PERSPECTIVE: The Connecticut Job Swap – An Economy in Transition

by Derek Thomas and Ray Noonan During the past 15 years, Connecticut’s economy has experienced a “job swap” – jobs lost in high-wage industries were replaced with jobs gained in low-wage ones.

As a result, from 2001 to 2015, the share of Connecticut’s private sector jobs in low-wage industries increased by 20 percent, while the share in high-wage industries decreased by 13 percent. This helps explain why a growing number of families, even after a full week of hard work, are forced to choose between groceries and rent, or between childcare and transportation costs.

Why did this shift occur? Like many Northeastern and Midwestern states, Connecticut lost tens-of-thousands of manufacturing jobs before the recession, as a result of several factors, including currency manipulation and technological improvements in response to global competition. Although jobs in manufacturing industries accounted for 15 percent of Connecticut’s private sector jobs in 2001, they accounted for two-thirds of net losses in high-wage industries from 2001–2007. The nearly 22,000 jobs lost in high-wage manufacturing industries during this period dwarfed the growth of less than 1,500 jobs added in the financial and insurance industry.

During the recession, industries across all wage categories experienced net losses with a total net loss of more than 85,000 jobs – nearly 6 percent of total private sector jobs. More than 97 percent of total losses were in mid- and high-wage industries. Manufacturing continued to experience disproportionate losses, accounting for almost 30 percent of all jobs lost during this period. The construction industry accounted for another 20 percent, with administrative and waste services industries (composed largely of janitors, laborers, office clerks) accounting for 13 percent of losses.

This leaves us where we are today. The most recent data, from 2015, indicates that 24.5 percent of Connecticut’s private sector jobs are in low-wage industries, paying on average less than $15 per hour ($31,200 annually). That’s barely enough to be considered a living wage for a single adult in Connecticut, let alone enough to support a family. These jobs are concentrated in the food services, social assistance, and retail industries, and they offer fewer benefits, predictability, and flexibility as well as little opportunity for career growth.

Jobs in high-wage industries, paying at least $33.95 per hour ($70,616 annually) on average accounted for 31.4 percent of total private sector jobs in 2015. Since 2001, the state experienced a net loss of 66,000 positions in these industries, including 33,225 jobs before and 38,617 jobs during the recession.

The good news is that, in spite of the high-wage for low-wage job swap, the share of mid-wage industries in Connecticut has remained constant over the last 15 years – accounting for 44.1 percent of total private sector jobs in 2015.

Other recent trends are also encouraging. As of 2015, the rate at which jobs in high-wage industries declined as a share of all private sector jobs was closer to zero last year than at any point since 2010. Similarly, the rate at which jobs in low-wage industries grew as a share of all private sector jobs was near zero in 2015. These trends, along with recent announcements from Electric Boat, Pratt & Whitney, and Sikorsky suggest the 15-year trend could be reversing.

 These recent trends also demonstrate that, in spite of the shifting economy, a strong foundation of mid- and high-wage jobs exists moving forward: as a result of investments in human capital, the state still boasts a high-quality workforce. Moreover, a greater share of the state’s workforce participates in the labor force (meaning they are working or looking for work) than the U.S. and all peer states. Our workers are the fourth most productive in the nation.

Nonetheless, this decade-and-a-half long swap should be matched with equivalent policy responses. For starters, lawmakers should give careful consideration to workforce investments that stimulate growth in high-wage industries when setting upcoming budget priorities. In addition, to help working families close the gap between low wages and the cost of supporting a family, lawmakers should strengthen investments in childcare, restore the state’s full EITC, and raise the minimum wage to $15 per hour. Lastly, scarce resources mandate that state spending of more than $7 billion on tax expenditures should be evaluated and subject to routine public scrutiny  just as it is for spending on schools, transportation and services.

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Derek Thomas is the Fiscal Policy Fellow at Connecticut Voices for Children. Ray Noonan is an Associate Policy Fellow at Connecticut Voices for Children. Their research is focused on how Connecticut’s fiscal policies and budget trends affect children and families. This article is based on their work on the “State of Working Connecticut” report. All the data is available at Connecticut Voices for Children’s website.

PERSPECTIVE commentaries by contributing writers appear each Sunday on Connecticut by the Numbers.