Let’s start with the first storyline: That the economy is returning to normal, as the labor force is on a historic streak of creating full-time jobs. There is some evidence that the nature of work—and the relationship between employers and employees—is undergoing a major shift that is more complicated than the “return to normal” narrative.
For several years, economists wondered whether freelancers or on-demand jobs, like Uber drivers, were growing. It was hard to know for sure, because the Bureau of Labor Statistics hasn’t conducted a proper survey on it since 2005. So, economists Lawrence Katz and Alan Krueger did their own.
They discovered that the on-demand “Uber” economy is still puny. But something bigger is happening. A larger category of “alternative” work has exploded, with contractors and temp workers—like home health aides, truck drivers, and call center workers—who often face unpredictable schedules and lack benefits like health insurance or a retirement package. Between 2005 and 2015, the economy witnessed a 66 percent increase in the number of workers in these "alternative” arrangements. Over the same period, the number of standard full-time jobs actually declined slightly.
For many workers, these flexible arrangements are ideal. But they don’t represent the old normal of “full-time work.” They represent a new normal of “full-time work-seeking,” where millions of people who used to work for companies with benefits now have to stitch together their own safety net.
This doesn’t make the old story wrong, just incomplete. Maybe the economy isn’t reverting back to 2006. Maybe it’s adding full-time workers and redefining the nature of full-time work at the same time.
Now onto the wage question. The big story of the past few years is that average wage growth has been disappointing, given all the full-time jobs the economy is creating. But it’s possible that wages are growing, just in ways that economists are missing by focusing on the word average.
Imagine a company, Cars Inc., with two groups of workers: Rich old workers who design cars, and cheap young workers who sell cars. In the recession, consumers want fewer cars. So the company lays off its cheap young employees. This creates an interesting scenario: The company is paying a high average wage, but only because it’s fired the cheap workers.
Then the recession ends, and people want cars, again. Cars Inc offers raises to its designers. But also, it hires back more salespeople at low wages. That’s a good thing, right? Everybody at Cars Inc is making more money than they used to! But average wages don’t rise very much, because all these cheap hires offset the raises for richer designers. After a few years, the rich workers retire. What happens when the highest wages are taken off the books? Again, it depresses the growth of average wages at the company.