Third and State
Third and State Recap: The Rise of Low-Paying Jobs, State of Working PA, What You Should Earn, Revenue Update, & More
Over the past two weeks, we blogged about the latest U.S. jobs report, the State of Working Pennsylvania, why low-paying jobs in hotels and restaurants are on the rise across the commonwealth, what you should be earning, state revenue collections, and more.
IN CASE YOU MISSED IT:
- On jobs and the economy, Mark Price highlighted the key takeaways from the latest U.S. jobs report and explained why low-paying jobs in hotels and restaurants are making up such a large share of job growth in Pennsylvania in recent years. Chris Lilienthal blogged about the Keystone Research Center's latest State of Working PA report and shared an online tool from the Economic Policy Institute showing how much you would be making if wages had kept pace with productivity in the economy.
- On state tax and budget issues, Michael Wood blogged that revenue collections appear to be on track two months into Pennsylvania's new fiscal year.
- And on income inequality, Steve Herzenberg wrote the speech he wished President Obama would have given on the 50th Anniversary of Martin Luther King Jr.'s "I Have a Dream" speech in Washington.
IN OTHER NEWS:
- Read the Keystone Research Center's State of Working PA report.
The nation's unemployment rate dropped by one-tenth of a percentage point to 7.3% in August and non-farm payrolls expanded by 169,000 jobs over the month, according to a report today from the Bureau of Labor Statistics (BLS).
Here is a rundown of reactions from DC’s top labor economists to today’s jobs report:
Today’s disappointing jobs report shows that labor market conditions continue to improve only at a glacial pace compared with what’s needed to restore employment to normal levels. Unemployment remains too high and the share of the population with a job remains depressed at levels last seen in the 1980s (see chart). Under these conditions, it’s disappointing that the Federal Reserve will likely begin tapering off its asset purchases (known as “quantitative easing”); it’s absolutely appalling that lawmakers have not enacted a balanced alternative to the sequestration budget cuts that would take effect only when the economy is stronger.
The jobs report released today underscores the fact that we still need all macroeconomic guns blazing to boost the economy. The labor market added 169,000 jobs in August, and a downward revision of 74,000 to earlier months’ data brought the average monthly growth rate of the last three months to just 148,000 jobs. At this rate, it would take until well into 2021 to fill our gap of 8.3 million jobs and return to a healthy labor market.
Job growth continued to be narrowly concentrated with retail adding 44,000 jobs, health care 32,700 and restaurants 21,200. The jump in health care employment follows three months in which growth averaged just 13,600, so growth is not likely to continue at this pace. Manufacturing added 14,000 jobs driven by a rise of 18,800 jobs in autos. This increase is mostly a seasonal-adjustment issue since the auto sector reported a loss of 10,400 last month. However, jobs in the sector are up by 24,300 over the last year.
The sharp rise in retail employment and restaurant work continues the pattern where low-paying sectors show the most rapid growth. While some have argued that this is due to technological changes, the data suggest that a weak labor market is forcing people to take bad jobs. This is seen by the correlation between state unemployment rates and the growth in the share of restaurant jobs. Also, wage growth has been less rapid in the restaurant sector than elsewhere (0.6 percent over the last year in restaurants compared with 1.9 percent overall), the opposite of what would be expected if technology was behind a relative increase in demand for restaurant workers.
As I discussed on Thursday, the Pennsylvania experience fits the pattern Baker describes of a weak labor market forcing people to take bad jobs. Below I present a version of Baker’s graph for Pennsylvania counties. With one caveat, it is also the case that the higher unemployment is in a county, the larger the increase in the share of employment accounted for by hotels and restaurants.
The caveat applies to a group of mostly sparsely populated and rural counties on the right of the graph: Carbon, Forest, Susquehanna, Bedford, Somerset, Tioga, Blair, Potter, and Cameron counties all experienced relatively large reductions in employment in hotels and restaurants between December 2010 and December 2012. Outside of those exceptions, the weaker the labor market in a Pennsylvania county, the greater the likelihood that workers are being forced to take the only jobs available, which are increasingly in hotels and restaurants.
