The Low-Wage Labor Market: Challenges and Opportunities for Economic Self-Sufficiency. Defining and Characterizing the Low-Wage Labor Market . Job-Based Definitions: A Strong Theoretical Foundation


Job-based definitions focus on a set of jobs with characteristics that lead both to working poverty and reducing upward wage and income mobility.  There are two major variants of this definitional approach: segmented labor markets and wage contours.

Segmented Labor Markets.  The fundamental insight of this branch of analysis is that jobs are organized into two separate segments and that there is more labor mobility within each segment than between them.2  Jobs in the primary segment are core jobs.  These pay higher wages and are more likely to provide fringe benefits (such as health insurance and paid vacations) than jobs in the secondary segment.  They also have ladders upward (often within the same firm), whereby workers can steadily improve their earnings and living standards over time.  Jobs in the secondary segment, on the other hand, are peripheral jobs.  They pay low wages, offer few benefits, tend to be nonunion, and generally have worse working conditions than core jobs in the primary sector.  They are also less stable than core jobs, with high job turnover and much churning but little upward mobility.  Race- and gender-based discrimination are also more common in the secondary than in the primary segment.

Wage Contours.3  The primary insights here are (1) that there are groups of jobs that share characteristics that together lead to wage levels within an identifiable range, and (2) that wages in these groups of jobs move, over time, in a related manner.  The group of jobs on a contour defined by the minimum wage provides a good example.4  These jobs tend to be in low-wage industries like retail trade and personal services and in occupations like low-end sales, administrative support, and other service occupations.  Workers on the minimum wage contour tend to be the traditional victims of labor market discrimination and have suffered most from declining real wages over the past 15 years.

Job-based definitions provide a compelling conceptual structure within which to understand the low-wage labor market.  They offer a rich model of the determinants of wages and employment, which, unlike traditional labor market theory, can incorporate the role of labor market institutions (such as unions, minimum wage legislation, and international trading regimes), along with established power dynamics (such as race- and gender-based discrimination).

Their very richness, however, makes them difficult to use in empirical analysis.  Few available data sets have the level of job-based information needed for such analysis.  Since worker-based definitions are more empirically tractable, and since the job-based approach yields empirical results that mirror those based directly on a worker-wage definition (discussed below), the greatest contribution of the job-based approach is the solid and innovative theoretical grounding it provides for the empirical work on the low-wage labor market as defined by worker characteristics.