Characteristics of Low-Wage Workers and Their Labor Market Experiences: Evidence from the Mid- to Late 1990s. Findings From The Univariate Analysis

04/30/2004

We find some broad differences in labor market outcomes across key subgroups of the low-wage population, although the differences are smaller than expected (Tables IV.4 and IV.5). Males, prime-age workers, educated workers, whites, those without health limitations, and those in wealthier households typically spend more time in higher-wage jobs than their respective counterparts. Furthermore, job quality matters--those who start with better jobs (measured by higher initial wages, the availability of health benefits, and full-time work status) are more likely to spend time in medium- and high-wage jobs than those in lower-quality jobs. In addition, we find some differences across occupations--males in professional and sales occupations and females in professional and clerical occupations have more positive labor market outcomes than other workers. These findings are consistent with those from the few previous studies that have addressed wage progression across subgroups of low-wage workers (Carnevale and Rose 2001; Smith and Vavrichek 1992; and Holtzer et al. 2001).

Table IV.4.
Time Spent Employed During The Three And One-Half Years After Job Start For Subgroups Of Low-Wage Workers Defined By Individual And Household Characteristics At Job Start
(Percentages)
Subgroup Male Low-Wage Workers Female Low-Wage Workers
Average Percentage of Months Percentage in Higher-Wage Jobs for Less than 25 Percent of Months Average Percentage of Months Percentage in Higher-Wage Jobs for Less than 25 Percent of Months
In Low-Wage Jobs In Higher- Wage Jobs In All Jobs In Low- Wage Jobs In Higher- Wage Jobs In All Jobs
Overall 55 28 84 55 58 18 77 73
Age (in Years)
   Younger than 20 59 22 82 67 56 10 67 84
   20 to 29 56 29 86 51 54 20 76 71
   30 to 39 53 32 86 51 59 17 77 73
   40 to 49 51 32 84 57 64 20 84 69
   50 to 59 56 22 79 64 66 17 83 75
   60 or older 54 18 73 74 56 16 74 70
Race/Ethnicity
   White and other non-Hispanic 54 31 87 50 58 20 79 69
   Black, non-Hispanic 50 21 72 71 57 14 72 75
   Hispanic 64 20 85 68 63 9 73 89
Educational Attainment
   Less than high school/GED 58 21 80 67 58 9 68 88
   High school/GED 56 28 85 54 64 15 79 78
   Some college 47 36 84 46 52 22 76 64
   College graduate or more 55 33 90 48 52 28 81 56
Has a Health Limitation
   Yes 52 17 71 73 51 11 63 83
   No 55 30 86 53 59 19 79 71
Household Type
   Single parent with children 51 28 81 56 61 16 77 76
   Married couple with children 56 31 88 49 57 16 74 77
   Married couple without children 54 27 81 59 60 19 79 69
   Other adults without children 55 27 83 60 56 24 81 62
Household Income as a Percentage of the Poverty Level
   100 percent or less 60 26 87 55 61 14 76 79
   101 to 200 percent 56 27 84 57 56 15 72 77
   More than 200 percent 52 31 83 54 58 22 81 67
Full Sample Size 522 522 522 522 817 817 817 817
Source: 1996 SIPP longitudinal files using the entry cohort sample of workers who started low-wage jobs within six months after the start of the panel period. All workers were followed for 42 months after job start.
Note: All figures are weighted using the longitudinal panel weight.

