Dim Job Scene Explains Consumer Gloom
ECONOMISTS generally term the 1990-91 recession moderate. The decline in output was about average. Unemployment increased modestly by comparison with several previous slumps.
Yet the gloom among United States consumers, even now about a year into economic recovery, has been deep as the Grand Canyon. Why?
James Medoff, a Harvard University economist, says one reason is that more of the unemployed are having to settle for jobs that are "distinctly inferior." They don't pay as well as their previous positions. They offer fewer benefits.
Another cause, says economist Isaac Shapiro, is slow economic growth for two years before the recession that began in July 1990 and the weakness of the recovery that started in the spring of 1991. As a result, the nation has suffered an extended period of "difficult times," he says.
Moreover, fewer of the jobless have been covered by unemployment insurance. A recent study by Mr. Shapiro's Center on Budget and Policy Priorities, a Washington think tank, found that last year only about two in every five unemployed workers (42 percent) received unemployment insurance benefits in an average month. That's less coverage than in any other recession since the end of World War II.
"People are feeling much less secure," says Lawrence Mishel, research director of the Economic Policy Institute, another left-of-center Washington think tank. That, he explains, is because layoffs have extended beyond blue-collar workers to white-collar employees to a greater extent than in previous recessions.
In addition, wage gains of many of the employed have fallen behind inflation.
"People who weren't affected by the disastrous wage trends in the 1980s are now being hit," Mr. Mishel says. During the 1980s, those with high school education or less saw their wages decline in real terms. Those with college education made real gains in income.
By now, he continues, the average wages of new workers have been trimmed. The entry level wages of men with one to five years job experience and a high school education were 7.5 percent lower in real dollars in 1991 than those getting new jobs in 1987. For women with high school, the decline in wages was 4.7 percent. Male college graduates saw their entry level jobs pay 4.9 percent less in 1991 than in 1987; for female college graduates the drop was 1.9 percent.
As a result of this wage deterioration, many parents worry about the economic prospects of their children, Mishel says. A long recovery
Economists do not expect a rapid improvement in the job situation. Jill Thompson and Leon Tucker, economists with DRI/McGraw-Hill, a Lexington, Mass. consulting firm, predict 7 percent-plus unemployment through 1992.
"Even by the end of 1994, it will stand around 6 percent," they write. The unemployment rate of 7.3 percent in March could move up slightly, they forecast, as discouraged workers and others currently out of the labor force seek employment again as economic recovery boosts expectations for finding a job. The labor force has already been growing at a 3 percent annual rate since December, they note.
Oddly enough, the current slump has produced far fewer discouraged workers - those who have given up on an active search for work - than the two previous recessions. The Consumer Confidence Index, as measured by the Conference Board in New York, was 46.3 in February of this year, its lowest since December 1974 and a sharp decline from 102.4 in June 1990. Yet, according to a report by Adam Zaretsky for the Federal Reserve Bank of St. Louis, only 1.1 million workers were classified by the Bureau of Labor S tatistics as "discouraged" in the third quarter of 1991. That compares to 1.8 million in the fourth quarter of 1982, a time of severe recession. Fluid job market
In the extraordinarily flexible US job market, people are always being fired, laid off, or leaving their job voluntarily, and then hired or rehired. According to a new Bureau of the Census study, some 41.5 million changed jobs between the end of 1986 and early 1989 after being without a job for at least a month, some of them more than once. During that period, about 120 million people were in the labor force.
This study showed that people were moving into a wide range of jobs, from good to bad. On average, men were getting jobs that paid $32,452 and women $20,828. But the study, based on a survey of 12,500 households over 28 months, makes no comparisons as to earlier or later periods. Thus it offers no information for a long-standing debate as to whether the economy in recent years has been producing more poor jobs ("McJobs") in the mix of new jobs than in the past.
However, Harvard's Professor Medoff does detect a "deterioration in the quantity and quality" of US jobs beyond the normal weakness in the labor markets associated with the recession.
In a study done for the Joint Economic Committee of Congress, Medoff assessed the availability of jobs with the "Help Wanted Index," a measure of the number of help wanted ads in newspapers. The index, he says, shows that job availability has declined "dramatically" since 1985.
Using Bureau of Labor Statistics numbers, he finds that a high proportion - 43.9 percent - of the unemployed are unlikely to return to their old jobs as the economy picks up steam. That percentage is up from 32.8 percent at the end of the 1974-1975 recession. So more people have lost their old jobs permanently.
Looking at data on a new job's "usual hourly earnings," Medoff notes that the quality of new jobs has declined "markedly." An index of job quality that stood at 100 in 1979 had fallen to 89 by January 1991, the latest data available. Similarly, 43 percent of job openings offered a pension in 1979, compared to 38 percent in 1988 (the latest data). Twenty-three percent of new jobs gave health insurance in 1979; 15 percent in 1988. Congress takes steps
A Joint Economic Committee member, Sen. Lloyd Bentsen (D) of Texas commented: "The dream of a step up in life has gone sour for too many American workers."
Earlier this month, Democrats proposed legislation that will give up to 20 extra weeks of unemployment insurance benefits for the jobless.
Currently, out-of-work people can qualify for 26 weeks of regular benefits, plus either 26 or 33 additional weeks of coverage, depending on the severity of unemployment in their state. The new bill would provide an extra 13 or 20 weeks of benefits to people who use up their regular coverage through year's end, and then phases out the extra coverage. President Bush favors a more limited extension of coverage.