If the US economy has created more than 40 million new jobs over the last 30 years, then why do so many people feel that they’re falling behind?
A new index suggests that it’s because many of those new jobs aren’t very good, a trend that not only hurts people’s wage growth but also implies that the nation’s employers may be underutilizing the nation’s workforce.
Professors at Cornell University and the University of Missouri Kansas City recently introduced the US Private Sector Job Quality Index, a measure that tracks the types of jobs across the country. According to the index, jobs are considered “low quality” if their weekly income falls below the mean for all such jobs (the index excludes management roles). Backdating information to 1990, the research found that 53% of new jobs were low quality. Now, however, 63% are low-quality roles.
“The findings are generally not surprising,” says Tom McMullen, a senior client partner at Korn Ferry and leader of the firm’s North America Total Rewards expertise group. Many higher-paying manufacturing jobs have been replaced with lower-paying service jobs, he says. Indeed, in 2018, the top three employment sectors in the US were education and health services; wholesale and retail trade; and professional and business services.
Those “low-quality jobs” also offer fewer hours than higher-quality ones, the index’s creators say. Low-quality roles are only about 30 hours a week. By contrast, higher-quality jobs average more than 38 hours a week. Indeed, the authors argue that the shift to more low-quality roles is behind stagnant wage growth and low productivity gains even as the nation has historically low unemployment. “The nation is not in need of more low-wage/low-hours jobs,” the authors say in the index’s accompanying paper.
Most corporate leaders are aware of the dilemma, as industries from tech to food service struggle to find and retain talent. Recently, many large corporations have been increasing wages to their lowest-paid workers, says Scott Macfarlane, a senior partner at Korn Ferry and global account lead for the firm’s Financial Services practice. Bank of America, for instance, is raising its minimum wage to $20 per hour nationwide by early next year. Such companies are betting that they can get more productivity out of fewer, better compensated workers. “When you see large employers taking those positions, it will have outward pressure on everyone else,” Macfarlane says.
Experts say companies also can make their jobs feel like high-quality roles even if the pay is modest. “If you want a person to do a good job, give them a good job to do,” says McMullen, quoting famous business management expert Frederick Herzberg. Effective job and organization design, clarity in purpose, and an energizing work climate will lead to more engaged and productive employees and, ultimately, organizations, McMullen says.