Lower-wage workers stuck as middle-class jobs disappear

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Washington --

For years, many Americans followed a simple career path: Land an entry-level job. Accept a modest wage. Gain skills. Leave eventually for a better-paying job.

The workers benefited, and so did lower-wage retailers such as Walmart: 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 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.

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"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," said Bill Simon, CEO of Wal-Mart U.S.

If Walmart 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 Walmart, 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 Walmart averages $8.90, according to the site Glassdoor.com. (Walmart disputes that figure; it says its pay for hourly workers averages $11.83.)

Since the recession began, the share of U.S workers employed by the retail and restaurant sector has risen from 16.5 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 Walmart, 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.

Last year, 17.4 million Americans between ages 25 and 64 earned less than $10.10 an hour, the minimum wage proposed by President 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.