Thursday, November 8, 2012

During Obama's First Term, Rehired Unemployed Face Greater Odds New Jobs Pay Less, With A Third Taking At Least A 20 Percent Pay Cut: Likely A Result Of Obama's Policies

From Federal Reserve Bank Of Cleveland, Economic Trends, "Displaced Workers and the Great Recession" by Murat Tasci:
The Great Recession lasted six quarters, from December 2007 through June 2009.... During the course of the recession, about 7.5 million jobs were lost in the nonfarm business sector. Job losses did not end until February 2010, by which point total jobs lost stood at about 8.7 million. More than two years since then and after three years of growth in the aggregate economy, employment recovered by 4.5 million, still short of the sharp decline we experienced.
The cost of displacement can be quite large. Consider the experiences of displaced workers from the 2010 [Displaced Workers Survey (DWS)] release, for instance. Those who were tenured had less than a 50 percent chance of finding a job by January of that year, but those who did find a job were more than likely (by 55 percent) to end up with a job that paid less than their previous wage. An incredible 36 percent of those who found jobs suffered at least a 20 percent wage loss. Prior to the recession, not only were the odds of being reemployed higher (67 percent), but the odds of being paid more relative to the predisplacement wage were much higher too, 55 percent, as opposed to 45 percent in 2010 and 46 percent in 2012. Unfortunately, a significant fraction of the reemployed displaced workers, 33 percent, still reported having suffered at least a 20 percent wage loss in the 2012 survey [Emphasis added.}.

Source: Federal Reserve Bank Of Cleveland

Workers from every industry took a larger hit in terms of significant wage losses (more than 20 percent) in the 2010 survey relative to the prerecession survey in 2008. Some sectors, such as professional and business services and retail trade, took larger hits with the recession. However, they recovered a bit in the 2012 survey, whereas the depth of the wage loss worsened in construction and government. Nevertheless, workers who were displaced from manufacturing and construction industries are among those with the worst wage outcomes according to the 2012 survey, with slightly more than 30 percent suffering at least a 20 percent wage loss.

Source: Federal Reserve Bank Of Cleveland

While causes for the greater chance of a lower wage upon rehire are not discussed in the article, several of Obama's policies likely contributed to the wage loss of rehires:
  • Extended unemployment benefits lengthened the time workers remained unemployed and contributed to a loss of skill and a decline in the workers' value to employers.

  • Extended food stamp benefits (SNAP) with a loss of the benefit above certain income levels pressured more workers to take lower full-time salaries or to work part-time at a lower wage to continue to receive food stamps.

  • The stimulus program which employed people at short lived government funded jobs and which crowded out private investment and the creation of well paying permanent jobs.

  • The new health care law, the Affordable Care Act, which adds significant employer costs to the hiring of full-time private sector workers.

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