Friday, December 13, 2019

The Brookings Study On Low-Wage Jobs. What To Know Before Interpreting The Numbers.

About a week ago I  read a summary of a new Brookings Institute study on the prevalence of low-wage jobs in the US.  The study looked interesting, so now that I have more time I dug into it a little. 

If you wish to do the same, please take careful note of what I say below about this quote concerning the study findings:

Even as the U.S. economy hums along at a favorable pace, there is a vast segment of workers today earning wages low enough to leave their livelihood and families extremely vulnerable. That’s one of the main takeaways from our new analysis, in which we found that 53 million Americans between the ages of 18 to 64—accounting for 44% of all workers—qualify as “low-wage.” Their median hourly wages are $10.22, and median annual earnings are about $18,000.

The bolds are mine.

To correctly interpret the figures of 44% of all workers and the median annual earnings of $18,000, note that the authors of this particular study made two choices which are not terribly common in the kinds of studies which end up reporting some measure of average (such as median) annual earnings:

1.  They chose to include in their study young people (from the age eighteen up) who have not yet completed their education (who are still in college, say).  Very few of these individuals would be regarded as full-time workers.

2.  They also chose to include all part-time or seasonal workers in the study.  This is the crucial point to keep in mind when considering that $18,000 annual median earnings figure*.  It is NOT a measure of what the annual average earnings of full-time workers (those who work forty hours per week year around) are.  The authors state:

Fifty-seven percent of low-wage workers work full time year-round, considerably lower than the share of mid/high-wage workers (81%). Among those working less than full time year-round, it is not clear if this is voluntary or involuntary, or if it reflects part-time work throughout the year or full-time work for part of the year. For some low-wage workers, such as students and caretakers, part-time work is probably desirable. But given the disproportionately high rates of churn in the low-wage labor market, it is likely that spells of involuntary non-employment play a significant role, suggesting a more tenuous connection to the labor force.
 Once you adjust your economic spectacles to that fact, the rest of the report makes for useful reading.

* Data on the median annual earnings of full-time workers can be found here.