The workers benefited, and so did lower-wage retailers such as Wal-Mart: When its staffers left for better-paying jobs, they could spend more at its stores. And the U.S. economy gained, too, because more consumer spending fueled growth.
Not so much anymore. Since the Great Recession began in late 2007, that path has narrowed because many of the next-tier jobs no longer exist. That means more lower-wage workers have to stay put. The resulting bottleneck is helping widen a gap between the richest Americans and everyone else.
“Some people took those jobs because they were the only ones available and haven’t been able to figure out how to move out of that,” Bill Simon, CEO of Wal-Mart U.S., acknowledged in an interview with The Associated Press.
If Wal-Mart employees “can go to another company and another job and make more money and develop, they’ll be better,” Simon explained. “It’ll be better for the economy. It’ll be better for us as a business, to be quite honest, because they’ll continue to advance in their economic life.”
Yet for now, the lower-wage jobs once seen as stepping stones are increasingly being held for longer periods by older, better-educated, more experienced workers.
The trend extends well beyond Wal-Mart, the nation’s largest employer, and is reverberating across the U.S. economy. It’s partly why average inflation-adjusted income has declined 9 percent for the bottom 40 percent of households since 2007, even as incomes for the top 5 percent now slightly exceed where they were when the recession began late that year, according to the Census Bureau.
Research shows that occupations that once helped elevate people from the minimum wage into the middle class have disappeared during the past three recessions dating to 1991.
One such category includes bookkeepers and executive secretaries, with average wages of $16.54 an hour, according to the Labor Department. Since the mid-1980s, the economy has shed these middle-income jobs — a trend that’s become more pronounced with the recoveries that have followed each subsequent recession, according to research by Henry Siu, an economist at the University of British Columbia, and Duke University economist Nir Jaimovich.
That leaves many workers remaining in jobs as cashiers earning an average of $9.79 an hour, or in retail sales at roughly $10.50 — jobs that used to be entry points to higher-paying work. Hourly pay at Wal-Mart averages $8.90, according to the site Glassdoor.com. (Wal-Mart disputes that figure; it says its pay for hourly workers averages $11.83.)
Since the Great Recession began, the share of U.S workers employed by the retail and restaurant sector has risen from 16.5 percent to 17.1 percent.
“It really has contributed to this widening of inequality,” Siu said.
The shift has injected new pressures into the economy. Older and better-educated retail and fast food workers have become more vocal in pressing for raises. Labor unions helped launch protests last year against such employers as Wal-Mart, McDonald’s and Burger King.
Fewer teenagers are staffing cash registers, prepping meals or stocking shelves, according to government data. Replacing them are adults, many of whom are struggling with the burdens of college debt or child rearing. Some are on the verge of what was once envisioned as retirement years.
They are people like Richard Wilson, 27, in Chicago. More than 2½ years ago, a Wal-Mart store manager spotted Wilson cleaning the cafeteria at Liberty University in Lynchburg, Va.
A double major in biblical studies and business communications, Wilson had $3,000 in tuition due and had maxed out on student loans. He said the recruiter suggested that a management job could eventually be within reach for him because, “Wal-Mart is where people’s dreams become a reality.”
Wilson first worked at a Wal-Mart near college before returning to his Chicago hometown without a degree but with $50,000 in student debt and another job at a boutique Wal-Mart specializing in groceries.
Today, Wilson earns $9.45 an hour at that Wal-Mart and lives on the city’s western edge with his grandmother. He boards a bus most mornings at 3:30 a.m. and arrives for his 5 a.m. shift in the more upscale neighborhood of Lakeview East. He has applied for promotions. So far, no success.
If he had the money for a ring and a wedding, Wilson said he would propose to his girlfriend.
Last year, 17.4 million Americans between ages 25 and 64 earned less than $10.10 an hour, the minimum wage proposed by President Barack Obama (The current federal minimum is $7.25.) That’s equal to an income of nearly $19,000 for a full-time employee — less than half the median pay of a U.S. worker.
The share of Americans in their prime earning years who earn the equivalent of $10.10 an hour or less, adjusted for inflation, has risen to 13.4 percent from 10.4 percent in 1979, according to government data analyzed by John Schmitt, a senior economist at the progressive Center for Economic and Policy Research.
Nearly a third of low-wage employees last year had had some college education. An additional 10 percent had graduated. By contrast, in 1979 less than 25 percent of low-wage employees had college experience. Most had not completed high school. For millions of lower-wage workers, more schooling hasn’t led to higher pay.
“Where you start out in terms of wages helps to predict where you move over time,” Schmitt said.
