Abstract
The first two decades of the twenty-first century have been marked by the Great Recession (GR), which was followed by the longest recovery in U.S. history, here termed the Long Recovery (LR). The LR lasted more than 10 years and ended with a pandemic bang in March 2020. This article introduces the eighteen articles that make up our review of the effects of the LR on the working class. What did more than a decade of economic expansion following the GR do for the working class and various groups of disadvantaged workers? We study this question through the lenses of economics, demography, sociology, and policy. The working class—lower-middle-income units, especially those whose adults have low education levels or other credentials—was hit hard by the GR. Did groups who are usually at a labor market disadvantage in fact make absolute and relative gains in incomes and living standards during the LR? Lessons from the LR will help to inform policy efforts to sustain the postpandemic economic expansion, which is still under way as of this writing.
Dramatic macroeconomic events have marked the first 21 years of the twenty-first century. The Great Recession (GR; 2007–2009), the largest and longest downturn since the Great Depression, was followed by the longest recovery in U.S. history. Of course, the Long Recovery (LR) then ended with a pandemic bang in March 2020. Although the economic impact of the COVID-19 virus and associated policy responses will be important topics for consideration over the years ahead, the economic experience of the LR bears scrutiny as well. Lessons from the LR will help to inform policy efforts to sustain the postpandemic economic expansion, which is still under way at this writing. Better longitudinal data on workers, families, and children can help us in time to understand the divergent economic, health, and social effects of the COVID recession and recovery.
The LR began in July 2009 and became the longest economic expansion in recorded U.S. history. In the second half of the twentieth century, and especially during the roaring 1990s at the end of the twentieth century, such periods of growth benefited a wide swath of workers, lending truth to the adage that “a rising tide lifts all boats” (Card and Mas 2016; Krueger and Solow 2002). In contrast, while the LR was lengthy, it was also uneven. The GR affected households in different socioeconomic circumstances quite differently. Over the LR, technological change and growth in the service sector affected different workers in myriad ways. And so, the story of the LR from the GR is not simple to tell.
What did more than a decade of economic expansion following the GR do for the working class and various groups of disadvantaged workers? These are the questions we seek to answer in this volume. We study those questions through the lenses of economics, demography, sociology, and policy—and with an eye toward lessons to be drawn for the pandemic recession and now the recovery, which is still in progress. The working class—lower-middle-income units, especially those whose adults have less education or other credentials—were hit hard by the GR. Economic theory predicts that when unemployment falls to very low levels, such as those found in the United States during the 2015 to 2019 period, these workers should fare better as the economy bids up wages and opportunities during a long recovery. But did that happen? Did groups who are usually at a labor market disadvantage in fact make absolute and relative gains in incomes and living standards during the recovery? This is the basic question that we seek to answer.
Volume Origin and Changes in Focus
In October 2019, we started with this overarching question: what has happened to the American working class since the GR? The idea came out of an employment, self-sufficiency, and economic security (ESS) working group, beginning at the Institute for Research on Policy (IRP) in early 2017, that brought the editors of this volume together and gave important group input on the issues that we needed to address here. Our original problem was to capture the latter stages of the long but slow recovery that was still picking up steam at the end of 2019. The American Academy of Political and Social Science gave a Fellows’ Conference Grant to one of the editors, and we sought and found the best scholars we could to address the issues that we thought fed into our larger question. We had planned a summer 2020 volume. And then the onset of COVID-19 in March 2020 abruptly ended the LR. It also pushed back our planned meetings. Given that the effects of the pandemic were ongoing, we decided to have papers presented virtually in January 2021.
These intervening events provided some advantages, as it gave us three distinct periods of economic life to bookend the LR:
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And so, while we began with trying to capture the LR and the effects of low unemployment on the working class, not knowing when it would come to a halt, we ended with a distinct LR sandwiched between two very different recessions—the GR and the C19RR.
The major contribution of our effort is to bring together new and nearly complete evidence about the LR. Our timing permitted us to update data into the later years of the recovery in all cases and even into 2020 in some cases. Hence, we provide a thorough and comprehensive evidenced-based examination of how the working class and more disadvantaged workers fared over the LR. With this evidence in hand, we are better equipped than many to predict possible outcomes of the C19RR, although given the uncertainty of the current era, we are, at best, conjecturing.
A strength of this volume, though, is that different authors study different windows of time and define the working class in clear but slightly different ways. The goal of each article is to answer specific questions, which means that some articles rely on different definitions than others. The volume as a whole—which seeks to be comprehensive—benefits from what in the aggregate becomes a thoughtful mosaic of approaches.
Taken together, the articles in this volume provide nuanced evidence that characterizes the average and common experience of workers and their families in the recovery. The LR featured pockets of serious problems and pockets of unusual successes, and this volume addresses those as well. Some of the articles study specific groups of workers. In the spirit of the volume, the articles stress both the relative and absolute outcomes experienced by these groups. Others look at policy institutions, regulations, and other mechanisms that affected the working class in the LR and still have strong effects today.
Economic Cycles in Context
While our main focus is the LR, some articles in this volume analyze a longer period, using windows outside the LR to place the LR in context. Figure 1 captures changes in nonfarm employment over these three recovery periods. The GR technically ended in June 2009, and the LR continued through February 2020. The LR was indeed long in many respects, with jobs not returning to their earlier peak until May 2014, a full 58 months after the GR ended, and then continuing to grow slowly for another 69 months beyond that. By the time the LR ended in March 2020, 127 months (10 year and 7 months) after the GR, the economy had added 10.2 percent more jobs than the previous peak shown in Figure 1.
Payroll Job Losses during the COVID-19 Recession compared to All Post–World War II Recessions
The C19RR that shocked the nation in March 2020 reduced employment by 14.7 percent in March and April 2020. And while more than half of those jobs had been recovered by the end of April 2021, 8.2 million jobs, more than 5.4 percent of nonfarm payroll jobs since the previous peak, are still missing. At the time of this writing, the number of long-term unemployed is about 4.3 million workers. And many of the same low-paid service jobs with low peak wages in Table 1, are the working-class jobs that are missing, as the C19RR continues. These lost jobs, like many of the gains we observed, were held disproportionately by low-skill workers, minority workers, and women.
Employment and Median Hourly Wages in the Largest U.S. Occupations
SOURCE: U.S. Bureau of Labor Statistics (BLS; 2019) and National Academy of Social Insurance (NASI; 2021). Shading indicates the largest low-wage occupations.
Disadvantaged Workers and “the Working Class”
On the eve of the pandemic, the employment rate for prime-age people was higher than it had been in two decades. In 2016, inflation-adjusted median household income as reported by the U.S. Census Bureau reached a record high and continued to grow in the LR years that followed. In the final years of the LR, employment rates for workers with the least education were higher than their pre-recession averages for college graduates. Vulnerable workers—workers with disabilities, or longer-term unemployed, for example—saw considerable gains toward the end of the LR. The business cycle that began with the GR and ended with the pandemic was one of the better periods for wage growth in many decades. In the last five years of the LR, the wages of low-wage workers grew faster than at the median or at the top.
While overall gains have been strong over the LR, they did not come quickly enough for Americans with less education. Wage growth at the bottom and middle of the earnings distribution finally strengthened in the latter years of the recovery, in part because of tight labor markets (where the demand for workers exceeded the available supply, therefore bidding up wages) and also minimum wage growth in some states, but lagged growth at the top of the distribution for the first half decade of the recovery.
But even then, wages were low in many large occupations even by the middle of 2019. For instance, Figure 1 shows that in May 2019, “working-class” jobs in many large occupations (shaded) paid their average full-time, year-round worker $11 to $14 an hour, roughly $23,000 to $30,000 per year. This is barely enough to keep a three-person ($21,330) or four-person ($25,750) family from official poverty (U.S. Department of Health and Human Services [DHHS], Office of the Assistant Secretary for Planning and Education [ASPE] 2019).
While the safety net worked to prevent great increases in poverty during and right after the GR, poverty rates did not return to pre-recession levels until 2017, suggesting that the low-wage labor market was not responding to the LR before then and finally showed some real earned income–driven decline in 2018 and 2019. And finally Blacks, Hispanics and disabled workers were making significant gains in employment and income as the LR finally gained real steam in 2018 and 2019. Better late than never for all of these gainers.
Even in the LR, individual worker characteristics may overlay with geography to create “pockets of distress,” for places with high proportions of disadvantaged workers, limited local economic opportunities, and other compounding and intersecting social issues such as high rates of opioid use. At the same time, other areas—mostly metro areas in coastal regions—might have seen tremendous local economic growth from emerging sectors of the economy but face regional structural issues with housing affordability and high wage and income disparities (Muro and Whiton 2019).
Just as authors in this volume picked timeframes that best fit their analyses, they also could choose their own definitions of disadvantage or working class. Different windows and different definitions are better suited to addressing specific questions, populations, and institutions. Giving authors the freedom to answer the questions of their specific article allows the volume as a whole to address this remarkable period in a robust and comprehensive manner.
The Questions and Articles
A set of three broad questions structure this volume.
How have poor and working-class Americans and those at risk of economic disadvantage fared during this expansion, in terms of income and employment and related markers of well-being?
How has the labor market for lower-paid workers changed since the GR? Who benefited or did not, and by how much, from the LR’s long, slow swing upward; and then who were most affected by its abrupt end?
How have labor market institutions and social policy systems serving lower-income Americans changed over, or reacted to, the LR expansion?
We convened a group of authors who would pay attention to these questions broadly as well as create evidence on important variation and subgroup stories. This work builds on previous efforts to understand the economic outcomes of major cyclical events (Card and Mas 2016; Krueger and Solow 2002). But here, we use an explicitly interdisciplinary lens and invite inquiry rooted in theory and methods, sociology, ethnography, geography, policy analysis, and social welfare, as well as economics.
We posited that across population groups and regions we might see several types of recovery—ranging from very successful recovery to no recovery at all. We invited authors to examine the experiences of specific demographic groups who have traditionally experienced ongoing historic or emerging systems of disadvantage during the LR. We wanted to scrutinize both workers and households—the individual-level analyses—as well as institutions and policies. Finally, we asked authors to address lessons to take away from this period in terms of economic inclusion and needed policy reforms. We did not tell every story, but likely left out fewer than we included. Future work may build on our efforts here.
The LR expansion took place within a larger and more gradual transformation of our economy. In seeking to make sense of how this period affected disadvantaged workers and their families, we want to emphasize several overarching themes: cyclical versus secular change; the role of technology and automation; generational changes, including labor force behaviors of and outcomes for older versus younger workers; and changing patterns of, and returns to, human and physical capital accumulation. While we do not think that empirical examinations of the LR can satisfactorily disentangle transitory changes from secular trends, we have encouraged thoughtful consideration of these larger trends in light of available data.
As we emerge from the pandemic, the shape of the recovery from the COVID recession is beginning to emerge. Some of the articles offer hints at what is happening in the current recovery, and many speculate that it may well be a continuation or acceleration of advantages flowing to higher-educated and white workers, leaving lower-skill service and minority workers even further behind today than at the start of the recovery from the GR. The key to the near future of the working class is how far and how fast they recover, as the number of vaccinated adults grows and the pandemic begins to fade.
What Did We Find?
Overview
The volume begins with three broad overviews of trends from roughly 2000 to 2019, mainly emphasizing the 2010 to 2019 period: a macroeconomic article, a labor market article on the working class, and an article on trends in family economic and social well-being (including health insurance, food insecurity, and housing situations) for the working class. We encouraged these authors, where relevant, to look at both minority-majority patterns of economic changes, and men and women separately within groups, as well as consider family status.
Overall women’s labor force participation was lower at the end of the LR than it was pre-GR, although with some variance across demographic groups; while men, especially minority men, finally recovered in terms of their employment and labor force participation, albeit with wide regional variance (Baker 2019; Nunn, Parsons, and Shambaugh 2019). In turn, the abrupt COVID recession has clearly hurt the least-skilled service sector workers, many of them highlighted in Table 1, as well as minorities and especially women (Fabrizio, Gomes, and Tavares 2021); while many of them who are still working face health hazards in nursing homes and other venues where personal contact cannot be avoided. Like the authors of the articles, we want the reader to keep these in mind as we address the long slow recovery before the COVID pandemic shocked the nation.
Jay Shambaugh and Michael R. Strain begin the volume with a broad review of the macro economy during the recovery. They show that while the recovery was indeed slow and lengthy, the last five years of the expansion, after labor market slack was absorbed, included wage growth gains at the bottom of the income distribution that outpaced gains in the middle and the top of the distribution. In fact, employment rates for the workers with the least education rose further above their pre-recession level than those for college graduates by the end of 2019. They argue that the recovery from the GR was much longer than the recessions that came before it in part because the economy had to work through the major structural imbalances in financial and housing markets that led to the GR. Households needed some time to bring their balance sheets back to health, which unfortunately many had not yet accomplished even by the onset of the COVID recession. They conclude that the tight labor markets in the latter years of the recovery are the most effective jobs and wages programs in the government’s policy arsenal. But low-wage and lower-skill workers are also the groups who have the most to lose from a serious recession. Because the underlying causes of the COVID recession differ from that of the GR, they are optimistic about the rebound in jobs, output, and productivity as we continue to move toward better public health and a more open economy in 2021.
Erica Groshen and Harry Holzer examine both wages and labor force participation for prime-age workers with a high school or less education—compared to those with college or more. They find that the lengthy 2009 to 2019 recovery helped to raise earnings, even a bit more in percentage terms among low-wage workers than others. For example, wage gains for Asians and Hispanics have exceeded those for whites and Blacks. Yet these recent developments did not broadly disrupt trends in earnings inequality between college and noncollege workers; nor did they alter the fact that median real wages for the less educated have been fairly stagnant (among women) and declining (for men) during this century, even accounting for the lengthy recovery (see Table 1). They also find that labor force participation continued to decline for the less educated, even during the recovery, which they attribute to what economists call “hysteresis” effects, where workers may have difficulty recovering from lengthy periods with no work activity, because of depreciating skills, diminishing employer interest, and loss of labor market information and contacts with other workers. And finally, the recent lack of labor force growth among working-class women suggests a need for better policies to balance work and family life, such as subsidized childcare and paid family leave.
