Ed Muchnick knows his biggest paydays are behind him. The Mount Laurel, N.J., resident had been making more than $60,000 a year as manager of the children’s clothing shop founded by his parents in 1964. When the store closed in early 2007, Muchnick wanted to stay in retail management. He found a job as an assistant manager at a HomeGoods store in suburban Philadelphia in November 2007, with a salary of $48,000. That lasted two years.

Since then, the 57-year-old Muchnick has struggled to find a permanent job. He worked four months for the Census Bureau, at $17 an hour, and spent 10 weeks as a holiday-season hire at Target, earning $8 an hour. “It’s hell out there,” Muchnick says. He’s given up on landing a job that pays $50,000, let alone the $60,000 he was making five years ago. “It’s discouraging. The big companies are making money. I don’t think they’re hiring, and if they’re hiring, they’re hiring at the lower wages.”



Companies nationwide actually have started hiring again, but Muchnick is right that, at least so far, a disproportionate number of the jobs being created pay less than the positions that have been lost. Since March 2010, the economy has seen a net gain of 1.26 million jobs — a welcome rebound, but still far shy of the nearly 9 million jobs lost in the recession.

Yet economists say many of the new positions created are in lower paying occupations. Despite the overall job gains posted last year, companies continued to eliminate management positions, with about 550,000 being lost. “The problem is not just the quantity of new jobs being created, but the quality of those jobs as well,” Paul Ashworth, chief U.S. economist at Toronto-based Capital Economics, wrote in a recent report. He adds that underemployment creates a hidden drag on the economy by discouraging consumer spending. A Gallup poll last year found the underemployed spend 36 percent less than those who consider themselves fully employed.



Downshifting Has Left Millions Dissatisfied

While lower-wage industries like restaurants, retail and temp services accounted for 23 percent of the jobs lost during the recession, they now represent 49 percent of the new openings created, according to a report last month by the National Employment Law Project, a worker advocacy group. Higher-paying industries like finance and information services, meanwhile, accounted for 40 percent of the jobs lost but have only contributed 14 percent of the recent growth. By contrast, the recovery that followed the 2001 recession was much more balanced.

Those labor-market trends have forced many Americans into lower-level jobs, with correspondingly lower pay, than they’d previously held. That downshifting has left millions of workers dissatisfied with their jobs because they are earning less, stuck in a lower-level job, or simply logging fewer hours than they’d like.

Underemployment “is an increasingly important, but understudied, component of the overall employment picture,” write Frances McKee-Ryan and Jaron Harvey in a study on the subject published last month in the Journal of Management. “Trends consistently point to underemployment becoming more prevalent in the future,” they note.



There is no good measure of the overall underemployment picture, which includes people who go back to work, but take lower paying jobs. Economists tend to think of underemployment first and foremost as a matter of people working fewer hours than they’d like. As of February, more than 8.3 million Americans were still working part time because they can’t find full time work, according to the Bureau of Labor Statistics. That’s down from 9.1 million such people in October 2010, but the average hours worked each week and the ratio of full-time to part-time employment are still much lower than they were before the recession.

‘They’ve Got To Survive’

Whether it’s part-time hours or trading down to a lower-paying job, underemployment can have serious consequences for workers. Financial pressures can be intense, and carving out time to look for a new job can be difficult. The emotional toll can also be high. Results of a Gallup survey released this month showed that underemployed Americans report much higher levels of worry, stress, anxiety, and anger than those with jobs. The numbers, Gallup finds, suggest that the underemployed “are more similar to those who are unemployed than they are to those who are fully employed” and “the daily negativity this group experiences could have an impact on their lives now and in the future.”

Steve Colella has seen those deleterious effects all too often. A vocational rehabilitation counselor, Colella started a Job Club in West Warwick, R.I., in November 2009. Since then, some 75 unemployed and underemployed locals have come through his free program to get help with their resumes, interviewing skills — and the encouragement that can come from a weekly support session. About a third of the club members have found new work, but it’s often at jobs that pay $12 or $13 an hour — less than they were earning before, Colella says. One Job Club attendee who had been a machine operator earning $17.50 an hour took a job as a parking valet, at $8 an hour.

“I guess the word is survival,” Colella says. “They’ve got to survive, so they’re resigning to the fact that they’ve got to take some kind of a job so they can at least pay some of their bills and put food on the table and then go

from there.”

That’s how Mike Hernandez is thinking about it. After being fired from his $50,000-a-year customer service job in October, Hernandez, 35, found a temporary job as a mail handler with the U.S. Postal Service for the tax season. The Clovis, Calif., resident now makes $11 an hour, lugging carts full of letters and packages on the graveyard shift, from 9:30 p.m. to 6 a.m. “It’s a pretty humbling experience,” he says. “I’m just glad to be working.”

The good news for Hernandez and workers like him is that a wider range of industries and occupations could — eventually — see improvement as the recovery continues. The slack in the labor market will continue to put downward pressure on wages, though, according to economists. And ultimately, it’s too soon to say just how the employment picture will shake out. “Unfortunately,” says Paul Ashworth of Capital Economics, “only time will tell.”

Related Links:

Study: Having a Bad Job Is Worse than No Job for Mental Health (Time.com)

Highest U.S. Underemployment Rates: Illinois, California and Michigan (DailyFinance)

Forget the Jobs Recovery, The Gallup Poll Shows We’re No Better Than Last Year (Business Insider)