That principle has become an alarming reality for many. Only 5.5 percent of people with jobs at the fast food chain Wendy’s will earn more than $70,000 in today’s dollars at that company, based on a review last year of 8 million resumes by the analytics firm Bright.com.
Just 8 percent of Home Depot employees will be so fortunate. For Macy’s, 9.4 percent. By contrast, more than a quarter of Amazon staffers will exceed $70,000 a year. The ratio is even better for Verizon and AT&T workers. A majority of Ford employees will achieve that income at least once in their career. Just 10 percent of Wal-Mart workers will.
Wal-Mart promotes itself as a source of opportunity, and in some cases, that’s proved true. Over 11 years, for example, Tonya Jones rose from staffing a checkout line to managing a section of a Wal-Mart supercenter in Hendersonville, Tenn. Jones, 41, said her pay exceeds $15 an hour — enough with scholarships, including one from Wal-Mart, to help put her daughter through college.
Asked whether she represents an average Wal-Mart worker, Jones said opportunities at the company boil down to personal choices.
“I want to be No. 1,” she said. “I am very competitive.”
That said, the data show why it’s harder now for workers to rise into higher-paying fields despite an economic recovery now nearly 5 years old. About 1.9 million office and administrative support jobs were lost to the Great Recession, according to government data. That includes 714,370 executive secretaries with annual incomes averaging $50,220. And 252,240 fewer bookkeepers with average incomes of $36,640.
By comparison, the number of lower-wage jobs increased: The Labor Department says restaurants added 777,800 jobs since the recession began, general merchandise stores 345,600.
“You see adults moving into these relatively generic services (jobs) that don’t require expertise, just dexterity, attention and showing up,” said MIT economist David Autor. “You want people to be in jobs that have good trajectories. I can imagine you only get so efficient as a checkout clerk or a stocker.”
Wal-Mart customer service manager Janet Sparks of Baker, La., trained as a bookkeeper. She owned a video rental store and worked for an accountant, a nuclear power plant, a McDonald’s and a bank before joining Wal-Mart about eight years ago.
Sparks, 53, said Wal-Mart once offered a path to the middle class with merit raises of up to $2 an hour. The company ended those raises, while making more employees eligible for bonuses based on a store’s overall performance. It also introduced what’s called “optimal scheduling” to match employees with expected sales. It can mean that workers whose shift ended at 11 p.m. might have to begin their next shift at 7 a.m., Sparks said.
Sparks said the erratic schedule makes it hard for employees to earn additional income from a second job. She joined Wal-Mart in 2005 with the expectation that the since-cancelled merit pay raises would eventually let her clear $21 an hour. She instead received smaller raises and now earns $12.40.
Wal-Mart said it began to change its bonus system in 2006. It now pays bonuses of up to $2,500 to some employees based on their store’s performance.
And it says its scheduling system considers the preferences and availability of employees and gives them three weeks’ notice of their work calendars.
Other retailers have also adopted optimal scheduling. Starbucks was sued by a former employee over its system, according to Massachusetts court records. Starbucks said on its corporate site that the “goal” of optimal scheduling “was to provide the most working hours to those partners who were available to do so.”
Retail industry executives argue that stronger economic growth would make it possible to pay higher wages. The economy grew just 1.9 percent last year, well below its post-World War II average of 3.2 percent.
“For generations of Americans, it was an entry-level wage that got you into a position in which you could gain skills and experience and then get connected to the workforce and move up,” said Matthew Shay, CEO of the National Retail Federation. “The problem now is the economy is not growing rapidly enough to create those other opportunities.”
Simon’s suggestion that many Wal-Mart employees might be better off leaving for other jobs surprised Wal-Mart cashier Joanna Lopez. A 26-year-old single mother, she owns no car and lives with her church pastor near Fremont, Calif. She collects food stamps and receives insurance through California’s version of Medicaid.
Lopez started at Wal-Mart as a temp in August 2011, after being unable to land a hospital job with her associate’s degree. Her pay has risen from $8 an hour to $9.20, after she moved from part time to full time. The suggestion by a Wal-Mart executive that some employees might be staying too long offended her.
“To me, that’s an utter humiliation,” Lopez said. “How can you sit there and have management say that we should find other jobs because this place is ‘no bueno?’”
Wal-Mart spokeswoman Katie Cody said that its employees have “endless opportunities for advancement” and that “management is not saying that people should find other jobs.”
“But when the economy is doing well, people tend to move around more,” Cody said. “If people were moving around more, that would be a better indicator that the economy is doing well, which is good for our customers, our associates and our business.”