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Saturday
Aug082009

What’s the future for unskilled workers, and will they have to be supported by highly-paid workers?

Gregory Clark suggests that in the future unskilled workers will have ever-declining incomes and that the only solution is to tax the better off to keep the masses out of poverty—a backdoor "from each according to his ability, to each according to his need." Mark Thoma quotes liberally from the Clark piece and says he isn't so sure the future for low-skill workers is that bleak. Among the many comments on Mark's blog is this one from Skeptic.

The distribution of incomes amongst high- and low-skill jobs will probably depend more on the total number of jobs created than on the mix of skill sets. If we don't create enough jobs in the aggregate, even degree holders will be scrambling for jobs waiting tables. We already have a shockingly large number of B.A. holders working in jobs for which no college is required, including one-quarter of travel agents and retail sales supervisors, one-third of flight attendants, and one-half of aerobics instructors according to this report.

The US private sector aggregate job growth rate has fallen seriously behind population growth. Between 1950 and 2000, the decennial rates of population increase were in the range 9.8% to 18.5% (0.98% to 1.85% annually without compounding). From July 2000 to July 2008, the population increase was 7.7% or 0.96% per year. As there are about 109 million private sector jobs, we needed to create more than 10 million incremental jobs just to keep pace with population growth between July 1999 and July 2009. What happened? Only 121,000 new jobs, according to this NYT report. The jobs growth rate was essentially zero. As a baseline against which to compare that disaster, the job creation rate was reliably about 2% annually from about 1967 to 2001 but has been steadily declining ever since according to the graphic in the NYT piece. In 2008 the job growth rate sank below the population growth rate for the first time since about 1965.

We need a demand-side jobs creation strategy more than we need a Field of Dreams supply-side education and skills strategy. If we can figure out how to create annually 1-2 million domestic private sector jobs of any mix, I would trust market signals to get the supply-side skill mix about right. If we don't create that many additional jobs, the chronic oversupply of labor must continue downward pressure on incomes in almost all job categories, and a mass upgrading of skills, as recommended by McKinsey and many others, would just put pressure on the wages of skilled workers as well.

Mark isn't sure about the long-term direction of wages, and neither am I. But I'm pessimistic because offshoring and trade deficits seem likely to continue, and I don't see what the next new big thing might be that would generate the necessary boom in overall job growth. What positive factors am I missing?

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Reader Comments (1)

I believe unskilled workers will lose their income soon for sure. The results of the social research, which I managed to find on http://rapid4me.com - rapidshare search , show that today there are too many unemployed and as a result a big cimpetition among those who want to get a job exists. Of course, people who have higher education will get some work first of all. And unskilled workers will have to agree for any work they are suggested. It's not difficult to understand that in this case they're sure not to be paid through the nose.

November 14, 2009 | Unregistered CommenterGanny

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