An Essential Part of Job Creation Policy Is Missing

An Essential Part of Job Creation Policy Is Missing


The presidential candidates from both parties have focused on the struggles of the working class, and rightly so. Inequality has been rising, jobs have been hard to find, and when jobs do appear they tend to pay low wages and offer few if any benefits.  There is little security due to globalization and digital technology, and workers cannot count on adequate social insurance to insulate them from the high costs of unemployment.

Meanwhile, as wages for those who do have jobs stagnate, the costs of childcare, health care, housing, utilities, college, transportation, insurance, food, recreation (how many hours at the minimum wage are required to simply take a family of four to the movies?) and so on continue to rise making it harder and harder for families to make ends meet.

Related: Full Employment Alone Won’t Solve Problem of Stagnating Wages

So the candidates have focused on how to create jobs that pay a decent wage. But there is an important facet of job creation that is being left out of these and other discussions, the opportunity for advancement. People are taught that if they play by the rules, do well in school, go to college, find a job, and then show up every day and work hard, they will be rewarded. Over time they will move up the job ladder, their income will rise, and a time will come when life won’t be such a struggle. That won’t happen to everyone, of course, but workers need to be able to see a path to a better life.

But the dream has faded. As recent work by economists Raven Molloy, Christopher Smith, and Abigail Wozniak shows, there has been a “a decline in the fraction of workers moving from job to job, changing industry, and changing occupation” that has occurred since the 1980s, reversing an earlier trend. The main reason for the decline in the movement to new, better jobs appears to be a decline in the wage offers that workers receive from outside firms.

Notably, there has been a similar decline for within firm promotions. The opportunities for advancement are not what they once were, and it’s getting progressively worse. I see this frequently in conversations with students in my economics classes. They have often accumulated significant debt, and they wonder if they will be able to find a job that requires a college education, let alone work their way up the job ladder. Some think, why am I even bothering with this at all? Is it worth it?

Related: With the Jobless Rate at 5.1 Percent, Are We Really at Full Employment?

As the opportunities to move up the job and income ladder have diminished over time, workers become discouraged, disenfranchised, and look for someone to blame. It’s immigrants, unfair opportunities granted to others through affirmative action, globalization that allows labor to be exploited in other countries at a cost to U.S. jobs – the list goes on and on. In many, if not most cases, the blame is misplaced, but the underlying anger with a system that broke its promise about “playing by the rules” is more than understandable.

My goal is not to suggest some magical solution that will fix this problem quickly. It’s a difficult problem that will take time and concerted effort on a variety of fronts to address. Instead, my goal is to propose that we evaluate job creation efforts not just on how much a typical job pays in salary and benefits, but also on the chances it provides for advancement.

A firm that offers less compensation to workers than another firm may be preferable if it offers workers significant and ample opportunities for advancement, and job creation policies ought to take this into account. Workers need and deserve to be able to look forward to a better future instead of dead ends that trap them in a low-paying job, or a series of such jobs, that they hate but see no way to escape no matter how hard they try.

Related: House Committee Advances Republican Bill to Limit Joint Employment

Although the solutions are elusive, there is one thing that would help quite a bit, full employment. When there are unemployed, qualified workers at every step of the job ladder, the opportunities for advancement decline and upward mobility stagnates. When the economy is at full employment, vacancies are much harder to fill and the opportunities for upward mobility rise considerably. In light of this, the Fed must make full employment its primary goal, and not let fears of inflation get in the way. Congress must make full employment rather than deficit reduction its overriding concern, and that includes implementing policies that attract new businesses that offer workers the chance to get ahead.

Full employment will help, but it is not enough. We have to find a way to provide more jobs that reward people who play by the rules and diligently do the things they are told will open the doors to a better future. Far too many people find those doors closed. Providing workers with more opportunities to move up the job ladder is an important step toward restoring faith in our economic system and, importantly, overcoming the growing economic and political fractures that are threatening to tear us apart.