Labor Discussion

provides some of the resources needed to promote “social inclusion”—that is, economic security and full participation in society—and whether public work supports manage to bridge the gaps that low-wage workers face when trying to support their families.

AT THE OUTSET, ITS REASONABLE TO ASK WHETHER k any (or at least very many) jobs in the United States should pay low wages. Over the past few decades, American workers powered the economy to new heights. Between 1973 and 2006, gross domestic product (GDP) per capita increased by more than 150 percent, and productivity, the average amount that workers produce per hour, increased by 83 percent.At the same time, education levels and use of new technologies in the workplace increased, which should have led to overall increases in wages as the workforce became more skilled. Education levels increased across the board: the share of Americans with a high school diploma

increased by more than a third and the share with education beyond high school more than doubled. By 2006, 86 percent of Americans aged twenty-five or older had completed high school, and more than half had attended one or more years of college. In less than a genera

tion, computers have become ubiquitous in the workplace. Nearly 60 percent of all workers aged twenty-five or older use a computer at work.2 Computer use is not limited to workers holding a college or advanced degree. In fact, a majority of the workers who use a computer at work—some 37 million—have less than a four- year college degree.

Given these impressive increases in the basic inputs—labor productivity and human capital—that produce economic growth, it would be reasonable to assume that the wages and conditions of low-paid work have improved considerably over the past few decades. However, as we demonstrate in this article, nothing could be further from the truth. In fact, low- wage jobs have remained a constant feature of the U.S. economy.

The persistence of low-paying jobs is a consequence of deliberate policy choices. Over the past generation, policymakers have purposefully chosen to make it easy for employers to uniformly dictate the terms of employment, while pulling the safety net out from under many low-paid workers. Unionization has declined, due in no small part to the legal difficulties in organizing workers, along with the declining share of traditional union strongholds in the overall economy, which has left the conditions of millions of jobs entirely at the whim of employers. Legislation designed to protect workers, such as the minimum wage, has diminished in importance and has become less frequently enforced.3 Further, the lack of progress on ensuring that everyone has health insurance coverage has affected low-paid workers far more than higher-paid workers.

HERE ARE TWO ALTERNATIVES TO USING THE federal poverty line to define low-wage work: (1) an inequality measure; and (2) a basic-needs measure. The inequality measure defines low-paying work by referencing the me- wage. The basic-needs measure defines low-paying work by referencing the cost of purchasing a basic standard of living in a specific community.Using the inequality approach, we define a low-wage job as one that pays less than two-thirds of the median wage for men. This is consistent with measures of low-wage work used by the Organization for Economic Cooperation and Development (OECD), although typically the OECD uses median wages for all workers, not just men, as the reference point.4 We opt to use the median wage for men, rather than the median wage for all workers, to limit the extent to which gender inequality in wages affects the definition of low- wage jobs.In 2006, the median wage for men in the United States was $16.66 an hour, therefore jobs paying less than two-thirds of the median wage for men paid $ 11.11 or less per hour. Using $11.11 as the inequality low-wage threshold, we find that, in 2006, 44 million workers —about one out of every three—held low- wage jobs.The low-wage threshold under the basic- needs measure uses an estimate of the income necessary to purchase a minimal bundle of goods and services needed for daily living. Typically, the goods and services in a basic-needs measure include food, housing, health care, transportation, child care, clothing, personal care, taxes, and other basic items.5 Basic-needs budgets vary by geographic location and fam-

size since the amount of goods and services necessary for the family will be based on local costs and family composition. Therefore, there is no single national dollar figure for the wage threshold to define a low-wage job under this approach.

The persistence of low- paid labor markets is a consequence of deliberate policy choices.

Both the inequality and basic-needs measures are improvements on a low-wage measure that relies on the federal poverty line. A key strength of the basic-needs definition is its accuracy as a measure of the wage needed to afford a basic standard of living. Although derived from conservative figures, it incorporates the actual costs of living in todays economy, in which housing, transportation, child care, and health care expenditures represent a larger share of basic household budgets than they did in the 1950s, when the poverty line was developed. The resulting budgets are typically higher than the poverty threshold, although rural, low-cost areas have budgets close to the poverty line. This is a further indication that using the federal poverty line to define low-wage work is inadequate for most places in the United States.A limitation of the basic-needs definition of low-wage work is that it does not directly incorporate rising inequality. In recent years, inequality has returned to Gilded Age levels in the United States, and public concern about inequality is on the rise. This concern makes sense. An economy that leaves a substantial segment of workers far behind the rest of the

