WASHINGTON – If economic commentators (including me) seem to agree on one thing, it is this: Jobs in America have become less secure. If you’ve got an OK job, don’t let go, because you may not be able to find another. The conventional wisdom is widely shared – but it may be wrong.
We now have an intriguing report from a small Washington think tank, the Information Technology & Innovation Foundation, arguing that “the U.S. labor market is far more stable than people think.” I’m not entirely convinced, but the study is thought-provoking and reopens basic questions about the economy.
The study – written by the think tank’s head, Robert Atkinson, and analyst J. John Wu – accepts that many Americans think the labor market has become more treacherous. By one poll in 1987, 59 percent of workers thought their jobs were secure; in 2014, only 47 percent felt that way. Employment fears stem mainly from obvious sources: memories of the Great Recession (8.7 million jobs lost) and the job-killing potential of the internet and globalization.
The question is whether these heightened fears are matched by greater chances of being laid off. No, say Atkinson and Wu. They compared layoffs in 1995 and 2015. In 1995, about 7.3 percent of workers lost their jobs in any quarter; by 2015, the layoff rate had dropped to 5.7 percent. Job security had actually improved. While fears had gone up, layoffs (as a share of all employment) had gone down.
Moreover, the effect was widespread. Atkinson and Wu examined 10 major business sectors – from retail trade to construction – and found the same pattern in all of them. Layoffs as a proportion of jobs in each had declined between 1995 and 2015.
Atkinson and Wu also doubt that the rise of the “gig economy” (Uber and other internet-based contractors) has created much insecurity. The sector, comprised mostly of the self-employed, is too small to affect the broader workforce. Indeed, the share of the self-employed of total employment dropped from 9 percent to 7 percent between 1995 and 2015, they report.
It’s an impressive case, but I have reservations. For starters, people’s perceptions of the labor market don’t depend only on fears of being laid off. They also reflect the possibility of getting a new job. If you can find one quickly, at your old salary or more, you’re less worried about being laid off. You may actually quit to seek a better opportunity.
By these measures, job insecurity looks more threatening. Even Atkinson and Wu concede that job creation has been spotty and often inadequate, and that new jobs are frequently inferior to their predecessors. Only 60 percent to 70 percent of displaced workers find new jobs after three years, according to the Bureau of Labor Statistics. About half earn less than at their last job.
I have a theory. It’s well-known that, as workers get older, they tend to settle into jobs that last longer. As baby-boomer workers age – and given today’s added job insecurity – they are even more inclined to stick with the job they’ve got. This may help explain why wage growth has been so slow; employers don’t have to pay more to keep good workers, who aren’t looking for a big raise from a competitor.
In practice, fear has subsidized employers through muted wage growth. The possible side effects fit the facts. Labor’s share of total income has eroded in favor of capital’s share (business profits, interest and rent). Incumbent companies have an advantage over startups, because they have more experienced workers. Unsurprisingly, business startups have declined, despite some successful high-tech exceptions.
As I said, it’s just a theory. It could be wrong. Atkinson and Wu could be right. Either way, we need to know. Perceptions are often reality. People act on their beliefs, even if they’re misguided. Atkinson fears that if Congress harbors unduly pessimistic views of the economy’s stability, it may embrace perverse policies that, in the name of improving security, cripple flexibility and stifle innovation.
Robert Samuelson’s column is distributed by The Washington Post Writers Group.