Minorities, Rural American Need Stronger Labor Market to Regain Lost Ground
President Bush's response to the 29 month recession and "job-loss" recovery has eroded the short-term economic status of many Americans, particularly minorities. A continued return to the "trickle-down" policies of the 1980s, e.g., making recent tax cuts permanent, will further erode the absolute and relative income gains that middle and low-income households made during the 1990s.
Today's release of the Bureau of Labor Statistics' Employment Situation provides a clearer signal as to the health of the labor market. April's employment gains of 288,000 jobs are the second month in a row where job growth was well above 150,000 new jobs, the amount needed to accommodate labor force growth – a minimum standard for job creation as it excludes jobs for everybody who left the labor market because they could not find work.
The Administration will likely over interpret the numbers and once again misrepresent the administration's commitment to helping American workers. According to the Heldrich Center's recent Work Trends Survey, Americans will not be fooled by President Bush's rhetoric about the labor market. Workers and employers both feel that President Bush has done little to help them cope with the past three years of lay offs. One in three workers believe President Bush is doing a poor job handling issues related to jobs, compared to only 7 percent who find his performance to be excellent.
People know the losses they have suffered since the boom years of the 1990s. The last boom lasted from March 1991 to March 2001. During this ten-year period, the unemployment rate hit a 30 year low. The nation's jobless rate was below 5.0% and 4.5% for 46 and 28 consecutive months, respectively.
In many communities, where employment gains had been slow in the past, the persistently low unemployment rates created skills shortages. Employer demand for workers exceeded the ready supply of workers. This shift placed upward pressure on wages and led to the use of bonuses and other forms of compensation to attract and retain workers. It also forced employers to further expand their labor pool to youth, minorities, women, older workers and even ex-offenders. Thus, the gains of the longest post-war expansion were widely shared.
Since the start of the recovery in November 2001, the economic outlook has improved. Yet, the labor market remains the weakest link. Even after the recovery's start, unemployment continued to rise, and employment continued to fall for the first time since the Great Depression. Most problematic has been the economy's inability to absorb the nearly 18 million Americans that comprise an untapped pool of potential. This figure stood at 13 million in 2000.
After hitting an historical low of 7.2 percent in March and April 2000, the African-American jobless rate jumped to 11.6 percent in June 2003. It still stood at 9.7 percent in April. It has trended downward in recent months, but only because African Americans have left the labor force. The African-American teenage unemployment rate jumped from 25.9 percent in 2000 to 33.0 percent in 2003, and was still 28.3% in April.
A comparison with the recovery in the early 1990s shows that during the 1990s there was a dramatic improvement in job prospects, but a reversal of fortune after 2000. Fortunately, the gains of the 1990s have so far not been fully crowded out by the events of the last three years.
The primary economic policy tool of the Bush administration has been massive tax cuts. The fundamental question that lies beneath the tax cut and other policy debates is whether Americans want our next economic expansion to look like the 1980s when the increases in real household income were greatest at the upper portion of the income scale, or the 1990s when the increases were distributed all throughout the income scale? During the 1990s, low-income minority households experienced the largest gains.
One's answer depends on their "core" values and vision for America. For example, the most recent tax cuts should have been delayed until Americans had more information about the costs of the war on terrorism and rebuilding of Iraq. Albeit minor, delaying the tax cuts would have been a way for high-income beneficiaries to make an easy sacrifice that honors the men and women who serve in the armed forces. This could be done because the motivation for the tax cuts had little to do with creating a short-term stimulus, and more so with reinstituting a chief component of the "trickle-down" value system, giving more money to the rich.
If President Bush had wanted to implement tax cuts to fulfill a campaign pledge, and remain consistent with his "core values," then the tax cuts should have been tilted toward lower- and middle-income households. Targeting the cuts toward these Americans would have displayed a more genuine concern toward families that through no fault of their own have borne the brunt of the recession and current "job-loss" recovery.
Looking to the future, the tax cuts should not be made permanent. The President's rationale that we are at war and all Americans must make sacrifices can be used to justify this policy stance. Doing this would provide needed resources to help laid-off workers retool and upgrade their skills, fund No Child Left Behind, invest in the nation's aging infrastructure, and ensure that our military has the resources that it needs. Further, the revenue saved from not making the tax cuts permanent could be utilized to address long-standing persistent poverty in many areas such as Appalachia and the Mississippi Delta, areas that were left untouched by the prosperity of the 1990s. Just as President Bush made a pact with the Iraqis that the US will not leave until the job is done. The President should do so with rural America.
Employment growth has only improved over the past two months. The almost 17 million unemployed and under-employed Americans – 8.2 million unemployed; 4.6 million working part-time for economic reasons; and another discouraged 4.6 million who have taken themselves out of the labor force but who want to work – need more. Given the magnitude of the anxiety that our recent Work Trend Survey captured, I will be quite surprised if workers' memories of being left to fend for themselves during the last 3 years fade away. These anxieties need to be addressed through more responsible public policy if we don't want to leave millions of Americans, especially in minority communities, rural America and elsewhere, behind.
- Job Less vs. Job Loss Recovery (Cumulative Employment Growth During the Current and Most Recent Recovery)
A year into the recovery, cumulative employment was up in the recovery in the early 1990s. In comparison, the economy had fewer jobs in the third year of the most recent recovery compared to its start in November 2001.
Source: Bureau of Labor Statistics (BLS), Establishment Data, Washington, D.c=: BLS.
- Unemployment Rates by County, 1991, 2000, and 2002
Comparing unemployment rates by county from 1991 to 2000 shows that the unemployment rate fell all across the country (lighter colors indicate lower unemployment rates). Although the unemployment rate rose from 2000 to 2002, the losses did not completely erase the gains of the 1990s.
Source: Bureau of Labor Statistics (BLS), Local Area Unemployment Statistics, Washington, D.C.: BLS.
- Percent Change in Mean Income Received for Each Fifth and Top 5%, White, Black and Hispanic Households, 1983 to 1989 and 1992 to 2000
A comparison of income gains shows that minority households, especially lower income households, lost ground in the 1980s, but gained on white households in the 1990s. Moreover, in some instances, low income minority households gained on high income households in the 1990s.
Source: Author's calculations from published U.S. Census Bureau data.
William Rodgers III is a professor and chief economist. He is co-author of "Laid Off: American Workers and Employers Assess a Volatile Labor Market" and a member of American Progress' academic advisory committee on economic policy.