James Ziliak explores trends in the material well-being of working-class households, households whose head or spouse are between the ages of 25 and 54 and who have less than a four-year college degree. The key question is, Does the LR from the GR hold hope for these households to achieve the elusive American Dream? Like others before him (Strain 2020), Ziliak finds that while after-tax incomes stagnated, and homeownership and insurance coverage both fell in the period leading up to the GR, the economic hemorrhaging either abated or reversed in the decade after the GR, especially for the least skilled and for households headed by a Hispanic person. This includes robust earnings growth among the working class, resulting in falling lower-tail earnings inequality, falling absolute poverty, and declining food insecurity, coupled with increased public sector insurance coverage replacing employer coverage and a modest rebound in after-tax incomes. Only the decline in homeownership, which he terms the “bellwether of the American Dream,” continued to stagnate as 2019 came to an end, with an especially large decline among Black families. He also cautions that many of these recent advances likely stalled with the onset of the COVID-19 pandemic. In closing, he suggests renewed efforts to expand public health insurance, a redesign of the unemployment insurance system and an expansion of feeding programs as we recover from the COVID recession.
Population outcomes
The next series of articles examines how specific populations at risk of economic disadvantage fared over the recovery period. These are workers by education levels, criminal systems involvement, disability, Black workers, Hispanic workers, those already citizens and immigrants, as well as Native Americans and Indigenous populations. Finally, we assess racial differences in wealth accumulation and decumulation over the course of the recovery, focusing on the 2019 Survey of Consumer Finances.
The most salient questions may vary from group to group, but, in general, these articles assess how individual earnings and employment changed over this period. And in one article, racial household income and asset changes are assessed. In many articles, the implicit comparison group is white college educated and/or professional occupation groups.
In “A Growing Divide: The Promises and Pitfalls of Education for the Working Class,” Douglas Webber looks at how higher education has changed since the onset of the GR, both for students and the institutions that serve them. The average higher education experience is overwhelmingly positive; the typical college graduate receives a lifetime earnings premium that justifies the time and monetary investment many times over. At the same time, however, the downside risk of attending college (particularly acute among those who do not complete their degrees) is substantial and likely growing. The article explores many factors driving this asymmetry in outcomes, such as growing debt, institutional failures to meet the basic needs of the modern college student body, badly outdated federal accountability policies, and more.
Using administrative records on felony convictions and incarceration linked with IRS W-2 employment records, Keith Finlay and Michael Mueller-Smith look at how persons who have come into contact with the criminal legal system fared during the LR. The strong labor market conditions over the period seem to have helped this group, but only slightly. By 2018, less than half of those released from prison before, during, or immediately after the GR had employment income in a given year; in contrast, a comparison group of adults without high school degrees was almost 18 percentage points more likely to be employed. The formerly incarcerated did see gains in average annual earnings from 2009 on, although earnings topped out around $10,000 per year. Persons with felony convictions or prison records fared relatively better in areas with stronger local labor market conditions in the construction and other services sectors than they did where those sectors were less strong.
Leila Bengali, Mary Daly, Olivia Lofton, and Robert Valletta examine the economic status of persons with disabilities since the GR. Over the decade beginning in 2009, persons reporting disabilities saw increased employment participation, substantial drops in unemployment, and increases in real earnings. Applications to government disability programs also dropped as unemployment rates dropped, suggesting the economic opportunities in the LR kept persons with disabilities in the labor market. While previous recessions saw reliance on disability programs drop during recovery, the overall labor market gains for persons with disabilities in the LR were much stronger than in the 1990s recovery.
Randall Akee examines the labor force experiences of American Indians and Alaska Natives (AIAN) and Native Hawaiians and Pacific Islanders (NHPI). AIAN labor force participation and median earnings dropped during the GR and did not regain pre-recession levels by 2018. The NHPI population saw losses in employment and earnings as well, but more or less recovered to the pre-recession levels. Earnings were persistently lower for AIAN who lived on homelands (American Indian reservations or Alaska Native villages), although even AIAN workers living off homelands did not return to pre-recession earnings levels. Workers with a high school degree or less experienced lower earnings after 2007 relative to more educated workers, indicating that the effects of the recession were slightly less bad for “working-class” Native workers. Across occupational categories, food services workers saw smaller income dips than other occupations, and they were the only occupation tracked that saw higher wages by the end of the recovery than in 2007. Because public health measures shut down or limited many food service venues, Indigenous workers in this industry will likely fare far less well during the pandemic recession.