Table IV.5.
Time Spent Employed During The Three-And-One-Half Years After Job Start For Subgroups
of Low-Wage Workers Defined By Initial Job Characteristics
(Percentages)
Subgroup Male Low-Wage Workers Female Low-Wage Workers
Average Percentage of Months Percentage in Higher-Wage Jobs for Less than 25 Percent of Months Average Percentage of Months Percentage in Higher-Wage Jobs for Less than 25 Percent of Months
In Low-Wage Jobs In Higher- Wage Jobs In All Jobs In Low- Wage Jobs In Higher- Wage Jobs In All Jobs
Overall 55 28 84 55 58 18 77 73
Hourly Wages
   Less than $5.00 63 19 83 68 59 8 68 88
   $5.00 to $5.99 63 17 81 71 66 13 79 81
   $6.00 to $6.99 50 37 88 42 55 26 81 59
   $7.00 to $7.50 42 42 84 39 46 39 85 41
Hours Worked per Week
   1 to 19 54 20 76 74 57 13 71 80
   20 to 34 57 22 81 65 57 18 75 75
   35 to 40 56 29 86 54 59 20 80 69
   More than 40 49 37 88 41 58 19 79 71
Weekly Earnings
   Less than $150 56 22 80 67 58 13 72 81
   $150 to $299 57 27 85 56 59 21 80 68
   $300 to $600 42 45 89 30 51 28 80 47
Owns Business (Self-Employed)
   Yes 40 43 87 35 60 18 82 73
   No 56 27 84 57 58 18 77 73
Health Insurance Coverage(a)
   Yes 50 34 86 47 56 22 79 67
   No 57 25 84 60 60 15 76 77
Occupation
   Professional/technical 52 38 92 43 56 28 86 55
   Sales/retail 53 35 90 41 56 20 77 71
   Administrative support/clerical 59 24 84 62 51 28 80 55
   Service professions/handlers/cleaners 57 24 82 63 62 13 76 80
   Machine/construction/production/
transportation
51 32 84 49 62 10 73 88
   Farm/agricultural/other workers 58 23 82 65 58 18 76 80
Industry
   Agriculture/forestry/fishing/hunting 56 24 83 62 62 14 79 80
   Mining/manufacturing/construction/ transportation/utilities 53 31 85 52 60 12 72 84
   Wholesale/retail trade 59 28 88 54 56 17 73 74
   Personal/health/other services 53 26 80 61 59 22 81 67
   Other 37 44 85 33 68 30 102 58
Full Sample Size 522 522 522 522 817 817 817 817
Source: 1996 SIPP longitudinal files using the entry cohort sample of workers who started low-wage jobs within six months after the start of the panel period. All workers were followed for 42 months after job start.
Note: All figures are weighted using the 1996 calendar year weight.
a. These figures pertain to health insurance coverage from all sources, including coverage through the employer as well as from other sources. We used this variable instead of the employer-based health insurance coverage variable, because data on overall health insurance coverage is available monthly, whereas the employer-based coverage variable pertains only to jobs in progress at the time of the interview. Thus, the employer-based health insurance variable could not always be linked to the job under investigation, which led to a significant number of missing values. However, the subsets of health insurance variables overlap considerably: the source of health insurance coverage was the employer for 80 percent of those with any coverage.

At the same time, the story is complex--substantial diversity exists in labor market success within groups. Thus, although we identified groups that are at particular risk of poor labor market outcomes, we could not fully account for the variation in outcomes across low-wage workers. Next, we present the evidence for these findings.

a. Findings for Subgroups Defined by Individual and Household Characteristics

Table IV.4 presents our findings for subgroups defined by individual and household characteristics at the start of the low-wage job. We summarize these findings here:

  • Male low-wage workers exhibit more movement out of the low-wage labor market than female low-wage workers. During the mid- to late 1990s, males spent more time in the labor market (an average of 84 percent of the time, compared to 77 percent of the time for females) and spent considerably more time in higher-wage jobs (an average of 28 percent of months, compared to 18 percent of months for females). Similarly, females typically spent more time in low-wage jobs. These gender results hold across all subgroups.
  • Low-wage workers between ages 20 and 60 have better labor market outcomes than those older and younger. In our sample, teenage workers and those older than 60 had the poorest outcomes; they spent less time in the labor market and fewer months in higher-wage jobs than other workers. Those between ages 50 and 60 (and males, in particular) typically had the next poorest outcomes. Prime-age workers between ages 20 and 50 had the best outcomes. However, even within the 20- to-50-year-old age group, there was substantial diversity in labor market success; more than one-half of males and more than two-thirds of females in this age group spent less than one-quarter of months in high- or medium-wage jobs.
  • Whites typically spend more time in higher-wage jobs than blacks and Hispanics. White female workers in our sample spent an average of 20 percent of months in higher-wage jobs, compared to about 12 percent of months for minority female workers. The corresponding figures for males are 31 percent for whites and 20 percent for minorities, respectively. Similarly, whites spent less time in low-wage employment than Hispanics, and spent more time employed in all jobs than minority workers (and, in particular, than black workers). We stress again, however, that there is considerable variation in labor market success within each racial and ethnic group.
  • Education is strongly associated with labor market success. As expected, labor market outcomes for sample members were typically poorest for the high school dropouts and improved with education level. Among female workers, those who were high school dropouts at the start of their jobs spent an average of only 9 percent of months in higher-wage jobs, compared to 15 percent of those with a high school credential and about 25 percent of those who attended college. Similarly, those with low education levels typically spent more time in low-wage jobs than their counterparts and spent less time in all jobs.
  • Low-wage workers with health limitations are at particular risk of poor labor market outcomes. During the mid- to late 1990s, male workers with health problems typically spent only about 17 percent of months in higher-wage jobs, compared to 30 percent for those healthier, and the corresponding figures for female workers are 11 percent and 19 percent, respectively. Overall employment rates were also much lower for those with health problems for both males and females. Thus, those with health limitations tend to spend most of their time in either low-wage jobs or in nonemployment.
  • Married males have slightly more successful labor market experiences than other males. Among males in our sample, those who were married and had children were employed, on average, for 88 percent of all months, compared to 84 percent of months for all male workers. Similarly, they were employed in medium- or high-wage jobs for an average of 31 percent of the follow-up period, compared to 28 percent for all workers. These differences, however, are smaller than expected.
  • There are few differences in the labor market experiences of single-parent females and females living in other types of households. Figures for female low-wage workers on the time spent in higher-wage jobs and in all jobs are similar across household groups.
  • Poverty status is associated with labor market success. Not surprisingly, during the mid- to late 1990s, low-wage workers in wealthier households spent more time, on average, in higher-wage jobs than those in poorer households. For example, females living in households with incomes below poverty spent nearly half as much time in the higher-wage labor market than households with incomes more than twice the poverty level (14 percent, compared to 22 percent). Similarly, those in the poorest households spent more time in the low-wage sector than their wealthier counterparts. These differences are similar for females than males. Despite this, however, we again find considerable differences in labor market success even for those within the wealthiest households. For example, 67 percent of females in the wealthiest households spent less than one-quarter of their time in higher-wage jobs, which is not substantially below the 79 percent figure for males in households below poverty.

b. Findings for Subgroups Defined by Job Characteristics

Our findings for subgroups defined by job characteristics at the start of the low-wage job indicate that job quality matters--those with better jobs tend to have more positive labor market outcomes than those in lower-quality jobs (Table IV.5). We summarize these results here:

  • Those with higher initial wages are more likely than those earning lower wages to leave the low-wage labor market. Sample members who earned less than $5.00 per hour (about 27 percent of all low-wage workers) had the poorest labor market outcomes, and outcomes improved as wage levels increased. For example, male workers earning less than $5.00 per hour spent an average of 19 percent of months in higher-wage jobs, compared to 37 percent for those earning between $6.00 and $7.00 and 42 percent for those earning between $7.00 and $7.50. Similarly, the lowest earners spent much more time in low-wage employment than higher earners. Not all high-earners had successful outcomes, however; about 40 percent of those earning more than $7.00 spent little time in higher-paying jobs.
  • Full-time workers typically have more successful outcomes than part-time workers. During the mid- to late 1990s, low-wage workers who reported working more than 35 hours per week (about 26 percent of all workers) spent, on average, much more time in higher-wage jobs and less time in low-wage jobs than those working fewer hours. These results hold for both males and females. For example, males who worked less than 20 hours per week typically spent only about 20 percent of their time in higher-wage jobs, whereas the corresponding figure is 37 percent for those working more than 40 hours per week. These results strongly suggest that part-time workers are at particular risk of poor labor market outcomes.
  • The availability of fringe benefits on the job is a strong predictor of labor market success. Those covered by health benefits (about 60 percent of all low-wage workers) spent considerably more time in higher-wage jobs than those without these benefits (34 percent compared to 25 percent of months for males, and 22 percent compared to 15 percent for females).(34) These results further confirm our findings that job quality matters.
  • Male business owners typically have better labor market outcomes than male jobholders. As discussed, business owners (about 13 percent of all low-wage workers), tend to work many hours in order to get their businesses off the ground and tend to have lower hourly wages than jobholders near the start of their employment spells. However, earnings growth appears to be somewhat greater for the self-employed. Male business-owners spent an average of 43 percent of months in higher-wage jobs, compared to 27 percent for male jobholders. Differences between the outcomes of female business owners and jobholders, however, are smaller.
  • Among male low-wage workers, those in professional and sales occupations experience more wage progression than other workers. The differences across occupations are substantial. During the mid- to late 1990s, professional and sales workers (14 percent of workers each) were typically employed for about 90 percent of the time during the 42-month follow-up period, compared to about 83 percent for other workers. Similarly, professional and sales workers spent about 37 percent of months, on average, in higher-paying jobs, compared to 24 percent for clerical workers, 24 percent for service workers, 32 percent for machinists and construction workers, and 23 percent of those in other occupations. Similarly, a relatively small fraction of professional and sales workers spent little time in medium- and high-wage jobs.
  • Female workers in professional and clerical jobs have the most labor market success. Female sample members in professional and clerical occupations spent more time employed in all jobs, and higher-wage jobs in particular, than those in other occupations. These workers spent about 28 percent of the follow-up period in the higher-wage labor market, compared to less than 20 percent for those in each of the other occupations. Service workers had particularly poor outcomes.
  • We find smaller differences in labor market success across industries. This result holds for both males and females.

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