Heidi Shierholz at the Economic Policy Institute
spotlighted some additional positive news for the future of the nation's still rough labor situation Thursday. In short, average weekly work hours are approaching where they were when the Great Recession began.
In Dec. 2007, when the Great Recession began, the average number of hours worked per week in the private sector (including both full-time and part-time jobs) was 34.6. As employers cut hours, the length of the average workweek dropped to 33.8 by March 2009. While this drop in hours meant smaller paychecks and more hardship for workers, it also actually saved jobs. The 2.3 percent drop in average hours multiplied across the private sector workforce of more than 100 million workers means that if hours had not dropped, 2.5 million more jobs would have been lost. [...]
But the restoration of work hours is bad news as far as employment growth goes, because increasing hours absorbs work that could be done by new hires. In the current recovery, the restoration of hours has been a drag on employment growth ever since average hours began growing again in late 2009. Think of it this way: The drop in hours saved 2.5 million jobs on the way down, but it has delayed new employment growth to that same extent on the way back up.
The good news is that the restoration of average work hours is nearly complete, now just a tenth of an hour off their pre-recession level. Which should mean, all else being equal, stepped-up hiring as the "slack" can no longer be taken up by workers already on the job. The recent drop in the productivity level is another indicator that, on average, squeezing more from people already working may no longer be practicable.
Higher average hours up and increasing the number new hires is, of course, only one element needed to improve the labor market. Such acute problems presented by the Great Recession, or perhaps we should call it the Little Depression, have drawn most of the attention until recently. But America's chronic economic problems, some of which contributed to the immense pain of the downturn of the past 52 months, remain. Stagnant wages, for instance, were a problem long ago and have been with us through the past five recessions, with a slight, but only slight, improvement during the final years of Bill Clinton's presidency.
One very disturbing chronic problem is the plunge in entry-level wages for high school and college graduates, entry-level being defined as one to seven years experience:
From 2000 to 2011 [...] wages actually fell among every entry-level group regardless of education.Wage losses occurred for each group of entry-level workers between 2000 and 2007, as well as during the recessionary years between 2007 and 2011. This stands in sharp contrast to the extremely strong wage growth for each of these groups from 1995 to 2000. During this period of overall strong wage growth, wages rose roughly 10 percent for entry-level high school-educated men and women, and increased by 20.3 percent for entry-level college-educated men and 11.4 percent for entry-level college-educated women.
As the chart below shows, the long-term statistics include plenty of evidence that entry-level wages may keep dropping in both the private and public sectors. For instance, new hires in the auto industry are being paid far less than they were just five years ago. And new teachers in many public school districts face the same situation. Benefits, which are another form of compensation, are being steadily reduced, too, The wage drop just adds more pain to another problem, the fact that young people who do not get a job in their preferred career choice relatively soon after graduation are followed around for the rest of their lives by reduced earnings.
Resolving these chronic problems is essential if we really want a vibrant economy.