Low wage jobs are on the verge of making a big comeback.
In a recent research note, Credit Suisse noted that demand for lower wage and lower skill labour is starting to accelerate. Many people who lost their jobs during and after the Great Recession have been sidelined, with long-term unemployment staying high. Credit Suisse theorizes that an increase in low wage jobs might be a good way for those left out of the recovery so far to re-enter the working world:
“Although the creation of new, low-earnings jobs can lead to short-term declines in productivity, it also signals a quickening move toward full employment and higher income growth for some households that have not experienced that for a long time. Because unemployed individuals tend to have lower skills and less education on average than those who are employed, reemploying them requires jobs growth in low-skill sectors.”
Of course, one of the big long-run problems of the US economy is the declining middle class. We’ll see if a big increase in low-wage, low-skill jobs will actually be a boon for the economy in the long run, or just exacerbate our issues with inequality.
Credit Suisse included this chart showing the rate of acceleration in hours worked for most of the major industry sectors in the economy set against the average wages in those industries. The low-wage leisure and hospitality and retail sectors, which together account for a huge proportion of US employment as indicated by the size of their bubbles, are adding hours at a faster rate than most higher paying industries: