Characteristics of Low-Wage Workers and Their Labor Market Experiences: Evidence from the Mid- to Late 1990s. What is the Size of The Low-Wage Working Population?


Several recent studies using a variety of data sources and definitions of low-wage workers (that are not based on family income levels) show that about one-quarter to one-third of all workers in the late 1990s and early 2000s were in low-wage jobs. Bernstein and Hartmann (2000) find that 29 percent of all workers in 1997 were low-wage workers, and Mitnik et al. (2002) find a corresponding figure of 25 percent in 2001. Both studies use cross-sectional Current Population Survey (CPS) data and a poverty-level wage cutoff value to define low-wage workers. Using a similar definition of low-wage workers, but Survey of Income and Program Participation (SIPP) data, Ryscavage (1996) estimates that about 25 percent of jobholders in 1993 were in low-wage jobs. Finally, using data from the Panel Study of Income Dynamics (PSID), Carnevale and Rose (2001) find that, of all people who worked in 1998, 32 percent were low earners, whom they define as those with annual earnings below $15,000, which was just above the amount needed to keep a household of three out of poverty.

Although less relevant to our study, estimates of the size of the low-income working population are much lower in studies that have examined workers in low-income working poor families. Several studies show that the poverty rate among working adults was only about six percent in the late 1980s, where a worker is defined as poor if his or her family's total income fell below the federal poverty level and if the person worked or looked for work in at least 27 weeks over the past calendar year (Gardner and Herz 1992; Hale 1997; and Klein and Roens 1989). Schiller (1994) uses a stricter standard to define a worker  only those who worked full-time and full-year  and finds that the poverty rate among them was only 2.5 percent. Kim (1998) uses a much less stringent standard to define workers: any adult who worked at all in the previous calendar year. She finds that 10 percent of workers were poor. The poverty rates for workers more than double if the family income threshold used to define the working poor is increased from 100 to 150 percent of poverty (Kim 1998; and Schwarz and Volgy 1992).

Why are estimates of the size of the low-income working population much lower in studies that use total family income to define low-wage workers than in those that do not? The explanation is that a significant number of low-wage workers are in families with total incomes above the poverty level. Carnevale and Rose (2001) confirm this  they show that 57 percent of workers who earned less than $15,000 a year in 1998 lived in families with incomes above $25,000. Using SIPP data, Long and Martini (1990) find a similar result  the lower tail of the earnings distribution coincides only partly with the population in poverty. These results suggest that some low-wage workers are secondary earners and work part-time or take lower-paying jobs. Consequently, they fall in the low-wage group based on their own earnings (but not on their family income).

Has the size of the low-wage working population changed over time? The evidence suggests that it has changed only slightly, although the direction of the change depends on the definition used to identify low-wage workers. Using cross-sectional CPS data from 1973 to 1997, Bernstein and Hartmann (2000) find that the share of workers earning poverty-level wages increased slightly over time, from 24 percent in 1973, to 27 percent in 1987, to 29 percent in 1997. Interestingly, the five percentage point increase between 1973 and 1997 was due entirely to an upward trend for males but not for females. Carnevale and Rose (2001), however, using PSID data, find that the share of the workforce with earnings below $15,000 (in 1998 dollars) decreased slightly over time, from 38 percent in 1979 to 36 percent in 1995 and 32 percent in 1998.

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