On Labor Day 2013, California’s Recovery Has Yet to Reach Large Segments of the State’s Workers

Long-Term Unemployment Still High, Current Recovery Relying Heavily on Low-Wage and Part-Time Work

FOR IMMEDIATE RELEASE

SACRAMENTO – A new report from the California Budget Project (CBP), a nonprofit, nonpartisan public policy research organization, finds that even after more than three years of job gains, California’s recovery from the Great Recession thus far has left many workers behind.

Uneven Progress: What the Economic Recovery Has Meant for California’s Workers finds that Californians continue to face a deeply challenging job market, with long-term unemployment down only slightly from a record high, much of the state still stuck in double-digit unemployment, and wages among low- and mid-wage workers still below where they were prior to the recession, after adjusting for inflation.

“The addition of more than 750,000 jobs in the past three-plus years is a positive sign. But California still has a job market in which too many workers can’t obtain full-time jobs that pay a good wage,” said Luke Reidenbach, policy analyst with the CBP and the report’s author. “The statewide trends highlight a troubling fact: that California’s emerging recovery is not providing the mix of jobs needed for a robust economic rebound that benefits the full range of workers and their families.”

The report found that:

  • Long-term unemployment in California remains close to the record high, and many workers who do have jobs are unable to obtain full-time employment. The share of unemployed Californians who have been seeking work for six months or longer is down only slightly from a record high and stands at 43 percent. In other words, more than two out of five unemployed Californians have been looking for a job for at least half a year. Meanwhile, involuntary part-time employment – when workers cannot obtain a full-time schedule even though they want one – is a reality for more than 1.3 million workers, or 8.0 percent of all employed Californians.
  • Recent employment gains among California men have outpaced those for women. During the past three years of overall job growth in California, employment among prime-working-age men has increased, even as it dropped slightly for prime-working-age women. Between June 2010 and June 2013, the employment rate among men ages 25 to 54 increased by 2.7 percentage points to 82.2 percent. During this same period, the employment rate among women ages 25 to 54 actually dropped by 0.8 percentage points, falling to 64.8 percent.
  • Unemployment remains high across much of California, especially the inland areas. During the first half of 2013, a majority of California counties – 34 out of 58 – had an average unemployment rate in the double digits, and all but three of these high-unemployment counties were inland counties. The lowest county unemployment rate was 5.1 percent in Marin County, and the highest was 24.5 percent in Imperial County.
  • Compared to prior periods of economic recovery in California, the current recovery is relying more heavily on low-wage industries and less on industries that generally pay more than the state’s typical hourly wage. The industry composition of California’s current recovery is markedly different from that of prior recoveries. Most notably, this recovery is more heavily reliant on service industry growth that typically pays lower wages. For example, the leisure and hospitality industry – with a 2012 median wage ($11.20) that was just slightly above the 20th percentile of all California workers – accounted for nearly one-quarter (24.4 percent) of total job growth between February 2010 and June 2013, a much larger contribution than this industry had made to economic recoveries following the 1990s and 2001 recessions. At the same time, the construction industry and the government sector – which typically pay hourly wages above the statewide median – are contributing far less to overall job growth than in previous recoveries.
  • Only high-wage workers have seen their purchasing power – the inflation-adjusted value of their hourly wage – nearly return to where it was prior to the recession. Due to recent gains, high-wage workers – those at the 80th percentile of California’s earnings distribution – have seen inflation-adjusted hourly earnings nearly return to their 2006 level. Meanwhile, inflation-adjusted wages of low-wage workers (those at the 20th percentile) and mid-wage workers (with earnings exactly in the middle of the distribution) have failed to catch up to pre-recession levels. Among low-wage workers, the inflation-adjusted hourly wage is nearly 6 percent below the 2006 value and amounts to the equivalent of a $1,370 cut in inflation-adjusted annual pay for a full-time worker.

These weaknesses in the state’s job market mean that significant economic challenges that had faced California even prior to the recession – such as wage stagnation and the widening inequality between high-earners and other workers – are now continuing during the recovery.

“A strong economy is one that fosters widely shared prosperity, and California’s recovery from the Great Recession to this point has fallen short of the mark,” said Chris Hoene, executive director of the CBP. “Policymakers cannot afford to wait for the pace of recovery to quicken. Reinvestment in all aspects of education – early childhood, K-12 schools, colleges and universities – is critical to the state’s near- and longer-term economic growth. Also, our findings show why federal and state leaders need to make sure there is a strong safety net for workers and families still confronting the harm created by the Great Recession and its aftermath.”

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The California Budget Project (CBP) engages in independent fiscal and policy analysis and public education with the goal of improving public policies affecting the economic and social well-being of low- and middle-income Californians. Support for the CBP comes from foundation grants, subscriptions, and individual contributions. Please visit the CBP’s website at www.cbp.org.