The COVID-19 pandemic has drawn attention to a trend that began in the mid-1970s: The economy has produced too many low wage jobs

Guy Boulton, Milwaukee Journal Sentinel
·13 min read

MILWAUKEE – Almost 27,000 people who worked at hotels and restaurants in the Milwaukee area made less than the median wage of $40,700 a year and did not get health insurance through their employer in 2018. That's an estimated 41% of the total jobs in the hospitality sector.

In the retail sector, 21,540 people, or 27% of the workforce, are in the same category.

The estimates are from an interactive tool, "Visualizing Vulnerable Jobs Across America,” compiled by the Brookings Institution. They measure the percentage of workers in 380 metropolitan areas who are the most vulnerable in the economic downturn bought on by the coronavirus pandemic.

This downturn differs from others not only in how swiftly it hit, but also how its impact has been concentrated in a few sectors of the economy.

It has had a disproportionate effect on people who work as waiters, taxi drivers, janitors and in an array of other service jobs.

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This project is supported by a grant from Marquette University Law School's Lubar Center for Public Policy Research and Civic Education to make possible journalism on issues of importance to the Milwaukee area. All the work was done under the guidance of Journal Sentinel editors.

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Many have lost their jobs or had their hours sharply reduced and now are struggling to make rent and pay other bills. A large share are Black or Latino workers. The majority are women.

Brookings, a public policy research organization based in Washington, D.C., refers to these jobs – low pay, no insurance – as vulnerable. It found that 19% of U.S. jobs, or almost 1 in 5, paid less than the median wage, adjusted for location, and did not provide health care benefits in 2018.

“Those are workers who have low wages and spotty hours in the first place,” said Laura Dresser, associate director of the Center on Wisconsin Strategy at the University of Wisconsin-Madison.

Luther Rivers, 37, a prep cook at Fiserv Forum, lost his job in March.

He was making $13.50 an hour and was set to get a raise to $16.75 an hour – about $35,000 a year – under a contract negotiated with the Milwaukee Area Service and Hospitality Workers Organization.

"Everything was a go and then the corona came," Rivers said.

Now, more than six months later, he doesn't know when he will be called back.

At the same time, people with jobs in management, finance, law and other sectors that enable them to work remotely overall have been relatively unscathed financially. They also are more likely to make a good wage.

The COVID-19 pandemic has drawn attention to gaps in unemployment benefits, weaknesses in child care and varied access to health insurance.

It also has highlighted a well-documented trend that began in the mid-1970s: The U.S. economy, with Milwaukee in lockstep, has produced too many jobs that pay low wages and too few jobs that pay middle-class wages, with benefits.

The statistics are different, but in harmony, with data compiled as part of a new report from the Milwaukee Area Project at Marquette University Law School's Lubar Center for Public Policy and Research. The authors of the Lubar Center report – Mike Gousha, distinguished fellow in law and public policy, and John D. Johnson, research fellow – focused on household income, the money brought in by all those who live in one place.

The report acknowledges that the slide in Milwaukee-area household income goes back decades. But it highlights the region's struggle to find its footing after two recent recessions, one in the early 2000s and the Great Recession of 2008.

Just since 2000, metro Milwaukee has 44,000 fewer jobs in manufacturing and 7,500 fewer jobs in finance and insurance. In return, it added jobs in hospitality, food service and health care.

“There are different ways of measuring income, but the trend is clear. Over the last 40 years, wages have stagnated and household income has declined overall for the average worker in the Milwaukee area,” Johnson said.

Creating jobs, but not the right jobs

The economy has continued to create jobs; it just hasn’t created enough jobs that pay a middle-class wage.

Instead, it has created low-paying jobs that offer little chance of advancement and that people cycle through, said Marcela Escobari, a senior fellow at Brookings.

Most of the increases in income, after adjusting for inflation, have gone to highly skilled workers.

The total income of those in the country's top 20% – individuals and families with household incomes above $142,501 a year – now is more than the total income of those in the bottom 80%, according to data from the U.S. Census Bureau.

This well-documented bifurcation of work has been hollowing out the middle class. And it is considered by many liberal and conservative economists as one of the most significant challenges facing the country.