While August tends to be one of the fiscal year’s smaller months for revenue collections, General Fund receipts last month show Pennsylvania’s budget is essentially on track two months into 2013-14.
August General Fund revenue collections fell $1.9 million, or 0.1%, short of the monthly estimates. For July and August, revenues were $2.2 million, or 0.1%, below estimates, while tax collections alone exceeded fiscal-year-to-date estimates by $11 million, or 0.3%. These differences are quite small compared to the overall revenue targets.
Unlike in 2012-13, sales tax collections have been running ahead of estimate so far in 2013-14. They currently exceed year-to-date estimates by $22 million, or 1.4%. Very modest shortfalls in other taxes, including personal income, corporate, and inheritance taxes, and a $14 million shortfall in non-tax collections offset the sales tax surplus.
Compared to collections through August 2012, tax revenue from July and August 2013 has grown by $69 million, or 1.9%, while total General Fund collections have grown by $42 million, or 1.2%. To meet estimates for all of 2013-14, General Fund collections must grow by a total of $469 million, or 1.6% from 2012-13 levels.
September typically has more of an impact on General Fund collections with quarterly corporate and personal income tax payments due for many taxpayers. We will also keep tabs on whether or not sales tax collections continue to exceed estimates.
In this year’s State of Working Pennsylvania, our annual evaluation of the health of the economy from the perspective of the middle class, three findings stand out:
A definite weakening in the overall pace of job growth in Pennsylvania since January 2010 largely driven by the loss of 45,000 jobs in the public sector
One of the strongest performing sectors in terms of job growth in the period since January 2010 was Accommodation and Food Services, which added 28,000 jobs (an increase of 6.7%) and accounted for one out of every three jobs added in Pennsylvania.
One of the sectors with the largest share of poverty-wage jobs in the Pennsylvania economy was the supersector Leisure and Hospitality — a sector comprised mostly of Accommodation and Food Service jobs. More than one out of every five jobs in Leisure and Hospitality paid less than $11.19 an hour.
On Wednesday Dean Baker noted that a number of analysts have been arguing that the disproportionate share of new jobs being created in hotels and restaurants is evidence that forces beyond our control are leading to an economy that produces a few high-paying jobs and lots of low-paying jobs for everybody else. Baker calls this the "it just happens" view but then counters:
An alternative explanation to the "it just happens" view is that the weak economy itself is responsible for the proliferation of bad jobs. In other words, because the economy is not generating decent jobs in any reasonable number, workers are forced to take bad jobs. In that story the proliferation of bad jobs is the direct result of a weak economy.
As Baker points out in Figure 1 below, the higher the unemployment rate is in a state, the bigger the increase in the share of all jobs accounted for by hotels and restaurants.
A key reason that hotels and restaurants make up such a large share of job growth in Pennsylvania is precisely because unemployment here remains high. When federal and Pennsylvania policymakers enact deep budget cuts and fail to move forward with much needed investments in our transportation infrastructure, they keep unemployment higher than it should be. That's a key reason that one of the few bright spots in our economy in terms of job growth is found in sectors that offer workers low pay.
The Economic Policy Institute took the Labor Day weekend to remind us that American workers should be paid more than they are.
EPI has a handy online tool — based on their project inequality.is — that shows how much you would be making if wages had kept pace with productivity, a key indicator of an economy working for all.
Elise Gould explains at the EPI blog, Working Economics:
Economic inequality is a real and growing problem in America. Since 1979, workers are working more, making more goods, and not reaping the rewards of their increased productivity. Instead, CEOs and executives — the top 1% of earners — now take home 20% of the nation’s income.
But it doesn’t have to be like this. Growing inequality isn’t an inevitability — it was created. It’s the result of intentional policy decisions on taxes, trade, labor, and financial regulation. But that’s the good news: if inequality is not inevitable, then it can be fixed.
