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

04/30/2004

Our review of the literature indicates that a lot is known about the characteristics of recent low-wage workers. About one-quarter to one-third of all workers are in the low-wage labor market, and their share in the full labor force has not changed much over time. Low-wage workers are disproportionately female, minority, young, and with low levels of education. At the same time, however, they are also a relatively diverse group. For example, many low-wage workers are poor, but many also live in families with other earners and with total family incomes above the poverty level.

Consensus also exists on the characteristics of jobs that low-wage workers hold. Most receive low hourly wages, work part-time, and hold jobs that are markedly less stable and provide fewer benefits than those that higher-wage workers hold. Low-wage workers are represented in all occupations and industries, but they are found disproportionately in retail trade industries, low-end service and sales occupations, and nonunion jobs.

Less is known about the employment dynamics and wage growth of low-wage workers, and the available evidence pertains to the pre-PRWORA period only. The literature has identified important patterns, however. First, several studies find that, although there is some movement out of the low-wage labor market over time, the movements are not large. Second, movement out of the low-wage sector increases somewhat with work experience. Third, although some workers escape the low-wage labor market, their wage and earnings growth is modest. Finally, female workers, minority workers, and those with low education levels are less likely than their respective counterparts to move into the higher-wage labor market.

Our study builds on the existing literature in two ways. First, and most important, we use a recent cohort of low-wage workers, a unified data source, and a consistent definition of low-wage workers to address a wide range of topics covered in the literature. We provide a comprehensive profile of recent low-wage workers and their labor market experiences, instead of focusing on narrow issues typically addressed in the literature. Second, we provide a more complete analysis of the employment dynamics and wage progression of low-wage workers than is found in the literature.

Endnotes

(4) For example, dividing the 2002 poverty level for a family of four ($18,100) by the number of full-time work hours in a year (2,080) yields a wage cutoff of $8.70 an hour for the low-wage sector.

(5) A larger literature exists on studies that have focused on the characteristics of jobs held by the welfare population only (see, for example, Rangarajan et al. 1998; and Pavetti and Acs 1997).

(6) Rangarajan et al. (1998) showed that a considerable number (nearly 30 percent) also experienced a decrease in wages over time. Recent studies that have examined wage growth among former welfare recipients suggest that those starting at low wages are most likely to experience wage growth, while those starting at relatively high wages are the ones most likely to experience wage reductions over time.

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