Characteristics of Low-Wage Workers and Their Labor Market Experiences: Evidence from the Mid- to Late 1990s. Extent of Wage Growth Over Time


While workers as a group who started low-wage jobs experienced wage increases over time, it is important to examine the extent to which individual workers experienced an increase in wages. To better understand the distribution of wage growth, we examined the fraction of low-wage workers who experienced wage growth, as well as the extent of wage growth during the three-year follow-up period.

Most low-wage workers (nearly 80 percent) experienced an increase in real wages between their wages in period 1 and their wages three years later (Table V.1). The proportion experiencing any increase in wages was essentially the same for males and females (78 percent, compared to 80 percent). The amount of wage growth was also considerable for many, although male workers were somewhat more likely than females to experience greater amounts of growth. For example, nearly half of males, and just over 40 percent of females, experienced an increase in real wages of over 25 percent over the three-year period. In addition, more than one in five workers experienced an increase of over 50 percent in their wages. In contrast, few experienced large reductions in wages. Given the low levels of their starting wages, this is not surprising.

Another dimension of wage growth, somewhat related to the analysis in the preceding chapter, is the fraction of low-wage workers who had moved into medium- or high-wage jobs three years later. Even though they experienced relatively large increases in wages over time, a significant fraction still remained in the low-wage labor market three years later (47 percent of males and 60 percent of females  Table V.1). Those who moved to higher-wage jobs were most likely to be in medium-wage jobs, and only a small fraction were in high-wage jobs. For example, three and a half years after they started their low-wage job, only about 2 percent of females and 5 percent of males had moved into high-wage jobs (with hourly wages over $16), and about 48 percent of males and 38 percent of females were in medium-wage jobs.

Table V.1.
Growth In Real Hourly Wages Among Low-Wage Workers
Who Remained Employed Three Years Later
  Male Workers Female Workers
Percentage Employed in Both Periods 82 74
Percentage Whose Wages:(a)
    Increased 78 80
   Decreased 22 20
Percentage Change in Wages(a)
   More than 50 percent 26 20
   26 to 50 percent 21 22
   11 to 25 percent 17 21
   1 to 10 percent 14 17
   -1 to -10 percent 9 9
   Less than -10 percent 13 11
Change in Real Wages Over Time (in Dollars)(a)
    More than $5.00 14 9
   $2.51 to $5.00 21 15
   $1.01 to $2.50 21 27
   $0 to $1.00 21 27
   $0 to -$1.00 11 11
   Less than -$1.00 11 9
Percentage Whose Job Three Years Later Was:(a)
    Low wage 47 60
   Medium wage 48 38
   High wage 5 2
Sample Size 460 636
Source: 1996 SIPP longitudinal file using workers who started low-wage jobs within six months after the start of the panel period.
Note: All figures were calculated using the longitudinal panel weight. Wage changes are calculated as the difference between average wages in period 1 (the first six months, after initial job categorization) and average wages over a six-month period three years later.

Workers who started low-wage jobs were more likely to experience wage increases than those starting medium- or high-wage jobs. For example, around 70 percent of medium-wage workers and under 60 percent of high-wage workers experienced an increase in real wages, compared with 80 percent of low-wage workers (Table D.4). Because they start at higher wage levels, the fraction of higher-wage workers who experienced large relative increases in wages (over a 50 percent increase in wages) is considerably lower than the corresponding fraction of low-wage workers who experienced such large increases. However, higher-wage workers were considerably more likely than low-wage workers to have experienced an increase of $5 per hour over the three-year follow-up period.

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