Click on the image above or click here, plug in your income into the box, and learn what you should be making.
Coming on the heels of a day when thousands of fast food workers in 50 U.S. cities walked off the job to protest low wages, the Keystone Research Center is out with a report showing there is ample reason for discontent among Pennsylvania workers.
The State of Working Pennsylvania, Keystone's annual Labor Day check in on how working Pennsylvanians are faring in today’s economy, found that since 2010 job growth in the commonwealth has slowed, wages have fallen across the board, and the number of poverty-wage jobs in the commonwealth has jumped by 11%.
As this chart shows, the slowdown in job growth has been dramatic, with Pennsylvania adding nearly as many jobs in the first full year following the Great Recession (2010) as it has in the two and a half years since.
The report also found that in recent years — and over longer periods — most middle-class Pennsylvania families have seen their wages stagnate. In fact, after adjusting for inflation, wages have fallen for low-, middle-, and high-wage workers alike since 2010, even though productivity in the economy has grown.
These recent economic trends follow some good Pennsylvania economic news last month when a new study by Harvard and Berkeley economists reported that most parts of the state outpaced the rest of the U.S. in intergenerational upward mobility from the late 1990s to 2010-2011. But as Keystone labor economist Mark Price said, if we keep shrinking the middle class, the tide will turn and the next generation of Pennsylvanians will fall behind.
We'll be back after Labor Day with more blog posts delving into the details of the State of Working Pennsylvania. Have a great weekend.
President Obama will speak from the Lincoln Memorial at 3 p.m. today, the 50th Anniversary of Martin Luther King Jr.'s "I Have a Dream" speech.
Given that job and wage trends keep getting worse for working people but that organizing efforts in fast food and other service industries are going increasingly viral, this is the perfect moment for the President to declare clearly and unambiguously whose side he is on.
I wish President Obama would say something like: "In the 1930s, the last time that the United States had to choose between staggering levels of inequality and broadly shared prosperity, organizers rallied workers with the cry 'The President Wants You to Join a Union.'
"Today again, a growing chorus of organizers and workers are challenging the stark inequality that has emerged in America over the past third of a century. Fast food workers in 35 cities will rally tomorrow for a $15-per-hour wage. Health care workers in Pittsburgh are rallying to lift entry-level wages above $15 per hour and transform area wage standards so that all who work hard and play by the rules can again support their families. Workers at giant retailers seek a similar outcome with entry-level service positions going from poverty-wage jobs to family-supporting jobs in the blink of an eye.
"If we simply honor workers' basic freedoms — freedom to associate, freedom to organize, freedom to join a union — workers in our major service industries would flock to area-wide locals and could undo the inequalities that plague our society.
"So I say to you on this anniversary of Martin Luther King's 'I Have a Dream' speech, I say to fast food workers and retail chain workers, to health care workers and restaurant workers, to all American workers who want a fair deal for their family, this President wants you to join a union.
"This one, simple step — real protection of workers' rights to join a union — could produce the economic justice that this country so desperately needs. Only with this simple step, can we complete Martin Luther King's dream. With this step, we can have liberty and justice for all."
OK, so Martin Luther King I ain't. But I wanted to get the general point down quickly, before President Obama's speech, so that I'm not Wednesday-afternoon quarterbacking if he should fail to capitalize on the chance to embrace the transformative economic and social justice organizing exploding across the country. Plus if he doesn't say what I want, I'll do a more polished version of the speech he should have given — after the fact. Here's the "speech" I wanted then-candidate Obama to give when campaigning in Pennsylvania in 2008. It also makes clear that I'm no Ted Sorenson (JFK's speechwriter), while still suggesting what might have been — and what might still be.
After all, President Obama said he wanted to be a transformative President. Here is his chance.
