There Are No 'Dead End' Jobs in This Hot Labor Market

(Bloomberg Opinion) -- Improved opportunities for low-wage workers are leading to a rethinking of the acceptability of what some would refer to as “dead end” jobs. The question is: How can the U.S. sustain those gains?

Right now, wages in the fast-food sector are competing with manufacturing. Businesses, which often grouse about labor shortages even when there are plenty of qualified people, are actually following up on their complaints with action this time. We hear story after story of employers boosting pay and offering bonuses, gift cards and other perks to attract and retain workers in lower-wage sectors.

For many occupations, pay is quite low. Before the pandemic, data from the Labor Department reported that the median wage of fast-food workers was $10.93 per hour. For waiters, it was $11. Half of all cashiers and retail sales workers earned less than $12 per hour. Laborers and freight, stock and material movers using manual labor had a median wage of $14.19 per hour.

In recent months, many workers in these occupations have seen considerable gains. From February 2020 to May 2021, average hourly wages in retail, leisure and hospitality rose by a whopping 7.8% and 7%, respectively, compared with a 6.4% increase for all workers.

The fast wage growth is welcome. Many who bemoan low wages argue that they exist because of power dynamics between employees and employers. But market forces are what is driving the increases in pay.

Demand is booming thanks to the trillions of dollars of stimulus circulating in a reopened economy and ample household savings available for spending. At the same time, the generosity of unemployment benefits, the scarcity of child care, an uptick in early retirements and remaining concerns about the virus mean there are too few available workers to meet this need.

The rate at which adults participate in the workforce has been flat since last summer. Because employers have to compete especially hard for the workers who are available, compensation is increasing.

This situation won’t last. In the fall, economic stimulus will fade, and households will pull back on their spending. Employers’ voracious demand for additional help will abate.

And by then, more people will come off the sidelines to re-enter the job market. Unemployment benefits will have normalized, and children will be back in classrooms. Less employer demand and more available workers mean wage growth will return to normal rates.

Does returning to normal mean many people are going back to so-called dead-end jobs? Progressives will argue that it’s government’s responsibility to make sure this doesn’t happen and call for more generous public support.

But the lesson from the current situation is not that traditional low-wage jobs are a dead end. They aren’t. Policy makers should continue to support and encourage work, not disparage low-wage jobs as unworthy of anyone’s time and effort. Consider three better conclusions to draw.

First, it’s bizarre to argue that the current success of those who were in low-wage jobs implies that those jobs only offer a “dead end.” Today’s experience demonstrates precisely the opposite: that many workers can use these jobs as a stepping stone to better opportunities. This spring and summer, we have seen that workers can do exactly that — for example, someone earning a relatively low pay in a grocery store who took advantage of today’s labor market to find a new, higher-paying position as a machine operator.

Instead of giving up on low-paying work, policy makers should focus on ways to help workers to increase their skills so that they can command higher wages and climb the employment ladder, using those jobs as a starting point. Work-based learning programs have been shown to be effective in raising wages in part because employers determine the skills people learn. Unlike traditional government job training, this ensures that these programs teach workers skills that employers actually want to see in new hires.

Second, when applicants are scarce, employers hire people with relatively fewer skills or less experience than they normally would. They are also likely providing increased in-house training to get the new workers up to speed.

This suggests that in normal times, many employers could be relying too heavily on experience or credentials when evaluating candidates. Some employers may find better workers if they focused more on which applicants can do the jobs they need done — even if some additional training is required — and less on the kinds of information listed on standard resumes and job applications.

Finally, today’s burst of upward mobility demonstrates that rapid economic growth benefits everyone — including those at the bottom of the pay scale.

Progressives and conservative populists alike, take note: The best employment program is a hot economy.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Michael R. Strain is a Bloomberg Opinion columnist. He is director of economic policy studies and Arthur F. Burns Scholar in Political Economy at the American Enterprise Institute. He is the author of “The American Dream Is Not Dead: (But Populism Could Kill It).”

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