions, and then only in halting ways.
The most notable example is the Earned Income Tax Credit (EITC), a provision
in the tax code specifically designed to raise standards of living of
the working poor above what they can get through the labor market.16
The EITC is the one redistributive program that was expanded in the
1990s. The failed attempt at creating universal health insurance in
the early 1990s can also be interpreted as an attempt to partially decouple
the standards of living of working people from the pattern of earnings
and benefits generated by the labor market. If the EITC were further
expanded and comprehensive universal health insurance enacted, it would
matter much less whether jobs with low pay were rapidly expanding or
if mobility bridges between those jobs and better paying jobs had collapsed.17
Policy reforms like the EITC leave the distribution of
job quality generated by the labor market largely unaffected. Indeed,
for many policy makers this is one if the virtues of the EITC: the tax
code provides income subsidies to the working poor without mucking about
with the internal operation of labor markets. This would be fine if
there were no negative consequences to an economically polarized employment
structure beyond the standard of living of those at the bottom. But
employment polarization also undermines opportunities for individual
mobility, reduces social solidarity, and reinforces (when polarization
follows racial lines) stereotypes and other forms of racial division.
Moreover, the amount of income-raising that is politically feasible
through the EITC is likely to remain small compared to potential impact
of other programs.
The question, then, is whether public policy can effectively
shift the pattern of job creation and help generate more middle-range
jobs. Here there are two broad kinds of strategies: first, direct intervention
by the state to create certain types of jobs through publicly funded
employment; second, the creation of incentives and institutional infrastructure
to encourage private employers to create such jobs.
Since the triumph of neoliberalism and the demise of Keynesian
views of state intervention, the public-sector employment option has
been completely off the political agenda in the United States. In the
immediate future, there is no real political prospect of launching a
major expansion of public employment, except perhaps of public school
teachers. Nevertheless, we may soon enter a period in which a serious
expansion of public works is once again politically feasible. The oft-noted
neglect over the past quarter century of bridges, public transportation,
public school buildings, and other state-financed infrastructure creates
a need for a considerable expansion of public works. And the large government
budget surpluses generated by the economic expansion of the 1990s make
such an expansion fiscally feasible as well. An expansion of public
works could help shift employment expansion away from personal services,
retail, and other low-end jobs, and toward the middle range of the job
structure. Particularly if one wants to counteract racial polarization,
a significant expansion of public works could be important, since it
is easier to direct public works towards specific labor markets and
populations than it is to direct private-sector employment.
In a variety of
ways, public policy can also have a significant impact on the extent
to which private employers create low-end jobs or relatively well-paid,
skilled jobs. This is at the heart of the discussion of "high-road"
versus "low-road" capitalism: high-road capitalism is characterized
by the expansion of relatively well-paid, skilled jobs in the middle
of the employment structure; low-road capitalism by the expansion of
low-skill, low-wage jobs. So, the question is: what can be done, as
Joel Rogers puts it, "to close off the low road, help to pave the
high road, and enable workers and firms stuck on one to walk the other."18
Two policies are especially relevant to closing off the
low road: raising the minimum wage and strengthening the labor movement.
While modest increases in the minimum wage probably have little effect
on the pattern of job creation, a substantial risea rise sufficient
to give people in low-end jobs a "living wage"would
almost certainly dampen the expansion of jobs at the bottom of the job-quality
distribution. Changing labor laws in ways that would facilitate the
growth of unions and strengthen their role in regulating labor markets
and working conditions could also contribute to dampening low-road job
creation. While much would depend upon the specific strategies and visions
adopted by unions, a strong union movement has the potential to reduce
wage differentials by raising wages at the bottom, making subcontracting
to low-wage firms more difficult, and in other ways making "low-road"
strategies more costly for employers.