workforce is contrary to the national belief that the United States is "one nation, indivisible." This point is eloquently illustrated by journal- ist Polly Toynbees image of a nations workforce as a caravan that gets pulled apart as the dis- tance between workers' pay increases. Toynbee asks, "When the front and the back [of the cara- van] are stretched so far apart, at what point can they no longer be said to be traveling at all, breaking the community between them?" The pulling apart produced by wage and income inequality has concrete and negative effects. For example, as epidemiologist Rich- ard Wilkinson shows in The Impact of Inequal- ity: How to Make Sick Societies Healthier, there is considerable research showing that extreme inequality is bad for public health.7 Among rich nations, people are healthier and live longer than those in nations with lower levels of in- equality.

The inequality measure of low- wage work also has an important practical advantage when used to assess low- wage work at the national level. Unlike the basic-needs measure, it does not vary by family size. A definition of low- wage work in which earnings vary by house- hold size is unwieldy, and less suited for estab- lishing basic standards, such as minimum wage or living-wage standards. This measure could be taken for specific geographic areas, but we have not done so in this paper.

TRENDS IN LOW-WAGE WORK

Low- wage workers have experienced little growth in their inflation-adjusted wages since 1979 (see Figure 1). Between 1979 and 1984, low- wage workers saw their wages fall by 10 percent while higher- waged workers saw their wages hover around their 1979 level in infla- tion-adjusted terms. For low-wage workers,

wages remained relatively stagnant until the mid-1990s, rising sharply in the latter half of the 1990s but, after peaking in 2001, they have since returned to their 1979 level. Higher- waged workers, typically college-educated and employed in professional and managerial occupations, have seen their wages grow since the mid-1980s, although that growth leveled off during the 2000s.However, the share of low-wage jobs in the workforce has declined due to the rising wages of women. Our measure of low-wage work sets the low-wage threshold at two-thirds of the male median wage. As Figure 2 shows, while men have not seen their share of low-wage workers change significantly, women have. In 1979, among all workers, 37 percent were in low-paying jobs compared to just 30 percent today. This decline in the percentage of low-wage jobs is entirely due to a decline in the share of women holding low- wage jobs, even though women are still overrepresented in low-wage work. The progress of women has been due to their increased investment in gaining educational credentials and job skills over the past generation, as well as the much larger array of occupations that are open to women compared to a generation or two ago, allowing them to enter higher-paying fields and achieve higher positions within organizations. One clear advantage of our inequality measure is that it incorporates the progress that women have made in the labor market over the past generation.

IN RECENT DECADES, IN AUSTRALIA, CANADA, THE United Kingdom, and Continental Europe,

the concept of social exclusion has emerged as complementary to using poverty and income inequality to evaluate trends in well-being. There is not one universal definition of social

Among rich nations, people are healthier and live longer than those in nations with lower levels of inequality.

exclusion, but there are clear similarities across definitions, which share a focus on the ability of people to participate fully in society. For example, the European Union defines social exclusion as a lack of “the opportunities and resources necessary to participate fully in economic, social and cultural life and to enjoy a standard of living and well-being that is considered normal in the society in which [one] live[s]ľ8Achieving social inclusion means ensuring that everyone in a society has the opportunity to participate in the life of the nation and that a set of basic needs are met. In countries with strong labor standards, universal health care and social protections, and relatively few low-wage jobs, a job alone is often sufficient to ensure social inclusion.However, achieving social inclusion may not be so easy in the United States, where low- wage work often fails to provide the resources needed to fully participate in society, and these resources are not provided on a universal basis by the government. We will now review the extent to which low-wage work typically fails to provide a basic set of employment standards

that are necessary to be economically secure and fully participate in society. These standards include health and other forms of insurance,

One advantage of our inequality measure is thait incorporates the progress that women havemade in the labor markeover the past generation

retirement benefits, paid time off, and flexibil- ity for workers. It is important to note that, in this section, we draw on research that uses defi- nitions of low- wage work that differ from the definition we put forward in this article. While there would be some modest differences in the precise numbers if a consistent definition of

low- wage work was used in the research cited, the various sources provide an accurate picture of the disparities in workplace benefits that ex- ist between low-paid workers and other workers.