Ofronama Bui, Chrisopher Famighetti, and Darrick Hamilton track the experiences of working- and professional-class Black and non-Hispanic white workers across recessions. Proportionally, Black workers, both men and women, saw lower gains than white workers over the period 2009 to 2020, and the gains that Black workers saw were largely among the working class, defined as those with less than a college degree. Black women with a bachelor’s degree (BA) or more as a class saw declines in real income, while similarly educated Black men’s income remained basically unchanged. And the Black-white wage gap increased for all. Decomposition analysis shows the Black-white wage gap not only grows in recessions but also becomes less likely to reflect differences in workers’ characteristics, a finding consistent with racial discrimination playing a larger role in recessions. In terms of implications for the pandemic recession, these findings must be considered alongside the occupational sorting that results in Black workers being crowded into “essential” roles with proximity to clients or colleagues. Absent intervention, Black workers may lose both economic ground and life in the current recession.
Alongside its effects on employment and earnings, the GR sharply reduced household wealth, mostly via changes in homeownership, with disproportionate effects on communities of color. Fenaba Addo and William Darity investigate changes in wealth by race between 2010 and 2019. Black, Latinx, and white households all saw gains in net worth over this period. Among working-class households (those employed in nonprofessional or nonmanagerial jobs), white and Latinx households saw larger changes in total wealth than Black working-class households, suggesting that the LR increased Black-white wealth disparities. Indeed, smaller proportions of Black working-class or professional households reached the top three wealth quintiles in 2019 than they did in 2010, compared to white or Latinx households who fared better. Debt holdings, particularly education debt, drove some of these differences.
Pia Orrenius and Madeline Zavodny examine how Latinos fare during economic recoveries. Latinos are the largest minority group in the United States, making it important to understand their economic well-being across the business cycle and over time. They find that Latinos’ economic outcomes improved as the LR moved along. That said, Latino employment and unemployment are more cyclical than for non-Hispanic whites, and they are more vulnerable to recessions than non-Hispanic whites, on average. But their position in the income distribution tended to rise over the 25-year period prior to the pandemic. Poverty rates among both foreign- and native-born Latinos fell significantly over that period but remained higher than among other groups. Since Latinos are more susceptible to job loss in recessions, have less education, and are more likely to lack health insurance, they would benefit from better access to the social safety net. Immigration reform would further benefit foreign-born Latinos, many of whom have only temporary or no legal status.
Institutional changes
This section of the volume addresses the evolution of employer practices, worker protections, and employee voices; labor market institutions and their effects on compensation; means tested and other income support systems; and workforce training and career and technical education (CTE). Articles answered the questions, Has there been a relative decline in the normative employment relationship (employer-employee/full-time work vs. involuntary part-time or gig work)? How have entry-level wages and/or nonwage compensation changed during the LR? How quickly do people find work and employers find workers? Can we say anything about how hiring discrimination changed over the LR period? Questions about policies and programs examined changes in labor standards and how means-tested programs behaved considering changing market and budget conditions. For example, how big of an impact did changed state and local labor laws (minimum wage, paid leave, etc.) make, and how well are these laws enforced? How did caseload dynamics and program practices of major means-tested programs, as well as refundable tax credits, evolve?
Employer practices often shape workers’ labor market experiences. Julia Henly, Susan Lambert, and Laura Dresser consider how firms changed the nature of working-class work over the LR. Public data on the labor market focuses more on workers’ outcomes than firm behavior, making summary conclusions difficult. That said, evidence suggests employers increased their use of just-in-time scheduling practices during the GR and continued to use this strategy over the LR. Nonstandard employment such as on-demand platform (“gig”) work has become more common, but we know little about how many workers fully support themselves through such alternative work arrangements. No suitable data exist to track wage theft and other labor standard violations over time, making it impossible to know how such practices shaped the working-class experiences over the LR.
Labor markets institutions like minimum wages, private sector unions, noncompete agreements, and occupational licensing are the focus of the article written by Ryan Nunn and Jennifer Hunt. They argue that these institutions have a crucial role to play in determining workers’ outcomes. In some cases, policy reforms can reallocate economic rents to workers at acceptable losses of economic efficiency (modest increases in the minimum wage). In other cases, reforms can even enhance labor market dynamism and competition: for example, discouraging noncompete agreements can enhance workers’ wages and mobility. They describe a growing body of evidence that can assist policy-makers in making better, worker-friendly decisions.
Burt Barnow, Jeff Smith, and Lois Miller study young adults in the years following their high school educations, focusing on “noncollege youth”—those who will not go on to complete a traditional four-year college degree. Over the period leading up to the GR through the final years of the subsequent economic expansion, they find that educational enrollment increased and the share of young adults neither working nor receiving education declined. They document trends in participation rates in and performance of major federal workforce development programs. They conclude that the most successful programs focus relatively narrowly on providing CTE training for in-demand sectors and feature heavy involvement by employers themselves.