Closing off the
low road, obviously, is not enough. Unless this is also combined with
policies that encourage the expansion of middle-range jobs and the acquisition
of skills needed to fill those jobs, the result will simply be a decline
in job opportunities for people currently at the bottom of the job-quality
distribution. Improved education and expanded programs of vocational
training, particularly directed towards black and Hispanic communities,
would help, since an inadequate supply of skilled labor impedes the
creation of skilled jobs. But simply expanding the supply of skilled
labor does not automatically call forth the employer demand for such
labor. An effective sustained strategy for expanding middle-range employment
needs to link such training to an industrial policy that creates real
incentives for employers to invest in the right kinds of employment
None of these proposals
can be implemented in a serious way if public policy is driven by the
neoliberal belief that markets should be maximally unconstrained, the
state should be minimally interventionist, and taxes should be as low
as possible. Instead, these policies would require a dramatic increase
in the resources and energy of an affirmative state committed to counteracting
the inegalitarian dynamics of markets. This, in turn, would require
significant increases in taxation on the beneficiaries of the long expansion
of the 1990s. We have the resources to pursue such policies; the question
is simply whether an effective political coalition can be forged to
press for them. In the absence of political will, we are likely to see
more of the same.
Erik Olin Wright
is Vilas Professor of Sociology at the University of Wisconsin and director
of the Real
Utopias Project. He is author of Interrogating
Inequality. A methodological
appendix for this article and other research about inequality is
available at his Web site.
is a Ph.D. candidate in sociology at the University of Wisconsin.
1 Bruce Western and Katherine Beckett, "How Unregulated
Is the US Labor Market? The Penal System as a Labor Market Institution,"
American Journal of Sociology,104 (January 1999): 1030-60.
2 Mauricio Rojas, "The End of Work Fallacy," The Economist,20-26
February 1999, p. 28.
3 Annual Report of the Council of Economic Advisors(Washington:
United States Government Printing Office, 1997).
4 It is important to note that these results refer to
net job expansion rather than job creation per se. There is always a
simultaneous process of the creation of new jobs and the destruction
of already existing jobs. When we observe that a particular cell in
the occupation-by-sector job matrix increased by 10,000 over a period
of time, this could mean the creation of 25,000 new jobs and the destruction
of 15,000 old jobs. We see only the net effect of these two processes.
5 The technical details of the data we use are presented
in the appendix to this paper, available at: http://www.ssc.wisc.edu/~wright/
6One other note on the 1960s data: because of problems
in the CPS surveys in the early 1960s we could not use the data for
the first two years1961 and 1962of the employment expansion.
Our data analysis thus covers the period 1963-1970. For details of the
CPS data problems in the 1960s, see the technical appendix to this paper.
7 Stiglitz dropped all cells from this matrix with fewer
than ten cases; we have decided to include all cells in which there
are cases in both of the years in any time period over which we are
assessing job expansion. None of the substantive results we will report
would be different if we excluded these small cells.
8 A couple of brief further technical notes: (1) We are
using hourly earnings to index job quality rather than weekly earnings,
as in the Stiglitz report. The results are not substantively affected
by this shift, but we felt that hourly earnings was a better measure
of job quality. (2) In order to rank-order the cells of the occupation-by-industry
matrix by median earnings as accurately as possible, we combined the
CPS samples for the entire period of a job expansion and calculated
the median earnings (in constant dollars) of incumbents of these jobs
for this expanded sample. This means, in effect, that the quality of
jobs is being evaluated by the median earnings over the entire period
of a job expansion rather than simply at the beginning. (3) In the 1960s,
respondents were not directly asked about their hourly earnings for
the current job. Instead they were asked about their earnings for the
longest job held the previous year. We therefore had to use this retrospective
data to calculate the median earnings of the occupation-by-sector matrix.
9 Since jobs come in lumpy units, it is not possible to
aggregate the rank ordered jobs into groups each containing exactly
10 percent of the labor force. Thus, for example, of the ten deciles
in 1992, eight contained between 9.6 percent and 10.5 percent of the
labor force, one (the lowest decile) contained 11.4 percent of the labor
force and one (the third decile) 8.2 percent. None of the patterns we
will be examining are significantly affected by these deviations from
equal decile categories.
10 We have conducted similar decompositions of net job
expansion for the expansionary periods in the 1970s (1975-1980) and
the 1980s (1983-1989). The results suggest that these two decades were
transitional between the job expansion pattern of the 1960s and the
1990s. The 1975-1980 job expansion looks like a muted version of the
1960s patternthe bottom deciles contribute somewhat more to the
job expansion than in the 1960s, while the top deciles contribute a
bit less than the 1960s. The polarization pattern in the 1990s begins
to appear in the 1980s, although not as sharply.
