The Jobs Perplex: California, Labor Day 2016

Michael Bernick
Counsel with the international law firm of Duane Morris LLP, a Milken Institute Fellow and former Director of the California Employment Development Department

labordayparadeAs we come to Labor Day 2016, we find ourselves with the following Jobs Perplex: With the main employment numbers being so positive nationwide—the unemployment rate low and payroll job growth high–why is dissatisfaction and anxiety about employment so widespread?

Here in California, the most recent state unemployment rate for July 2016 is 5.5%, among the lowest rates of the past decade. Since February 2010, the state has gained over 2.3 million payroll jobs, including over 374,000 jobs gained over the past year. And yet, a Field poll a few months ago found nearly half of Californians describing the California economy as “bad” (only 39% described it as “good”). The Democratic state legislature regularly holds hearings and conferences on the plight of joblessness and of low wage workers in the state. Even in job rich San Francisco, I don’t know anyone outside of the tech oligarchy who regards the general employment situation with approval, or their own situation with confidence.

National polls similarly show little confidence in the current or future economy—even though the national unemployment rate is under 5%. Polls by Rasmussen and by Reuters over the past two weeks show over 60% of Americans regarding the country as moving in the “wrong direction”, with the economy being the main issue. A mid-June NBC News poll found “jobs and the economy” ranked as the number one concern of Americans, even above terrorism.

What to make of this?

We need to start with a multi-decade perspective. Employment dissatisfaction and anxiety–both regarding one’s own employment and employment across society– has been the norm throughout the past forty years. Added to this in recent years has been the growing contingent, part-time and project-based nature of employment—not reflected in the main official job numbers but what Americans see every day. And we’re likely to see dissatisfaction and anxiety continue into 2017, even if the official numbers remain positive, for these four reasons.

  1. No matter how low is the overall unemployment rate, it is never low enough for a segment of the political spectrum: Since I entered the job training field in 1979, the unemployment rate has gone up and down. However, there has not been a time during the past 37 years that the rate has not been described, especially by politicians on the left, as “unacceptable”—like other social measures, such as the poverty rate, it is never low enough.

In 1978, the Congress passed and President Carter signed the Full Employment and Balanced Growth Act (often known as the Humphrey-Hawkins Full Employment Act), which set the following numerical goals: by 1983 unemployment no more than 3% for workers age 20 or over and not more than 4% for workers age 16 or over. These rates have never been close to being reached, but they have continued to inform expectations.

This constant pushing to reduce unemployment, even when it is relatively low, has many positive impacts for our society. Full employment should be our goal. But this also means that we will continue to hear that unemployment is “unacceptable”, even if it remains below 5%.

  1. The rapid rise of joblessness during the recent Great Recession continues to haunt us: Americans continue to be haunted by the rapid rise of joblessness during the Great Recession, when unemployment nationwide rose rapidly to over 10% (in California to over 12.5%). On an individual basis, we worry that we can never relax, never be secure in our position. On a collective basis, we know that despite claims made in the 1990s and early 2000s, the business cycle has not been transcended; unemployment can rise at any time, and likely will at some time soon.
  2. We recognize that employment has become more contingent, project-based, and insecure, despite what the main official numbers say: The main numbers do not reflect important employment dynamics of contingent, part-time and project-based employment, that many Americans themselves see and experience. In a nutshell, the payroll job numbers include any part-time job, so long as the job is one hour a week. These payroll numbers also include the increasing number of positions that are short-term or project-based or contingent. Workers are more anxious for the good reason that employment has become less secure and anxiety-producing. The structural shifts in our economy leading to increased employment contingency are not well-captured in the payroll numbers.

Of course, the unemployment rate is even more limited in capturing these structural shifts. It not only includes the part-time and project-based payroll jobs, but also counts as “employed” all respondents who say they are employed, even if the employment amounts to forms of independent contracting that are highly unstable. And, as has been widely commented on in recent months, the unemployment rate does not well capture the declining labor force participation rate—at lowest levels since the late 1970s.

  1. We see the growth of lower-wage jobs, particularly as replacement jobs for laid off workers: Added to the contingent nature of jobs is the growth of low wage jobs as a share of total jobs. In particular, laid off workers today may find replacement jobs; but a line of longitudinal studies has found these jobs to be largely at lower wages. The growth of low wage jobs has attracted a good deal of attention in 2016, but so far little action, beyond the minimum wage increases.

***

As we come to Labor Day 2016, we do not have the high levels of joblessness we had in Labor Days not so long ago; and this is important to note. Instead, though, we are faced with the changing structures of employment, that heighten employment insecurity.

Dissatisfaction and anxiety with employment will continue through 2017, in part because it is built into our DNA as Americans—constantly striving to improve our nation’s condition and our own. In part, though, it is built on real structural and wage shifts—and as we’re finding, these are even more difficult to address than the adding of jobs and reduced unemployment rate the nation achieved over the past five years.

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