The Low-Wage Labor Market: Challenges and Opportunities for Economic Self-Sufficiency. Defining and Characterizing the Low-Wage Labor Market . Characteristics of Low-Wage Workers

12/01/1999

A useful way to begin a statistical description of low-wage workers is with the poverty-level wage approach described in the previous section.

Table 2 shows the characteristics of U.S. workers in 1997 by wage range.  The low-wage sector (column 1) is defined as those who earn $7.89 an hour or less — $7.89 being the hourly wage of someone who, if they worked 40 hours a week, 52 weeks a year, would have annual earnings equal to the 1997 poverty line for a family of four.  The medium-wage sector (column 2) is defined as those who command wage rates that would put them between the poverty line and twice the poverty line if they worked full-time/full-year in 1997 ($7.90 - $15.78).  The high-wage sector ($15.79 and above) is defined as those who command wage rates that would put their annual income above twice the poverty line if they worked full-time/full-year in 1997.

Table 2 holds no real surprises.  Compared to the overall workforce, low-wage workers are more likely to be women, minority, noncollege-educated, nonunion, in the retail trade industry, and in low-end sales and service occupations.

The top panels in this table (1A and 1B) present average wages and the share of workers in each wage sector, by gender.  For workers in the low-wage sector, the average hourly wage in 1997 was $5.92, about 44 percent of the average wage of the workforce as a whole.  For women, the low-wage share of the workforce was 35.3 percent, about 12.8 percentage points higher than the low-wage share for men and about the same as the high-wage share for men.  Clearly, by this definition, the low-wage sector consists of a nontrivial share of workers.

The rest of the table shows the shares of workers with particular characteristics within each wage range.  Panel 2 shows that the majority of low-wage workers (58.8 percent) are women.  Comparing the shares of the sexes in the different wage sectors with those in the total column reveals the extent to which workers in different wage sectors are disproportionately represented in the total labor force.  Women, for example, constituting 47.7 percent of the total, are over represented in the low-wage sector.  Minorities are also over represented in that sector.  The share of Hispanics, for example, is 17.2 percent, compared with their 10.5 percent share of the labor market overall.  Whites are the only racial group under represented in the low-wage category (63.0 percent versus 73.6 percent overall).

With respect to age (panel 4), workers in the low-wage sector are younger on average than in the more highly paid sectors.  Just over 60 percent of low-wage workers average 35 years of age or less, compared with about 40 percent of the high-wage workers.

Education levels (panel 5) are relatively low for the low-wage sector.  Nearly two-thirds have a high school degree or less, compared with under one-half of the medium-wage group and about one-fifth of the high-wage group.  Virtually no high-wage workers have less than a high school degree.  Figure 1 highlights the same information for the low-wage and high-wage groups.  Over half of the high-wage group have a college degree or more, for example, compared with less than one-tenth of the low-wage group.  Almost four-fifths of the high-wage group have at least some college, compared with just over one-fifth for the low-wage group.


Figure 1. Education Shares, Low- and High-Wage Workers, 1997

Figure 1. Education Shares, Low- and High-Wage Workers, 1997

Source:  Table 2.


By far the most populated industrial category for low-wage workers is retail trade, accounting for almost one-third of the low-wage workforce.  Low-wage workers, in contrast, are under represented in the industries typically associated with higher-quality jobs for noncollege-educated workers, such as manufacturing, mining and construction, and transportation and utilities.

For occupational categories, low-wage workers are disproportionately represented in low-end services occupations ("other" services include such occupations as food and cleaning services) and sales (such as cashiers and other sales jobs in retail).  Finally, low-wage workers are much less likely to be members of unions than their higher-wage counterparts.  Only 5.7 percent of the low-wage group are in unions, for example, compared with 15 percent in the medium-wage group, 22.7 percent in the high-wage group, and 14.5 percent in the workforce as a whole.

A limitation of the definitional approach to the low-wage labor market taken in table 2, as noted, is that it compares workers as if they all worked full-time/full-year, which ignores that fact that many in low-wage jobs do not work as many hours as they would like.  Figure 2 shows the share of poor families with children that have at least one full-time/full-year worker.  In 1997, less than one-quarter of poor families had such a worker, a slightly higher proportion than in previous decades.


Figure 2. Percent of Poor families with Children with at Least One Full-Time/Full-Year Worker.

Figure 2. Percent of Poor families with Children with at Least One Full-Time/Full-Year Worker.

Source:  Authors' analysis of March CPS data.


Another potential limitation of table 2's approach is that it shows pre-tax, pre-transfer income, which is different from the amount of disposable income available to such a family.  At the average wage rate for women in the low-wage labor market of $5.86 an hour in 1997, for example, a woman who worked full-time/full-year would have had a pre-tax income of $12,200.  When the Earned Income Tax Credit, the cash value of food stamps, federal and state tax payments, and uncompensated work expenses (including child care) are incorporated into the calculation, this woman's family would end up with a slightly higher ($13,231) income to spend.11