The people hardest hit have been men with only a high school degree.

The median income, meaning half had incomes above and half below, for male workers 25 and older with only a high school degree fell 26.8%, after adjusting for inflation, from 1976 to 2019, according to the U.S. Census Bureau.

In 2019 dollars, the median wage for those workers fell from $50,772 in 1976 to $37,144 last year.

DeiDra Blakley previously worked at Potawatomi Hotel and Casino as a dealer until losing her job in March. She was just called back to Potawatomi.
DeiDra Blakley previously worked at Potawatomi Hotel and Casino as a dealer until losing her job in March. She was just called back to Potawatomi.

The median income for men with some college education also fell.

Wages for women 25 and older with only a high school degree did increase from 1976 to 2019 as more jobs became open to them. That said, the median income for women in this group, after adjusting for inflation, rose only 9.3%, increasing to $22,052 in 2019 from $20,177 in 1976.

"I don’t think we’re getting paid what we are worth, pretty much in most jobs, especially for the people who don’t carry a degree,” said DeiDra Blakley, 45, who works as a hostess at a casino in Milwaukee.

“I don’t have any letters behind my name, but I’m a good worker."

She made about $27,000 last year.

Blakley lost her job in March but was recently called back. She considers the casino and hotel a good employer that promotes from within and offers health benefits. In an earlier stint, she worked as a dealer and hopes to do that again.

As a dealer, she made $34,000 to $35,000 a year. It was the most money she ever made in a job. It also was the first time she had health benefits.

Factors behind troubling trend

The reasons that wages overall have declined or been stagnant for the least-skilled workers are varied, but most economists agree that the main factors include:

  • Automation.

  • Globalization and the effect of imports on manufacturing.

  • The weakening and decline of labor unions.

  • The decline in purchasing power of the minimum wage.

  • Insufficient investment in education and job training.

Some of the trends have benefits. Globalization and the increase in imports have lowered prices for many products. And automation increases productivity and the overall standard of living while replacing tedious or dangerous jobs.

But both have resulted in fewer jobs in the United States that pay good wages.

And as the U.S. economy adjusted to the successive shocks from globalization – imports from Japan in the late 1970s and 1980s, from Mexico in the 1990s and China in this century – the country didn’t invest in helping the affected workers, said Escobari, of Brookings.

Marcela Escobari, a senior fellow at Brookings Institution, a public policy research organization based in Washington, D.C.
Marcela Escobari, a senior fellow at Brookings Institution, a public policy research organization based in Washington, D.C.

The next shock could come from automation.

More than 70 million Americans have a high school degree but have not completed college. And they are four times more likely to lose their jobs to automation than college graduates, according to a 2019 report by McKinsey & Co., a consulting firm.

An estimated 55% of the people 25 and older in the Milwaukee area do not have an associate or bachelor’s degree, according to the Census Bureau.

Yet at the very time the economy was changing, the United States was cutting back funding for training that might have given people with only a high school degree the skills needed to earn a middle-class wage.

Federal funding for workforce development declined from a high of around $24 billion in 2017 dollars in the late 1970s to $5 billion by 2017, according to a 2019 Brookings report.

“We say there is a skills gap and yet training is going down,” Escobari said.

But money is only half the equation. The other half is the structure of the programs that provide training.

Effective programs exist, Escobari said, but they often are hard to access, complicated and bureaucratic. Further, the programs often don’t take into account the circumstances of people who need training, such as child care, transportation, and financial assistance, she said.

Is it realistic to expect a single parent, for instance, to complete a training program while working and raising young children?

“So here it is: You have classes and training that you are giving the majority of your time to," said Melina Harmon, who worked as a bartender at Fiserv Forum. "You have a household you have to run, and then a job over here that you have to work with the little time you have left.”

Low wages, low benefits

One step that could be taken to lessen vulnerability is increasing the federal and state minimum wage of $7.25 an hour, or $15,080 a year.

Only about 2% of workers make the minimum wage and about half those are 16 to 24 years old. Still, it sets the bar for other wages to be measured against, and it was last increased in 2009. Since then, the cost of living has increased 21%.

