The key to driving the economy may be to elevate the country's many low-wage service jobs, with better pay and more opportunity
My op-ed in the May 3rd Financial Times makes a case for a radical approach to solving America's jobs problem -- upgrading low-wage service jobs. Here's a longer, original version of that piece, including the critical chart (immediately below) compiled by my colleagues at the Martin Prosperity Institute. The chart tracks the rise and fall of four broad classes of work -- agricultural work (farm), industrial work (manuf), knowledge-based and creative work (CC), and routine low-wage service work (LWS) -- from 1800 through 2009.
As the American economy has evolved and transformed, the nature of its great job machine has also shifted. Understanding these historical changes can help us better understand the broad sources of employment growth and what we need to do to revamp America's stalled job machine today.
The first American job machine was organized around farms and agricultural employment. More than four in 10 Americans worked on farms in 1800. Another 20 percent or so worked in manufacturing.
The second great American job machine took hold during the mid-19th century, propelled by the surge in manufacturing. By late in the century, some 60 percent of the workforce had been absorbed in industrial jobs while agricultural work dropped to roughly ten percent of employment. Industrial and blue-collar manufacturing jobs would power America's economic and employment growth for the better part of the next century, until roughly1950. But for most of those years, it was low-wage, long-day, dirty and dangerous work -- it wasn't until the Great Depression, the New Deal, and post WW II prosperity that blue-collar jobs became good, family supporting jobs.
America -- along with the rest of the advanced nations -- is now in the early throes of a third great economic transformation and a third great job machine. Against the backdrop of a massive decline in once high-paying blue collar manufacturing jobs which is eerily similar to the decline of agricultural jobs a century or so ago, this third transformation is creating not one overall, but two distinct categories of jobs and employment.
The first category includes millions of the best jobs America has ever seen: high-pay, high-skill jobs in knowledge-based professional and creative fields. Almost a third of American workers now have these kinds of jobs, which pay more than double most manufacturing jobs and which have been rather impervious to unemployment. When unemployment among production workers climbed to more than 15 percent and surged above 20 percent for construction workers, unemployment among professional, technical and creative workers never got much above five percent.
But the second category, which comprises such routine service work as personal care assistants and home health care aids, retail sales clerks, and food preparers -- is not so good. In fact, the pay for these jobs is roughly half that of manufacturing jobs. The result is as simple as it is tragic: a startling bifurcation of the job market and an increasingly unequal and divided society. Once we see this, it becomes clear that neither of the two most commonly cited prescriptions -- the counter-cyclical approach to job creation by boosting investment and demand, or the path of educating more people for higher-paying knowledge-based jobs -- can work.
The numbers don't add up. At best these strategies can take care of only about half to two-thirds of America's jobs problem. The reality is that more than 60 million people, or about 45 percent of the work-force, are already toiling in low-wage service jobs, which will remain low-wage jobs even if and when the economy expands. And it's those very job categories that are growing the fastest -- the US economy is expected to add another 7-10 million of them in the coming decade.
A successful jobs strategy must focus centrally on upgrading the content and improving the wages of this entire job category. That is what happened a century ago, when public policy shifted to protect workers' rights and line jobs in manufacturing, once considered dirty and dangerous and impossible to upgrade, became high-paid work.