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


With passage of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA), policymakers and researchers have recognized the importance of understanding the dynamics of the low-wage labor market and the economic opportunities in it. The "work first" focus and time limits established through the creation of the Temporary Assistance for Needy Families (TANF) program are designed to end the dependence of needy families by moving welfare recipients off the welfare rolls and into work. Given the low education and skill levels of typical welfare recipients, this work first emphasis has led many recipients into low-wage jobs. As large numbers of current and former recipients enter the low-wage labor market, we need to understand, in detail, job retention and mobility among low-wage workers, as well as their prospects for wage progression. A thorough understanding of these issues can provide insights into other possible policy initiatives for low-wage workers, such as strengthening work supports for former welfare recipients and improving job retention and career advancement strategies.

This report discusses the research that Mathematica Policy Research, Inc. (MPR) has conducted, under contract with the Assistant Secretary for Planning and Evaluation (ASPE) at the U.S. Department of Health and Human Services (HHS), to provide a comprehensive profile of the characteristics and labor market experiences of low-wage workers since the passage of PRWORA. The study was conducted using data from the 1996 longitudinal panel of the Survey of Income and Program Participation (SIPP), which covers the period between late 1995 and early 2000. The economy was strong during this time period; thus, the study's findings may be different under weaker economic conditions.

The study examines a broad range of research questions pertaining to the low-wage labor market. We categorize these questions into the following topical areas:

  • Who are the people in the low-wage labor market? What proportion of people in the workforce had low-wage employment in the mid- to late 1990s? How do their demographic characteristics compare to those of higher-wage workers? Do the answers to these questions differ across key subgroups of the low-wage population?
  • What are the characteristics of the jobs that low-wage workers hold? How much do they earn per hour and per week? What are their usual hours worked per week? In which occupations and industries are they concentrated? To what extent are health insurance benefits available on their jobs? How do their job characteristics differ from those of higher-wage workers? Do the answers to these questions differ across key subgroups of the low-wage population?
  • What are the employment-related characteristics of low-wage workers? How long have they been at their jobs? What are their employment histories? How many hold more than one job? How many hours do they work per week in all jobs, and what are their total weekly earnings?
  • What are the overall employment experiences of low-wage workers over a three-and-one-half-year follow-up period? How many job and employment spells do they typically have? How many eventually find a higher-wage job? How many move in and out of the low-wage labor market? What fraction of time are they in low-wage jobs, higher-wage jobs, and no jobs? Do employment rates increase over time? How do the employment patterns of low-wage workers compare to those of higher-wage workers?
  • What wage growth do low-wage workers experience, and what factors are important for wage progression in the low-wage labor market? To what extent do low-wage workers experience wage growth over a three-year follow-up period? What circumstances are associated with wage growth in the low-wage labor market? Are those employed in certain occupations or industries more likely than others to experience wage growth? Are initial wage and earnings levels associated with wage growth? Do those who continue in the same job experience greater or lower wage growth than those who switch jobs? Do low-wage workers experience more or less wage growth than higher-wage workers?
  • What are typical job and employment spell lengths for low-wage workers? Are spell lengths related to characteristics of the worker or of the job? At what rate do workers move from low-wage job spells directly into higher-wage job spells? At what rate do they become nonemployed? How soon do those who leave a low-wage job become reemployed in another low-wage job or a higher-wage job? How do job spell lengths of low-wage workers compare to those of higher-wage workers?

Subsequent chapters discuss our findings in detail. In the remainder of this chapter, we provide an overview of the data sources for the study, wage definitions, analysis samples, and our methodological approach. This chapter ends with a roadmap for the rest of the report.

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