Healthy Disability, and Life Insurance

In the United States, since we do not have universal access to health insurance, whether a t person has the security of health care is usually tied to whether their . employer offers coverage. However, jobs at the low end of the wage-distribution scale are far less likely than higher- wage jobs to come with health insurance and other forms of insurance. According to the Economic Policy Institute, about 24 percent of workers in the bottom-wage quintile have employer-pro- vided health coverage, compared to 62 percent of workers in the middle-wage quintile, and 78 percent of workers in the top quintile.9 Further,

by the Families and Work Institute found that one-third of jobs in the bottom-wage quintile provide a retirement plan option with an employer contribution, compared to almost two- thirds of jobs in the middle of the wage distribution and four-fifths of high-wage jobs.14

The share of workers in ow-paid jobs with access o employer-provided ealth insurance has eclined substantially

these workers pay a greater share of employment-based health care premiums than employees working in higher-paying jobs.10Since 1979, the share of workers in low- paying jobs with access to employer-provided health insurance has declined substantially. Between 1979 and 2004, the share of workers in the bottom quintile who had access to employer-provided health insurance fell from 38 percent to 24 perlcent. While workers at all wage levels saw declines over time, workers at the botttom experienced the largest declines.hLow-wage workers lack more than just health insurance. According to the dBureau of Labor Statistics, workers earn-ing an average wage of less than fifteen dollars per hour are much less likely to have access to dental care, vision care, or prescription drug coverage as part of their employer-provided health care package; they also have less access to long-term disability insurance, life insurance, and short-term disability insurance.11

Although the United States has a nationwide retirement security plan, Social Security, most people need to supplement this with their own savings or an employer-sponsored pension. In 2006, Social Security payments to recipients over sixty-five years of age were less than twelve thousand dollars a year, on average.12 However, jobs at the low end of the wage distribution scale are less likely to provide pension coverage or other retirement plan options with employer contributions. Only about 14 percent of workers in the bottom-wage quintile have employer- provided pension coverage, compared to about 48 percent in the middle quintile, and 72 percent in the top quintile.13 Research conducted

As with health insurance, access to retirement benefits has fallen over time, particularly for workers at the bottom of the wage distribution scale. Between 1979 and 2004, the share of bottom quintile workers with access to retirement benefits fell by 24 percent, compared to an 8 percent decline for top quintile workers.

Paid Time Off

Unlike most other countries, the United States does not require employers to provide workers with any paid time off for illness, holiday, or vacation. As with other employment-based benefits, workers at the bottom of the wage distribution scale are much less likely to enjoy leave with pay. According to the Families and Work Institute, only 39 percent of jobs in the bottom quartile held by individuals in low-income families offer any paid sick days for personal illness, compared to 79 percent of jobs held by mid- and higher-income employees. Among workers with paid sick days for illness, middle- and higher-wage employees were more likely to say that the amount of paid time off was

THE LARGEST LOW-WAGE OCCUPATIONS: RETAIL SALES, JANITORIAL SERVICES AND CLEANING, CHILD CARE, AND RESTAURANT WORKUsing our inequality threshold for defining 2005. Care providers—including child care a low-wage job, we find that most low-wage workers, personal and home care aides, jobs are in service occupations that typically and home health aides—make up another require face-to-face contact between the job major segment of the low-wage workforce. holder and the customer. The single largest Half of the 557,000 workers who provide low-wage occupation is retail sales, with 4.3 child care earn less than $8.20 an hour. million workers in 2005, half of whom Waiters and waitresses have the lowest earned less than $9.20 an hour. The median earnings. About half earn less than $14,050 wage for janitors and cleaners (not includa year. Almost 2.3 million workers are ing maids and housekeepers) is $9.23 an waiters or waitresses.hour; 2.1 million workers held such jobs in

sufficient to meet their personal needs. Only 51 percent of jobs in the bottom quartile held by persons in low-income families provide any paid vacation days, compared to almost 90 percent of jobs held by higher-wage and -income employees. Similarly, only 54 percent of jobs in the bottom quartile held by persons in low- income families provide any paid holidays.15

The Families and Work Institute defines “workplace flexibility” to include “policies and practices that give employees greater control over their work schedules, work locations, and the ability to take time off to meet personal or family needs.”16 Researchers find that jobs at the bottom of the wage distribution scale provide much less workplace flexibility than higher- wage jobs: about 38 percent of jobs held by employees in the bottom quartile who live in low-income families are low-flexibility jobs, compared to 19 percent of other jobs. In par

ticular, these low-paying jobs provide much less flexibility for child care, as only 24 percent allowed parents any paid time off to care for a sick child (without having to use paid vacation days), compared to 54 percent of other jobs.

