After years of stagnation, low-income jobs join the recovery

What do waitresses in California, security guards in Tennessee, and hairstylists in Virginia have in common? All of these employees are starting to get bigger paychecks, economists say.

The Great Recession of 2008 triggered a double-digit spike in the US unemployment rate, which led to lower wages as employers were not obligated to offer competitive salaries. The national unemployment rate has decreased every year since 2010, according to the Bureau of Labor Statistics (BLS), causing most paychecks to rise. Low-income workers, however, missed out.

But wage statistics from last year suggest this is changing. The Pew Charitable Trusts Stateline analyzed 2016 employment data from BLS, and found the largest income bumps for workers earning roughly $30,000 in 44 states.

“You are starting to see more broadly based wage growth,” says Elise Gould, a senior economist at the Economic Policy Institute. “All the wage growth didn’t happen at the top, and that’s a positive sign.”

But Dr. Gould cautions that low-income workers are making up lost ground rather than getting ahead.

“[H]ad all workers’ wages risen in line with productivity, as they did in the three decades following World War II, an American earning around $40,000 today would instead be making close to $61,000,” Gould wrote in a March report. “A hugely disproportionate share of economic gains from rising productivity is going to the top 1 percent ... instead of to ordinary workers – who are more productive and more educated than ever.”

Economists attribute the wage growth last year among low-income workers to a variety of factors: Economic recovery from the recession has created a demand for service level jobs; 15 states and Washington, D.C., increased their minimum wage; and the aging baby-boomer population now demands more in-home aid.

Even in Washington, one of the few places where high-income workers got the biggest pay increase, low-income workers saw a 22 percent boost.

“Primary jobs” are the first to reestablish after a recession, and as consumers feel more confident in the market, there is more of a need for “secondary jobs” in hospitality and leisure sectors, says Paul Turek, a labor economist at the Washington State Employment Security Department.

“It is a slow gain,” Mr. Turek says. “Over time, we have made progress when you look at it.... Higher-income workers earn higher wages early on in the recovery, and we are just now seeing more wage gains for lower-level jobs.”  

Waitstaff made the top five of occupations that had wage increases in Alaska and New Hampshire, and bartenders made the top five in Virginia, Texas, New York, New Mexico, and Hawaii. In California and Florida, both waiters and bartenders made the top five. Fitness trainers saw the biggest increase in Wyoming, and reached the top five in Vermont, South Dakota, Montana, Maryland, Iowa, and Illinois. Hairstylists had the biggest wage increases in Virginia and New Jersey.

Many of these states, which saw the biggest income increases at the $30,000 level, are the same states that raised their minimum wage in 2016. This is not a coincidence, says Gould. Wages for workers in the 10th percentile in states that raised their minimum wage in 2016 rose by 5.2 percent, more than twice the rate of workers in states that kept their minimum wage stagnant. This differentiation was especially acute among women in the 10th percentile – 6.3 percent versus 2.5 percent.

However, economic inequality will continue to widen unless the wage growth of low- and mid-income workers surpasses that of high-income workers – a shift that seems unlikely. “We’re not seeing inequality reverse course,” says Gould. “We just aren’t seeing it worsen.”

And while wage growth may remain disproportional, an aging US population will expedite a need for more low-income workers in the near future.

According to BLS, occupations generating an average income of $37,000 have the highest projected job growth by 2024. Many jobs in that range are a response to the needs of the baby-boomer generation, with employment of home health aides and personal care aides expected to increase 38 percent and 24 percent respectively over the next eight years.