The Fight for $15 campaign has pushed for a minimum wage of $15 an hour – $31,200 a year – as a benchmark, and more employers are moving toward making that the lowest wage for their employees.

Laura Dresser, associate director of the Center on Wisconsin Strategy at the University of Wisconsin-Madison.
Laura Dresser, associate director of the Center on Wisconsin Strategy at the University of Wisconsin-Madison.

Some economists are wary of sharp increases in the minimum wage, and Dresser, the UW-Madison economist, said she understands their concerns. But she said the focus should be on job quality and how to make work pay.

States have increased the minimum wage without hurting their economies, she said. And ballot initiatives to increase the minimum wage have passed in both Democratic and Republican states.

“This is broadly based, popular economic policy,” Dresser said.

Escobari said she would not argue against increasing the minimum wage, though the increases should vary by region.

“It is just a blunt instrument,” she said.

That said, some companies – such as Costco, Trader Joe's and KwikTrip – that compete in sectors of the economy dominated by low-wage jobs have shown that paying higher wages doesn’t necessarily hurt profits, Escobari said.

And if companies had to pay higher wages, they have an incentive to invest in making their employees more productive.

'Walk in our shoes, live how we live'

The data on vulnerable jobs pulled together by Brookings is designed to provide an overview for metro areas on how the pandemic could affect their economies and the makeup of their job markets.

For example, Wisconsin cities Fond du Lac and Sheboygan – with solid manufacturing bases and fewer workers in hospitality – ranked among the lowest in the country in the number of jobs deemed vulnerable in the Brookings data.

The data focuses on the percentage of workers who have lower wages and don’t receive health benefits. But incomes have been stagnant for a large share of male workers – despite the gradual increase in productivity – since 1976.

According to the U.S. Census Bureau, in 2019 dollars:

  • The median income for all men 25 and older increased 4.87%, to $49,674 in 2019 from $47,368 in 1976.

  • The median income for men 25 and older with a four-year college degree increased 3%, to $69,505 in 2019 from $67,459 in 1976.

In contrast, women overall have seen significant increases in income since 1976 – though they still make much less than men overall.

  • The median income of women 25 and older rose 87.2%, to $31,773 in 2019 from $16,973 in 1976.

  • The median income of women 25 and older with a four-year college degree increased 46.7%, to $45,942 in 2019 from $31,312 in 1976.

That said, in the Milwaukee area, the median wages of women 25 and older have been stagnant since 2000, according to the Lubar Center data.

The estimates on median income do not include the cost of health benefits, which have become a larger share of total compensation with the rise in health care costs. Income figures also can be parsed many different ways. And though income is a good measure of job quality, it is not necessarily a measure of the standard of living.

That can depend on age, family size and whether a household has two people working, Dresser said.

The Lubar Center data, for example, focused on median household income – all income earned by those living in a household. It found, after adjusting for inflation, that households in Milwaukee today earn, on average, $6,000 less a year than they did in 2000.

Median household income has declined $8,000 in Waukesha County, $14,000 in Ozaukee County and $13,000 in Washington County during the same time period, according to the Marquette data.

The question is what can be done to create more jobs that pay good wages.

It includes how to develop the right incentives for companies to create better jobs, to invest in training, such as apprenticeships, and to create career paths for workers, Escobari said.

“That’s where we learn," she said. "We learn from work.”

It also includes how to encourage companies to use automation in ways that maximize human capability – intuition, ingenuity, creativity.

There are no simple solutions, Escobari said.

But there are proposals across the political spectrum, and economists right and left agree this is an area where policy can help.

The goal is to encourage companies to invest in workers, so they can earn higher wages, while helping people get back on their feet during downturns and making the economy less susceptible to shocks such as the pandemic.

Blakley would welcome that.

"Personally, what gets me through is enjoying my job and knowing I’ve done my job to the best of my ability," she said.

But she added, “I really would like for somebody to just come and see what we do – walk in our shoes, live how we live – and make changes. Somebody needs to make changes."

Guy Boulton can be reached at guy.boulton@jrn.com

This article originally appeared on Milwaukee Journal Sentinel: In the U.S., the economy produces too many low-paying jobs