Yu-Ling Chang, Jennifer Romich, and Marci Ybarra track the evolution of major safety net programs—unemployment insurance (UI), the Supplemental Nutrition Assistance Program (SNAP), Temporary Assistance to Needy Families (TANF), and refundable tax credits—over the LR. Overall, they show a continuity of policy trends in place before the GR, with social policy reinforcing labor market participation among low-income families. Temporary expansions to UI and SNAP during the first years of the recovery were later curtailed while modest expansions to the EITC and CTC were made permanent, the latter boosting the net incomes of the working class, especially those with children. The relative stasis of income support programs over the LR stands in contrast to some of the immediate policy responses to the COVID-19 pandemic recession, which have included major expansions in UI payments and more modest increases in UI coverage; an increase in the EITC for single workers; and an expanded, fully refundable CTC, which began to be paid out in monthly form this summer.
Pockets of success and distress
Here we looked at two topics: the opioid epidemic and communities that advanced and those that remained distressed. In his spring 2019 talk at IRP and elsewhere, promoting his treatise, The American Dream Is Not Dead, Michael R. Strain mentioned a number of pockets of social and economic distress where upward mobility in economic and social terms was not promising. Seminar questions asked, How many of these pockets are there? What are the longer-term prospects in these cases? That the opioid epidemic was taking place during the LR does not mean that the LR caused it; indeed the recovery should have weakened the hold of opioids on workers, even if that is not what the facts say. How were they related, or not?
Janet Currie and Hannes Schwandt take on the opioid epidemic that has struck many working-class households, an epidemic that grew in strength along with the LR from the GR. They argue that the epidemic was sparked by the development and marketing of a new generation of prescription opioids early in the twentieth century, with provider behavior still helping to drive these sales via the legal prescription drug market. This explanation helps us to understand why there is little relationship between the opioid crisis and contemporaneous measures of labor market opportunity. Cohorts and areas that experienced poor labor market conditions do show some lagged increases in opioid mortality, but the effect is modest relative to the scale of the epidemic. They argue that there are specific policies and features of the U.S. health care system that led to the current crisis. And while it will not be possible to quickly reverse correlated depressed economic conditions, it is possible to implement policies that would reduce the number of new opioid addicts.
How did different communities within the country fare over the LR? Vincent Fusaro, Luke Shaefer, and Jasmine Simington track spatial patterns of well-being using a multidimensional county-level Index of Disadvantage based on income, health, and social mobility. They find some good news: most counties saw gains in income and employment. But these advances were not consistently associated with gains in other areas, and the relative ranks of disadvantaged counties changed little. Stable counties were, on average, the worst off pre-recession and remained the worst off near the end of the recovery. Among the U.S. counties that ranked below the median pre-recession levels, two thirds retained their place in the distribution. About one in six moved up in rank at least a ventile by the later years of the recovery, and a similar proportion declined. Counties with greater reliance on manufacturing, and less educational attainment—two common markers of working-class status—were less likely to be “risers” in their analysis. Improving counties were also less likely to be urban and tended to have smaller fractions of the population identifying as Black and larger fractions self-identifying as white.
Reaction and policy perspective papers
Here we asked two sets of authors with different political perspectives to reflect on the evidence presented in this volume, and remark on what policy prescriptions deserve attention if we are to achieve the hoped-for rapid recovery from the COVID recession in ways that spread the benefits of inclusive growth to more Americans.
Both the article by Richard Burkhauser, Douglas Holtz-Eakin, and Kevin Corinth and the companion article by Gary Burtless and Isabel Sawhill show absolute income growth for two definitions of working-class families (prime-age households in the former and the second and third quintiles of nonelderly households in the latter) during the 2009 to 2019 LR period. Their definitions of income differ from those of Ziliak in that they include the market value of government health insurance subsidies as components of income. But while their outcome graphs look the same, their policy stances and policy conclusions are very different.
Burkhauser and team applaud the tax cutting, aggressive deregulation, proinvestment, and progrowth strategy of the Trump administration, particularly the Tax Cut and Jobs Act (TCJA) of 2017, giving it credit for propelling the Obama-initiated recovery to the point where we achieved the tightest labor market of the last 60 years by 2018 and 2019. They add that the unprecedent expansion of the social safety net in 2020 (and now 2021) provided critical immediate relief in response to the COVID-19 shock but that continuing these policies after the pandemic subsides could delay an otherwise swift return to the strong pre-COVID economy. Their bottom line is that progrowth policies that include tax breaks for investments by larger corporations should be continued, and policies that increase the regulatory and tax burdens on firms and workers should be avoided.
Burtless and Sawhill see the same evidence but fear the stability of the recovery and the wage gains it engendered were not enough. Accordingly, as we recover from the COVID Recession, they recommend a range of policies to increase the pace of wage gains for the working class, including macroeconomic policies that increase the duration of economic expansions, reforms in labor law to improve workers’ bargaining power, strengthening policies to make work pay, and revising occupational training of non-college-educated workers to boost their earnings power.
