The Low-Wage Labor Market: Challenges and Opportunities for Economic Self-Sufficiency. Low-Wage Labor Markets: The Business Cycle and Regional Differences . Low-Wage Jobs

12/01/1999

In this section, low-wage jobs themselves are examined.  How many low-wage and near low-wage jobs are there?  What are the low-wage occupations?  What happened to the number of these jobs over the last business cycle?

In order to address these questions, it is useful to focus on workers in hourly employment.  This is reasonable because most welfare recipients who enter the labor market will be seeking a job that pays an hourly wage.  Also, the Current Population Survey provides data on the hourly earnings of one-quarter of the workers in the CPS sample (see the data appendix for details).

Low-wage jobs are defined by using the September 1997 minimum wage, which was $5.15 an hour.  That wage is then adjusted by the Consumer Price Index (CPI-U) to obtain a cut-off point of $4.48 for 1992 (slightly above the 1992 minimum wage of $4.25), and $3.75 for 1988 (when the minimum wage was $3.35 an hour).

To define near low-wage jobs, a somewhat arbitrary cutoff of $7.50 an hour for 1997 is used.  Thus, near low-wage jobs for 1997 are defined as jobs that paid between $5.15 and $7.50 an hour.  The $7.50 an hour cutoff is then adjusted by the CPI-U to obtain a near low-wage range of $4.48 to $6.53 an hour for 1992, and $3.75 to $5.46 an hour for 1988.

How Many Low-Wage Jobs Are There?

Figure 4 gives a general picture of hourly paid jobs over the last recession and recovery.  The total number of hourly jobs shows a typical cyclical pattern:  there was slow growth from 58.1 million in 1988 to 60.6 million in 1992 (or about 4 percent), then rapid growth during the recovery to 69.1 million in 1997 (about 14 percent).

Figure 4.  Hourly paid jobs, total and by wage level.

Figure 4. Hourly paid jobs, total and by wage level.

In contrast, the growth of hourly jobs at or near the minimum wage was more steady:  low-wage and near low-wage jobs combined grew from 21 million in 1988 to 24 million in 1992 (or 14 percent), and then to 28.5 million in 1997 (or 18.6 percent).

However, the patterns for low-wage and near low-wage jobs differ significantly from each other.  Low-wage jobs took a large hit during the last recession, falling from 7.1 million in 1988 to 6.2 million in 1992.  They then recovered to 8.9 million in 1997.  Near low-wage jobs, however, showed signs of being counter- cyclical, growing rapidly from 13.9 million in 1988 to 17.8 million in 1992 (or 28 percent), then growing more slowly during the recovery to 19.5 million in 1997 (or 9.6 percent).

The cyclical pattern shown by low-wage jobs is expected.  Both human capital theory and empirical evidence suggest that low-wage, low-skilled workers are more likely to be laid off in a recession than are high-wage, skilled workers.  In contrast, it appears that near low-wage jobs are sufficiently skilled (and filled by workers who are sufficiently skilled) that employers maintain the jobs through a recession, rather than eliminating the jobs and laying off the workers.

Mainly, the data in figure 4 make it clear that the number of low-wage jobs (that is, jobs earning roughly minimum wage) fell significantly during the last recession.  Such a drop can be expected to repeat itself in the next recession.

Occupational Mix of Low-Wage Jobs

Figure 5 shows a breakdown of low-wage and near low-wage jobs by occupation.  Three conclusions are clear from figure 5.  First, low-wage and near low-wage jobs combined are concentrated in service, sales, and clerical occupations, followed by labor (a catchall category for low-skilled labor), and operative jobs (that is, jobs that involve tending or operating a machine).  The largest of these — service and sales occupations — have been rapidly growing segments of the labor market.

Figures 5a and 5b

Figure 5a. Low-wage hourly paid jobs by occupation and Figure 5b. Near low-wage hourly paid jobs by occupation.

Second, low-wage jobs in occupations where they are concentrated tend to show the same pattern through the last business cycle:  a loss of jobs between 1988 and 1992 followed by recovery between 1992 and 1997.  This is the same cyclical pattern that can be seen for low-wage jobs overall in figure 4.

Third, near low-wage jobs in occupations where they are concentrated show a somewhat different pattern:  an increase in employment between 1988 and 1992 (except among operatives and laborers) followed by further increases (or, in services, a modest drop) between 1992 and 1997.  This reflects the somewhat counter cyclical pattern that can be seen for near low-wage jobs overall in figure 4.  It follows that most of the occupational segments of the near low-wage labor markets follow aggregate movements in near low-wage jobs.