Richard Florida is a co-founder and editor at large of CityLab and a senior editor at The Atlantic. He is a university professor in the University of Toronto’s School of Cities and Rotman School of Management, and a distinguished fellow at New York University’s Schack Institute of Real Estate.
More than 65 million Americans toil in insecure, low-paying jobs. Instead of hoping they will all find different, and better, jobs, we should upgrade the ones they already have.
When politicians and pundits talk about creating better jobs, they typically cite two strategies. The first, emphasized by economic nationalists and populists like President Trump, is to use trade and other policies to bring high-paying manufacturing jobs back to American soil. The second, emphasized by progressives, is to use education to prepare less advantaged workers for higher-paying jobs.
But even if we did both, we would not put a significant dent in the jobs problem. The reality is that high-paying knowledge jobs employ just a third of the workforce, and only 5 or 6 percent of Americans do manufacturing work. Even with the unemployment rate at less than 4 percent, more than 65 million Americans—almost half of the entire workforce—toil in low-paying jobs in fields such as food service, retail, and personal and health services.
The only real solution to America’s jobs problem is to make these currently low-paying and precarious service jobs into better, higher-paying jobs.
In a new study that I conducted with economists Todd Gabe of the University of Maine and Jaison R. Abel of the Federal Reserve Bank of New York, we examined the year-to-year transitions (e.g., keep the same job, become unemployed, move into a better job) of workers in low-wage jobs. We tracked the employment situation of these workers between 2011 and 2017, the period of the economic recovery.
We also created an index of job quality that accounts for average hourly wages; whether the job provides a standard 40-hour work week; the likelihood of benefits; and the prestige, or social desirability, of the job, as determined by previous academic studies. Using this index, we divided America’s employment landscape into four distinct quartiles, from high-paying, good jobs to low-paying, low-quality jobs.
Our overall findings are disturbing. Just a small fraction of low-wage workers move into occupations that offer a path to higher wages and a better life. America’s low-wage workers are more likely to become unemployed than to move up the economic ladder.
America’s bad jobs—that is, those in the lowest quartile—pay an average wage of $13 per hour. They deviate by an average of seven hours from a 40-hour work week and provide benefits for less than half of those who hold them. (By contrast, the highest quartile of workers has an average wage of $37 per hour and deviates from the average work week by about three hours; 90 percent of the workers in this group have benefits.)
Workers in the lowest quartile are significantly more likely than those in the other quartiles to become unemployed or exit the workforce after one year. They are also much less likely than even those in the second quartile to move up the economic ladder, demonstrating the extent to which low-wage workers are stuck at the bottom of the economic spectrum.
Almost 7 percent (6.7 percent) of America’s low-wage workers become unemployed within a year, which is nearly four times the rate for high-wage workers (1.8 percent). Low-wage workers exit the labor force at a rate of more than 10 percent per year, nearly three times the rate of high-wage workers. And low-wage jobs are the least stable; low-wage workers are the least likely to stay in their jobs and the most likely to switch jobs.
Even more troubling, just 5.2 percent of low-wage workers are able to upgrade to a higher-quality job in a given year. (Of this 5.2 percent, 2.9 percent move into a second-quartile job, 1.7 percent into a third-quartile job, and just 0.6 percent into a high-wage job.) By contrast, 91.3 percent of high-wage workers either remain in their job or get another high-paying job.
Which higher-quality jobs offer workers the best chances for doing better?
As the chart below shows, truck drivers are the big outlier here, as the occupation with the largest share of workers who transitioned into better jobs. Other occupations that provide low-wage workers a good shot at doing better include nursing aide, wholesale and manufacturing sales representative, customer-service rep, secretary, and administrative assistant.
While these job types might help people move up the economic ladder today, not all of them will be a long-term source of economic mobility. Secretaries and administrative assistants, for instance, are steadily being replaced by new software applications. Eventually, truck drivers will likely be replaced by autonomous vehicles. The job types with better long-term prospects are those that involve people skills, including communication, presentation, and organization.
There is a wide range of factors that make it hard for low-wage workers to move up. The chart below focuses on one of the most important, education. Having a four-year college degree or higher is associated with a 7.4 percentage-point increase in the likelihood of finding a better job. That likelihood increases more modestly for those with two-year college degrees or some college. Education is also negatively correlated with becoming unemployed or leaving the labor force.
Age is a significant factor, too. A 20-year increase in age is associated with a 6 percentage-point increase in the likelihood of remaining in the same job over the course of a year. Younger workers might be more willing to experiment with different job types, or might accept a low-wage job with the expectation of moving up the economic ladder later. Older workers are likely more risk-averse, opting for the stability that seniority brings—even in a low-wage job—over the opportunity to find a better job.
While it is important to develop new and better approaches to expand education and improve workers’ skills, these alone will be sorely insufficient to solve America’s low-wage-job problem. In the past, manufacturing jobs offered family-supporting wages to the less skilled and less educated—people like my own father, with a seventh-grade education.
Those jobs were not always good jobs. We made them good jobs, through labor laws and unionization, among other things. As my father often reminded me, when he started work during the Great Depression, it took nine family workers to make a living wage. But when he came back from his service in World War II, the very same job in the very same factory enabled him to get married, buy a home, and put my brother and me through college.
It’s not as if service jobs are damned to be low-wage occupations forever. Indeed, as MIT’s Zeynep Ton has shown, they are amenable to the same kinds of upgrading as manufacturing work. Companies that implement what she calls a good jobs strategy, paying workers more and involving them more deeply in their work, are likely to see a combination of higher productivity and better customer service, which leads to higher profits.
An under-appreciated way to solve America’s jobs problem and rebuild the middle class is to turn the millions upon millions of low-wage jobs we actually have into better, higher-paying ones.