Exclusions and Limitations
Reasonable limits on editorial capacity, funding, and journal page counts meant that we could not cover everything we might have wanted to include in this volume. For example, we do not pay specific attention to older workers, who were making progress during the LR but are still struggling to reach retirement security in significant numbers (Munnell, Schanzenbach, and Walters 2019). We have no separate article with an explicit focus on women and their outcomes in the LR and now the C19RR, even though the latter has taken a large toll on the employment of working-class women and especially mothers. To make up for the lack of an article on women’s outcomes, the three introductory articles each focused sections on working-class women and female-headed families (Fabrizio, Gomes, and Tavares 2021).
What We Learned
A few notable points emerge from this large and diverse collection of papers. We summarize them here in five talking points or take-home messages. First “tight” labor markets with long periods of low unemployment and steady growth clearly benefit the earnings and incomes of the working class. The rising tide did indeed eventually lift all economic boats by the latter part of the LR. This includes the professional class yachts who did not suffer greatly during the GR and who held steady during the LR and even through the C19RR, but also the working-class and middle-class tugboats, and those at the very bottom in the rowboats also benefitted.
As a result, the “hot” economy in the final years of the LR brought absolute income and wage gains to almost everyone. And growth in inequality in incomes and in earnings stagnated or fell over the course of the LR. Minimum wage increases helped in some states, and there was also a distinct uptick in those holding multiple jobs (Bailey and Spletzer 2020) among the rowboats and tugboats. Both working-class wages and hours/jobs increased during the latter stages of the LR. Still wages did not rise to very high levels in many low-skill rowboat and tugboat occupations by May 2019 (Table 1).
Absolute gains in Black worker earnings were largely among the working class, defined as those with less than a college degree. But curiously Black men and women with a BA or more did not fare so well in the LR. Similarly, more educated Indigenous workers (AIAN, NHPI) did not fare better than those with less education. In contrast, Latinos face greater cyclical challenges than other minority groups, but the benefits from the LR for this group were a steady increase in economic well-being after 2014 and a large decline in poverty, despite discriminatory policies that kept many of them from accessing the safety net. Hence, while tight labor markets and the LR meant gains in absolute levels of earnings and incomes for most, relative progress for groups at the bottom of the economic ladder are harder to come by. Racial income gaps did not close over the LR, and wealth gaps widened through 2016, with gaps shrinking only slightly by 2019.
Second, the timing of the recovery varied substantially by group. Some groups, such as the lowest educated, minorities and the disabled, only really benefited in the last few years of the expansion. Similarly, workers who have been out of the labor market longest find it harder to reenter good jobs, especially in the long and relatively weak recovery that we study here. Shambaugh and Strain clearly make the point that the most cyclical workers in bust-boom-bust economies are those in the lowest-paid and lowest-skilled jobs—the working class. This lesson might be applied to the C19RR period, which we are now in, as the economy begins roaring back—but with four million long-term unemployed and six or seven million fewer jobs than in February 2020. Based on almost all the special population articles presented here, getting over COVID and laying the foundations for a long, strong recovery should help to advance the economic well-being of most disadvantaged and lagging groups, especially if the recovery is sustained for several years.
Third, pockets of success existed during the LR. For instance, some degree or certificate beyond high school pays off handsomely, especially for the children of white working-class parents. But it is important not to ignore several cautionary footnotes. For those who do not finish the training or degree, the downside risk of attending college is substantial and likely growing, especially in terms of debt. Black, Hispanic, and white households all saw gains in net worth during the LR, especially between 2016 and 2019. But among working-class households, white and Hispanic households saw larger changes in total wealth and a faster drop in unsecured debt, suggesting that the LR still increased Black-white wealth disparities, especially in homeownership. In terms of a disadvantages index, almost all counties improved in absolute terms over the course of the LR, but not all gained equally.
Fourth, pockets of distress and anomie are still with us. The opioid epidemic is not over and has expanded during the more than year-long COVID isolation period. Young adults with involvement in the criminal justice system were last hired in the LR, and even then, the gains were small. The current drive to reduce prison time for young adults who are not involved in serious crimes will help, but not for the large ex-prison class of less-educated Black men who are struggling today. Many AIAN also did not show great gains during the LR. And income gains were least in many counties that lost manufacturing jobs, while some counties stayed more stably at the bottom of the relative disadvantage index, despite some absolute gains.
Fifth, institutional rigidities are important. Labor market institutions have a crucial role to play in determining workers’ outcomes, and they change only slowly. Labor has far less power than large employers and laws that favor employers such as noncompete agreements, which limit workers’ mobility and gains. Collective bargaining and worker organizing are very slowly returning to some workplaces based on tight labor markets and the rising profit share in large corporations and in the health care sector, but they are realistic alternatives only in a declining share of workplaces and industries. Care workers for elders and children are especially at risk of low wages, despite rising demand for their services and the risks they took and are still taking from COVID exposure.