THE ROLE PUBLIC WORK SUPPORTS PLAY IN MAKING LOW-PAYING JOBS BETTER JOBS

BECAUSE THE UNITED STATES LACKS MANY OF THE universal labor standards and social benefits that other nations have, workplace benefits and public work supports play a fundamental role in helping working families make ends meet. Public work supports—including the Earned Income Tax Credit (EITC), child care assistance, and public health insurance—are particularly important for low-paid workers who are less likely to receive workplace benefits than better-paid workers. Over the past fifteen years,

funding for some work supports, particularly the EITC, has expanded substantially.Recent research conducted by the Center for Economic and Policy Research and the Center for Social Policy (CEPR-CSP) finds public work supports substantially improve the living standards of low-paid workers.17 Across nine states and the District of Columbia, researchers found that work supports closed nearly half (44 percent) of the gap between earnings and needs for people living in families below a basic standard of need.But these programs also leave out many— if not most—families with low-wage workers because the eligibility criteria are set too low. For example, the income thresholds for work supports are often set so low that most low- wage workers earn too much to qualify: food stamps, housing assistance, Medicaid, and Temporary Assistance to Needy Families typically require that a family have income no higher than the official poverty line. Further, myriad other eligibility rules, covering everything from household composition to immigration status and asset ownership, make qualifying onerous at best.Even among those workers who meet all of the eligibility criteria, many, if not most, do not receive benefits. In three of the nine states examined in the CEPR-CSP research, more than one- third of people in working families who were eligible for health care through Medicaid or the State Childrens Health Insurance Program (SCHIP) did not receive it. In focus groups, workers noted that applying for work supports was difficult and time-consuming, leading many to simply give up and not apply. Coverage among those eligible for other programs, such as child care or housing

assistance, is closer to only one in five because there are caps on the number of workers who can receive assistance.As a result, across the nation, one in five people—over 41 million—have a gap between their income and the resources necessary to meet a basic standard of need, even though they have at least one worker in their family. The bottom line is that for many working families, the combination of low-paying work and public work supports isn’t sufficient to make ends meet.

LOW-WAGE WORK is NOT SIMPLY A PROBLEM FOR individual workers, but also for the United States as a whole. As a nation, we are stronger and more cohesive if we have an economy that does not allow those at the back to fall so far behind that the nation becomes less united. Improving job quality and standards of living for workers in low-paying jobs will require reforms in two general areas: strengthening labor-mar

Only about 14 percent of workers in the bottomwage quintile have employer-provided pension coverage.

ket institutions, and expanding public work supports.As MIT economists Frank Levy and Peter Temin have recently shown in an important National Bureau of Economics Research working paper,18 a greatly diminished role for labor

market institutions in promoting shared prosperity marks a significant difference between the recent decades of rising inequality in the United States and the immediate post

Workers at the bottom of the wage distribution scale are much less likely to enjoy leave with pay.

World War II period of mass upward mobility, when institutional concerns were at the forefront. Necessary labor-market reforms include enforcing and enhancing existing labor standards such as the minimum wage and other wage and hour standards, and establishing new basic labor standards, such as minimum guarantees of paid vacation, sick pay, and parental leave. Another essential element is the strength

ening and encouraging of collective bargaining through greater unionization. By improving the bargaining power of low-wage workers, unionization promotes better pay, benefits,and working conditions.To improve the set of public worksupports available to all workers, we needto rethink the existing work-support system. Some of these supports, in particular health insurance and child care, wouldbe more effective if they were structuredas universal benefits, modeled on SocialSecurity or Medicare. A universal systemof work supports would relieve employers ofhaving to provide benefits, while ensuring thatworkers have access to necessary supports. Other work-support programs should be expanded so that more low-paid workers are able to benefit from them. A top priority should bemodifying restrictive rules that make manyyoung workers and workers without children in their homes ineligible for the EITC. ■

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