The Rise of the Crap Job Economy

Why low unemployment is slow to create wage hikes.

The following is a come-on for you to read my latest weekly column in the New Republic, on why the labor shortage that’s driving up wages won’t last.

I have an old friend named Dan Alpert. He’s a very old friend. We met, I think, in September 1963, on the first day of Miss Hambel’s kindergarten class at the now-defunct Theodore Roosevelt Elementary School in New Rochelle, N.Y. In 1970 my family moved to California, and about 40 years after that my friend Joe Nocera, then a business columnist at the New York Times, told me he knew a very smart financier and policy wonk who’d gone to school with me. What’s his name? Dan Alpert. I don’t know any Dan Alpert. I phoned my elementary school friend Russell Handelman, who has near-photographic recollection of our childhood. “We didn’t go to school with anybody named Dan Alpert, did we?” “Of course we did! Danny Alpert.”

The fog lifted. “Oh, Danny Alpert.” We got back in touch—I think I phoned him—and immediately made a pact that I wouldn’t call him “Danny” if he didn’t call me “Timmy.”

Ever since then, Dan has been one of the people I call whenever I’m trying to figure out what’s happening in the labor market. (The short answer, on a global level, is too much labor and too much capital. Read his excellent 2013 book, The Age of Oversupply.) Dan and I don’t agree about everything, but he’s forgotten more about economic data than I’ll ever know, and I’m especially grateful to him for inventing, along with various academic colleagues, the Private Sector Job Quality Index (JQI). Pictured above you can see the past 30 years of JQI. Note that it’s gone down.

One of the great riddles of the slow economic recovery from the Great Recession of 2007-9 was why, even when economic growth finally started to pick up and the unemployment rate fell, wages scarcely budged. Real median income didn’t climb in any sustained way until 2014—five long years into the recovery, as unemployment dropped below 6 percent—and real median income didn’t return to its 2000 level until 2016, the final year of Barack Obama’s presidency. During the first nine years of the recovery, from 2009 to 2018, the last year for which data are available, the top one percent in the nation’s income distribution captured 45 percent of all income growth. That’s a lot!

Why did it take so long for the 2009-2020 recovery to create wage growth? It wasn’t, as President Donald Trump insisted, because President Barack Obama killed manufacturing. Manufacturing was pretty much of a dead letter by the time Obama entered office; the proportion of service-sector jobs in the U.S. economy was about 84 percent then, and remains about 84 percent now. Rather, what happened after 2009 is that the quality of service-sector jobs deteriorated, continuing a trend going back to 1990. And because service-sector jobs pretty much are the economy, the quality of jobs in the economy overall has deteriorated, too. The result is a Crap Job Economy wherein good jobs (defined as jobs that pay above mean weekly income) are displaced by crap jobs (defined as jobs that pay below mean weekly income) or, as Dan and his compadres more politely term them, “low-quality jobs.” The JQI is measured according to weekly rather than hourly income because a key feature of crap jobs, besides lousy pay, is that they seldom offer 40 hours’ work in any given week. (This is all explained in a handy white paper.)

The JQI is arrived at by dividing the number of good jobs by the number of crap jobs and then making various small technical adjustments. In 1990, the JQI was 94.9. Today, as the end of Covid lockdown creates a momentary wage spike, the JQI is 81.49. For the past three decades, crap jobs have been devouring the labor market, and there’s no reason to think that will stop. My latest column for the New Republic uses Crap Job Economic Theory to explain why management has little to fear from the current momentary labor shortage, barring revival of the U.S. labor movement.