The Low-Wage Labor Market: Challenges and Opportunities for Economic Self-Sufficiency. Defining and Characterizing the Low-Wage Labor Market . Changes in the Low-Wage Labor Market over Time

12/01/1999

To put the 1997 picture of the low-wage labor market into a broader perspective, figures 3 through 6 look at trends over the 1973-97 period from a variety of perspectives.  Whichever perspective is taken, the story is essentially the same.  Real wages have fallen for the low-wage sector of the labor force.

Wage-Rate Perspective.  Figure 3 shows the share of workers earning poverty-level wages or less, by gender (the 1997 figures are the same as those in table 2, panel B, column 1).  The middle line shows a rising trend for all workers, from 23.7 percent of the workforce in 1973 to 28.6 percent in 1997.  This trend, as discussed in more detail below, has been driven exclusively by men.  Women workers are still more likely to be in the low-wage sector than men, but their probability of being there has actually declined slightly over the last 25 years.


Figure 3.  Percentage of the Workforce Earning Low Wages, 1973-97, by Gender

Figure 3. Percentage of the Workforce Earning Low Wages, 1973-97, by Gender.

Source:  Michel, Berstain, and Schmitt (1999a).


Employment/Hours Perspective.  Figure 4 shows the trend in the proportions of persons, in families with children, who worked full-time/full-year and still had annual earnings below the poverty line for a family of four.  Their share increased about 4 percentage points between 1979 and 1989.  This is consistent with the trend in figure 2, which shows an increase since 1979 in the share of poor families with children that have at least one full-time/full-year worker.  A greater share of female-headed than male-headed poor families with children had at least one full-time worker throughout this period.  This share fell during the 1970s, grew 4 percentage points in the 1980s, and has been flat in the 1990s.  By 1997, one-quarter of female-headed families with children had a full-time worker with poverty-level earnings.


Figure 4.  Persons in Families with Children, Who Work Full-Time/Year-Round and
Have Annual Earnings at or below the Poverty Level, 1969-97.

Figure 4. Persons in Families with Children, Who Work Full-Time/Year-Round and Have Annual Earnings at or below the Poverty Level, 1969-97.

Source:  U.S. Bureau of the Census (1992) and unpublished data.


Education Perspective.  Figure 5 shows the trend in real hourly wages for workers with a high school education or less by gender for the 1973-97 period.  The real hourly wages for men and women with less than a high school degree fell by 30 percent and 16 percent, respectively, over this period.  For high school graduates, real hourly wages fell by 17 percent for men, but by only about 3 percent for women.


Figure 5.  Average Real Hourly Wages of Men and Women with a High School Degree or Less, 1973-97, Indexed to 1979

Figure 5. Average Real Hourly Wages of men and Women with a High School Degree or less, 1973-97, Indexed to 1979.

Source: Mishel, Bemstein, Schmitt, 1999b.


Relative Wage Perspective.  Figure 6 shows real hourly wages for both men and women in the 10th and 20th percentiles of the wage distribution.  For men and women in the 10th percentile, and for men in the 20th percentile, real wages fell by 16 to 18 percent.  For women in the 20th percentile from the bottom, the picture was somewhat less discouraging.  They suffered a real wage drop of only 7.6 percent.


Figure 6.  Real Wages for Men and Women in the 10th and 20th Percentile of the Wage Distribution, 1973-97, Indexed to 1979

Figure 6. Real Wages for Men and Women inthe 10th and 20th Percentile of the Wage Distribution, 1973-97, Indexed to1979

Source: Mishel, Bemstein, Schmitt, 1999b.


Shifts in Worker Characteristics over Time.  Table 3, which takes the same measurement approach as table 2, examines changes in the characteristics of low-wage workers.  Over the roughly 25-year period, the average real wage of the workforce as a whole remained virtually unchanged.  Within this overall wage stability, however, there were substantial differences by wage sector and sex.

  Low-Wage
Workers
Mid-Wage
Workers
High-Wage
Workers
Total
Table 3. Changes in Selected Workforce Characteristics by Wage Range,* 1979-97
Average Wage
(Percent Change)
All -7.3% -1.3% 9.4% -0.5%
Men -6.6 -3.5 11.0 -5.6
Women -8.0 1.3 12.1 12.9
Distribution Across Wage Groups
(Percentage Point Change)
All 4.9 -3.0 -1.9 0.0
Men 9.1 -0.3 -8.8 0.0
Women -1.8 -6.6 8.5 0.0
Change in Characteristics Within Wage Group
(Percentage Point Change)
Women -9.0 -1.0 17.7 4.3
White -12.7 -7.3 -4.5 -8.5
High school or less -13.5 -17.6 -26.0 -17.9
Ages 18 - 25 -7.6 -13.4 -6.3 -8.6
Manufacturing -3.5 -8.1 -10.6 -8.1
Retail trade 1.8 0.0 -0.5 1.4
Business services 2.7 2.6 2.8 2.7
Sales occupations 7.6 -4.4 3.6 5.3
Clerical occupations 8.4 -3.7 -2.5 -4.5
Union ** -0.2 -9.6 -17.9 -10.1
*  Wage ranges are multiples of the poverty level for a family of four divided by ull-time, full-year work (see text).
**  Since the 1979 CPS does not carry the variables necessary to determine union membership, the trends in union membership shown here are for 1978-97.

The low-wage sector lost substantial ground (real wages falling by over 7 percent).  The middle-wage sector lost only slightly more than the workforce as a whole.  The high-wage sector gained considerably (9.4 percent increase over the period).  Wage growth was strongest for women, with real wage rates growing by almost 13 percent over the period.  Within this overall average, however, women in the low-wage sector lost ground (with their average wage rate dropping by 8 percent).  Men lost ground overall, as did men in low-wage and middle-wage sectors.  But the high-wage men gained almost as much as the high-wage women.

With respect to workforce, employment in the low-wage sector grew by 4.9 percentage points.  Within this average, the share of men that are in the low-wage sector grew by over 9 percentage points while the share of women that are low-wage remained virtually unchanged.

The rest of table 3 shows the changing characteristics of workers within each wage group overtime.  Like the rest of the workforce, the low-wage sector included more minorities and became older, more highly educated, and less likely to work in the manufacturing industry.  Unlike the rest of the workforce, however, the low-wage sector included less women.  Women made up an additional 4.3 percentage points of the total workforce, while their share in the low-wage group fell 9 percentage points.  The "high school or less education" category declined by 13.5 percent.12  It may seem surprising that, in a period when the economic returns to education were rising (particularly over the 1980s), a larger share of those earning low wages were better educated at the end of the period than at the beginning.  But this is the unavoidable outcome of long-term educational upgrading combined with long-term wage decline.  Between 1979 and 1997, for example, the share of the workforce with less than a high school degree fell from 20.1 to 11.1 percent.  In the absence of this educational upgrading, even larger shares of men and women would have been in the low-wage sector in 1997.

By industry, low-wage workers became less likely to work in manufacturing and more likely to work in low-wage services like retail trade and "temporary" office services.  The occupational shifts within the low-wage sector were primarily a 7.6 percentage point increase in the share of the low-wage sector employed in sales and an 8.4 percentage point drop in the share employed in clerical jobs (compared with an overall drop of 4.5 percentage points in the share employed in clerical occupations).