America’s rich, most of whom accumulate a cushion of wealth for a rainy day, get richer. And the poor, well, they don’t have a cushion and can’t get much poorer.
A snapshot measurement based on the annual population surveys of the past half-century shows median American family income increasing from $53,899 in 1996 (in 2016 dollars) to $64,959 in 2016. But the income of the lowest tenth percentile of families, the poorest, dropped from $16,242 in 1966 to $14,459 in 2016. Meanwhile, the income of the ninetieth percentile of the economic ladder increased from $107,762 to $182,826.
The top one percent of American income earners garner more than 19 percent of total American income. Economists estimate wealth (assets minus debt) disparities at three times the magnitude of income disparities. In 2017, the richest ten percent of Americans owned 77 percent of the nation’s wealth.
Intergenerational mobility — the proportion of children earning more than their parents did — has fallen from 90 percent for children born in 1940 to 50 percent for children born in the 1980s, according to an article published last year in the journal Science written by the economist Raj Chetty and five colleagues at Stanford and Harvard. If present income were distributed across income groups as it had been for the 1940 cohort, much (70 percent) of that decline in mobility would be reversed. “These results imply that reviving the American dream of high rates of absolute mobility would require economic growth that is shared more broadly across the income distribution,” the authors write.
As the gap between those with higher wages and those with lower wages continues to increase worldwide and in the United States, the American dream of higher living standards for all has stalled. Upward mobility is difficult for those on the lower rungs of the economic ladder. For most of the lower-paid, the odds against a successful upward transition are very long indeed.
The higher-paid don’t have that problem. The economic rewards of skilled American earners keep improving, even as the jobs of many middle-skill workers have disappeared, forcing them in most cases to take lower-wage jobs. For low-wage workers in routine blue-collar and service jobs, wages have grown only slowly. As the middle class has been hollowed up, economic inequality has increased.
A low-wage job is preferable to no job at all. All things being equal, a low-wage job that is a stepping stone to a better job is more tolerable than a dead-end job that offers little or no chance of advancement. How likely is advancement?
A relatively small proportion of low-wage workers transition into better jobs, a new study for the Federal Reserve Bank of New York shows. Entitled “Can Low-Wage Workers Find Better Jobs?”, the report, written by Jaison Abel of the Federal Reserve, Richard Florida of the University of Toronto, and Todd Gabe of the University of Maine, provides a breakdown of the likelihood of advance for low-wage workers as a class. Surveying the period of economic expansion between 2011 and 2017, the research paper finds that around 71.8 percent of all workers remained in their same low-paying job within a twelve-month period. Some 10.6 percent left the labor force, 6.7 percent became unemployed, 5.7 percent switched to another low-paying job, and 5.2 percent low-wage workers — slightly more than one in every 20 — transitioned to a better job.
“If low-wage jobs are simply a stepping stone to higher-quality jobs,” explain the authors, “then the problem of low-wage work can be solved via the labor market. If, on the other hand, people tend to get trapped into low-wage jobs that are difficult to escape, then some more proactive policies may be warranted.” Information is needed about the obstacles to the transition of lower-paid workers to higher-wage jobs.
To define low-wage jobs, the paper measures four factors (“job quality metrics”): average hourly pay, desirability of the workweek, likelihood of employer-paid health insurance, and the occupation’s prestige. Some low-wage occupations offer more possibilities of a transition to higher pay than others. Sales-related occupations, administrative support workers and truck drivers offer better pathways.
A major conclusion the authors regard as inescapable is that educational attainment raises the value of a person’s human capital. In an economist’s terminology, education (acquiring new human capital) is generally a beneficial investment. There’s also evidence that higher-ability workers in routine jobs tend to transition more easily to non-routine work, which carries with it a wage premium.
What’s the ticket to upward mobility for America’s lowest-paid workers without much of an education? Economists have compiled a list of “opportunity occupations” that are attainable to persons without a college degree. Most of the upward moves are modest.
Truck driver is tops on the opportunity list. Ranking just above the 30th percentile for overall job quality, this work offers by a wide margin the greatest opportunity for those in the lowest quartile to escape lowest-wage work. Nearly one in every 300 low-wage workers becomes a truck driver. Other occupations high on the opportunity list include nursing aides, custom service representatives, secretaries and administrative assistants, and wholesale and manufacturing salespersons. Though these are only five of the 410 occupations on the list, they account for 17 percent of the jobs found by people escaping low-wage work.
Whereas sales jobs often offer a transition from low-wage work, the study data shows that production occupations and most healthcare, tourism-related and food-service occupations offer little mobility. For most people in these industries, promotion to first-line supervision is often the best they can hope for.
By and large, the present labor market is not doing very well providing the stepping stones to better-paying work for those at the lowest rungs of the economic ladder. Though truck driving is an honorable and challenging occupation, it should not be the most promising ticket to advancement for low-wage workers — especially as autonomous vehicles reduce the number of long-haul truck drivers.
Some more proactive policies may be warranted.
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