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Job Creation During the Late 1980's: Dynamic Aspects of Employment Growth

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Report Number P70-27

Introduction

One of the much discussed economic developments in the 1980's was the millions of jobs created by the economy—and the quality of those jobs. Between 1979 and 1989, Federal government statistics indicated that the number of workers on nonfarm payrolls had increased by almost 20 million.1 Many persons and organizations viewed this development as a reflection of the strength and vitality of the U.S. economy. Others contended, however, that a great number of these jobs were of the low-skill, low-pay variety which would not provide for a decent standard of living. Although this issue has been supplanted by other economic developments, such as the 1990-91 recession and the savings and loan crisis, the quality of the jobs that the economy generates remains an important area for economic research. After all, the jobs available to workers represent the foundation upon which our society builds its future. While this report comes to no conclusion regarding the quality of jobs issue, it does provide new statistical information which may be helpful to those attempting to reach one.

The debate in the 1980's over "good jobs vs. bad jobs" was based primarily on cross-sectional, or point-in-time, estimates of employment categorized by occupation, industry, wages, and other economic characteristics.2 Changes in the number of employed persons in these various categories over time were assumed to reflect the kinds of jobs the economy was generating.3

As useful as these employment data have been in understanding the economy's job creating ability, they do not actually measure the number of jobs "created" by the economy. Cross-sectional estimates measure the "stock" of employed workers at a specific point in time, and changes in these stock estimates represent "net" changes in the stocks. The labor market, however, is very dynamic with persons moving into jobs—job accessions—and out of jobs—job separations—continuously. In other words, there is a constant flow of persons between employment and nonemployment, and these offsetting flows are not measured.4 If the time between these cross-sectional estimates is very long, say several years, a great deal of information about persons moving into jobs (as well as moving out of jobs) is lost.

It may be tempting to think of "job accessions" as a measure of the economy's job creating ability, but this too must be carefully looked at. In its most general sense, job accessions reflect simply the entry of persons into jobs. Many workers, for example, may be simply switching jobs with others or be returning to work after periods of layoff. In these instances, no new jobs have been created but many job accessions have occurred. But despite this limitation, the movement of workers into jobs, or job accessions, does provide a new perspective from which to examine the job quality issue. This is because they permit one to examine the inflow of workers into jobs and to glimpse the circumstances surrounding the accessions. In this case, the circumstances represent the characteristics of the persons who entered jobs (e.g., age, sex, and family income) and the kinds of jobs that were taken (e.g., the industry in which the job was located, the nature of the work, or occupation, and pay that was received).

Data from the Survey of Income and Program Participation (SIPP) provide information on job accessions (see appendix A for a description of the survey). SIPP is a longitudinal panel survey in which information is collected from the same individuals for over 2 years. While the primary purpose of SIPP is to collect data on amounts and sources of incomes received by persons, as well as their participation in Federal government transfer income programs, the survey also obtains information on labor force activity. It is possible, therefore, to observe persons who have moved into jobs and the circumstances surrounding these job accessions.

In this report, data on persons with job accessions during the life of the 1987 SIPP panel are analyzed. The survey data cover a 28-month period that began approximately at the close of 1986 and ended in the opening months of 1989 (hereafter referred to as the 1987-89 period). During this time, persons who did not have a job in one month but did have a job in the subsequent month were identified as experiencing a job accession. While this does not represent all the persons experiencing job accessions in this period, it does represent a significant proportion of the total.

The number of people who entered jobs, of course, was considerably larger than the net changes in employment that actually occurred in this time span. This reflects the short duration, or tenure, of many jobs in the economy. Economists are typically interested in lifetime jobs or jobs involving long-term employment contracts since it is these jobs that help determine economic well-being over the long run.5 In other words, they are interested in the kinds of jobs that workers eventually settle in to for a significant period of time. Babysitting, hamburger "flipping," and other jobs frequently associated with the young would not, in most instances, represent lifetime jobs. While from a well-being standpoint, lifetime jobs are indeed of prime importance, it is also true that many workers who enter the labor market in search of jobs are not necessarily in search of lifetime jobs. Many are simply seeking work to supplement household incomes and fulfill other needs and satisfactions. The jobs that all these individuals have taken, for whatever length of time, however, represent the results of supply and demand forces operating in a dynamic labor market. Consequently, it is of interest to observe the full array of jobs that workers entered, whether for the purpose of earning some "spending money," putting a son or daughter through college, or providing the primary source of one's livelihood.

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1 According to the Bureau of Labor Statistics (BLS), nonfarm payroll employment increased from 89.8 million in 1979 to 108.3 million in 1989, an increase of 18.5 million jobs. See Employment and Earnings, U.S. Department of Labor, Bureau of Labor Statistics, July 1991, table B-1, page 81.

2 The literature on this subject is voluminous. For a sampling, see Barry Bluestone and Bennett Harrison, The Great American Job Machine: The Proliferation of Low Wage Employment in the U.S. Economy, Report to the Joint Economic Committee of the U.S. Congress, December 1986; Marvin Kosters and Murray N. Ross, "The Influence of Employment Shifts and New Job Opportunities on the Growth and Distribution of Real Wages," in Phillip Cagan, ed., Deficits, Taxes, and Economic Adjustments, Washington D.C.: The American Enterprise Institute, 1987; and Gary Burtless (ed.), A Future of Lousy Jobs, Washington, D.C.: The Brookings Institution, 1990.

3 A distinction, of course, can be made between a job and a worker. Many jobs, for example, are unfilled because of the lack of qualified workers, just as many persons are unemployed because they cannot find a job, or the "right" job.

4 They are, however, reflected in the net estimates to the extent the inflows and outflows offset one another.

5 See Robert Hall, "The Importance of Lifetime Jobs in the U.S. Economy," American Economic Review, September 1982, pp. 716-724.

Page Last Revised - October 8, 2021
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