We know far too little about trends in gig work and just-in-time scheduling, which especially affect the working class without credentials beyond a high school degree. Work hours in this sector of undereducated workers are highly variable and often at the behest of the employer. Wages are low even though employer benefits are also very small. And finally, worker training and skill upgrading programs, CTE, work best in tight labor markets where employer-led “sectoral” training guarantees good jobs for youth after the training experience. If the employer’s sector continues to prosper and expand, these programs offer gains for the working class. When demand for less-skilled labor changes due to trade, technology, or changing consumer tastes, sectoral employment can fall, and pockets of distress can build in hard-hit towns and smaller areas. This has been the experience with coal mining, lumber, and other extractive industries, and may soon affect oil and gas production in the same way.
Changes in the Last Year
The relative stasis of income support programs during the LR suggested that the institutional features of the safety net were also fairly well fixed and nonexpansive before we hit the C19RR period, when Congress and the Trump administration, in 2020, and the Biden administration in 2021, began to make changes to at least strengthen temporary aid. In March and April 2020, the impact of COVID hit firms, workers, and families with a huge economic shock. The immediate response was a set of COVID relief programs, like the Coronavirus Aid, Relief, and Economic Security (CARES) Act of March 2020, which temporarily bolstered incomes, jobs, and firms and may even have temporarily reduced poverty (Parolin, Curran, and Wimer 2020). In April and December 2020, additional relief funding helped to support the economy as the second and third waves of the pandemic surged. Finally in March 2021, Congress passed the American Rescue Plan (ARP) Act of 2021, a $1.9 trillion COVID relief package that substantially expanded emergency coverage and support for middle- and lower income families, leading to a 9 percent increase in net income for the second income quintile, where many of the working class are located (Rappeport 2021; TPC 2021). The ARP strengthened food programs, the child tax credit, and childcare subsidies, in addition to expanding the ACA and the Medicaid program (DeParle 2021; Rappeport 2021). The bill further aids populations like immigrants who were left out of the first CARES Act bill. Importantly, the ARP may create new institutions such as refundable monthly child tax credits (child allowances) that may endure beyond the recovery from the COVID recession.
Looking Forward
The ARP is projected to temporarily raise the incomes of the poor and the working class (first, second, and middle quintiles) over the next year and possibly beyond. While some applaud these expansive policies and others now proposed by the Biden administration, others are more skeptical and less sure about their size and their longer-term effects on jobs and the economy, as noted in our two policy perspective articles. While the poor and working class may gain now, how will these gains affect longer-term employment in 2021 and beyond? Will inflation and borrowing costs from the ARP create different but also possibly more difficult macroeconomic problems in the years to come, or will the return of tight labor markets soon erase the jobs deficit and lead to better incomes and more stable lives for the working class by the end of 2021 or early in 2022? Will the American Jobs Plan, currently being debated and tied to a major infrastructure expansion, help to eradicate some of the pockets of working-class distress noted in this volume? And should we pay for all of this expansion by taxing profitable firms and well-to-do families who have been advantaged throughout the twenty-first century? The articles in this volume give both hope and concern, as they provide a solid starting point for assessing the future of the working class.
Footnotes
Note:
We thank our sponsors: AAPSS Fellow Grant; the Institute for Research on Poverty (IRP) at Madison and its Economic Self Sufficiency (ESS) Network (
) with Office of the Assistant Secretary for Planning and Education (ASPE) support; the American Enterprise Institute (AEI); and the West Coast Poverty Center at University of Washington (WCPC). We thank our authors (who in almost all cases stayed with us, even changing jobs, institutions, and dealing with changing family responsibilities along the way). And we thank key staffers Maryanna Mitchell at AEI; Dawn Duren; Rebecca Schwei; Dana Connelly at IRP; Shannon Harper at WCPC; and the AEI Zoom team.
Timothy M. Smeeding is the Lee Rainwater Distinguished Professor of Public Affairs and Economics at the University of Wisconsin–Madison, where he was former director of the Institute for Research on Poverty. He is a fellow of the AAPSS. His recent work has focused on inequality in income, wealth and consumption, and social and economic mobility across generations.
Jennifer Romich is a professor of social welfare at the University of Washington School of Social Work and faculty director of the West Coast Poverty Center. She studies resources and economic well-being in families, with an emphasis on low-income workers, household budgets, and families’ interactions with public policy.
Michael R. Strain is the director of Economic Policy Studies and Arthur F. Burns Scholar in Political Economy at the American Enterprise Institute and is also a research fellow at the IZA Institute of Labor Economics.