Third and State Recap: Invest in Education, Flawed Study on Welfare, Facts About Nutrition Assistance, and More
Over the past two weeks, we wrote about a new study on the strong link between the educational attainment of a state’s workforce and both productivity and workers’ pay. We also responded to a flawed study on work and public welfare, separated fact from fiction on nutrition assistance, and weighed in further on a study about social mobility.
IN CASE YOU MISSED IT:
- On education and the workforce, Stephen Herzenberg blogged about a new study finding that states with higher educational attainment enjoy higher productivity growth and higher increases in pay for typical workers. "It's invest in education, stupid," Steve writes, paraphrasing James Carville's famous quote.
- On public welfare and health care, Sharon Ward responded to a Cato Institute study, explaining how flawed the study's methodology is and how out of touch with reality its conclusions are on the economic state of households receiving public benefits.
- On the federal budget, Chris Lilienthal shared a short video separating fact from fiction in the ongoing debate over nutrition assistance for low-income Americans.
- On jobs and the economy, Stephen Herzenberg asked whether the Right can afford to acknowledge low upward mobility in the U.S.?
- And on privatization, Stephen Herzenberg shared video of his weekend appearance on PA Newsmakers debating the wisdom of privatizing the state's wine and spirit stores.
IN OTHER NEWS:
- Read more about the study on educational attainment and a strong economy in a press release from the Keystone Research Center.
A LOOK AHEAD:
- With Labor Day fast approaching, look next week for the Keystone Research Center's State of Working PA, an annual review of how working Pennsylvanians and their families are faring in today’s economy. You will find it at Keystone's State of Working PA web page.
"It's the economy, stupid," Clinton campaign manager James Carville famously said during the 1992 U.S. presidential election campaign.
Remembering this phrase, we decided "it's invest in education, stupid" was an apt way to sum up the findings of an important new policy brief, A Well Educated Workforce is Key to State Prosperity, released yesterday by the Economic Analysis Research Network (EARN). EARN is a great network of 61 state/local and 25 national think tanks that Keystone Research Center helped found in the late 1990s. You'll be hearing more from EARN in the months ahead as it lifts its voice through multi-state releases co-branded by the network and individual groups.
Written by researchers affiliated with state think tanks in Iowa and Massachusetts, and released by Keystone in Pennsylvania, the new brief points out that states with higher educational attainment enjoy higher productivity growth and higher increases in pay for typical workers.
The numbers are quite striking.
For example, the top 10 states (measured by change in education levels) increased their share of adults (25 and over) with a bachelor's degree by an average of 18 percentage points, twice as much as the bottom 10 states. These same top 10 states experienced productivity growth nearly twice as large as the bottom 10 states: 82% versus 44% in the bottom 10 states. Median compensation (pay plus benefits) in these top 10 states rose by about 20% compared with a paltry 4% increase in the bottom 10 states.
States waste a lot of money on poorly targeted business incentives that don't strengthen their economies. The new brief makes clear that one way states can make a big difference to future growth and living standards is by investing in education.
Of Pennsylvania's neighbors, Maryland and New Jersey illustrate best the payoff to investing in education over the past three decades. Ohio and West Virginia illustrate the pitfalls of failing to invest in education. Pennsylvania is in the middle, doing quite well measured by improvements in the share of adults with a four-year college degree but still ranked near the bottom when it comes to the share of adults with at least some education beyond high school.
Pennsylvania is not in the middle in the last few years. Recently, the state has deeply cut investment in K-12 and higher education. This misguided direction poses a deep threat to future growth and living standards in the state. That's why we think it's important to be blunt about what the research evidence across the 50 states tells us: "It's invest in education, stupid."
I am a guest on PA Newsmakers this weekend along with Katrina Anderson of the Commonwealth Foundation debating the wisdom of privatizing the state's wine and spirits store system. I outline why privatization would be bad news for Pennsylvania from both a fiscal and social perspective. Check out the video. The privatization segment runs for the first 15 minutes.