11 A technical note on these results: the job quality
deciles in Figure 3 are the same as in Figures 1and 2that
is, these have been calculated on the basis of the entire full-time
labor force sample, not simply the thirty- to 55-year-old adult sample.
This means that there is no longer 10 percent of the older adult labor
force within each of these job quality "deciles," since younger employees
are more concentrated in the lower deciles. In particular, only 8.8
percent of thirty- to 55-year-old employees are in the bottom decile,
yet about 13.9 percent of net job expansion among mature adults comes
from this category of jobs.
12 It was not possible to do a separate analysis for part-time
employees using the 1960s CPS data.
13 In order to facilitate comparisons between Figure
4 for part-time jobs and Figure 1for full-time jobs, we have
used the same job quality deciles in Figure 4as were used in
Figure 1that is, they have been calculated on the basis
of median hourly earnings of jobs in the occupation-by-sector matrix
for the full time sample (rather than recalibrating these deciles just
for part-time workers). This makes the results of Figure 4 particularly
striking, since part-time employment is more concentrated in the bottom
deciles of the overall employment structure than is full-time employment.
Thus, for example, only 3 percent of part-time employees were employed
in the highest job-quality decile in 1992 (the beginning of the 1990s
job expansion), yet over 20 percent of the net job expansion of part-time
work occurred in this decile. If we recalibrate the job-quality deciles
to reflect the distribution of job-quality strictly within the part-time
sample, then this growth at the top appears even stronger: roughly 45
percent of the net expansion of part-time employment in the 1990s was
generated within the top job-quality decile when these deciles are calculated
among part-time jobs.
14 The job quality decile categories in Figures 5
and 6 are the same as those used in the analysis of the full
time labor force as a whole. This means that once we break the analysis
down into separate race-gender categories then there is no longer approximately
10 percent of the relevant category within each of these job quality
deciles. These figures thus present, for each race-gender group, the
distribution of net job expansion for that group across the job quality
categories defined for the entire labor force.
15 The aggregate numbers in Figure 7are slightly
different since we have not included "other races" (mainly Native Americans
and Asians) in the calculations.
16 The EITC is a limited negative income tax for people
in the paid labor force. It gives people an income supplement if their
annual earnings fall below a certain level and various other criteria
17 A more radical policy reform to partially decouple
standards of living from the labor market would be a universal basic
income grant that guaranteed all citizens an above-poverty standard
of living, regardless of their employment status. Whereas the EITC can
be considered a subsidy for low-wage work and thus potentially increases
the supply of workers willing to work for low wages, a basic income
makes it possible for people to exit the labor market entirely, thus
reducing the supply of workers for low-paid jobs. For an extended discussion
of basic income, see Philippe Van Parijs, "A Basic Income for All,"
Boston Review,October/November 2000. For a comparison of Basic
Income with other related proposals, see Erik Olin Wright, "Reducing
Income and Wealth Inequality: Real Utopian Proposals," Contemporary
Sociology (January 2000): 143-155.
18 Joel Rogers, "The Folks Who Brought You the Weekend:
Labor and Independent Politics," in Audacious Democracy,eds.
Steve Fraser and Joshua Freeman (New York: Houghton Mifflin, 1997),
19 An example of
such institutional innovation in skill formation and labor markets is
the much heralded Wisconsin Regional Training Partnership (WRTP). The
WRTP was formed in the mid-1990s in an effort to solve two problems
in worker training in the metalworking industry: that publicly provided
training often had little to do with the actual skills needed within
production; and that employers faced a chronic collective action problem
when providing high-level, flexible training to employees, since each
employer is worried that if they provide high levels of training to
employees, other employers will poach the trained workers. The WRTP
solution to these problems involves firms, unions, the state vocational
education program and a university-based labor market research institute
working together in collective institutions for skill formation and
job upgrading. For a description of the Wisconsin Regional Training
Partnership, see http://www.cows.org/projects/wrtp.htm.
Originally published in the December
2000/January 2001 issue of Boston Review