The Low-Wage Labor Market: Challenges and Opportunities for Economic Self-Sufficiency. Barriers to Entering the Low-Wage Labor Market


Many workers face serious barriers to employment, even when job openings are available. The next two papers in the volume address the problem of barriers. Harry Holzer identifies four major barriers to employment. Julia Henly focuses in more detail on one of these barriers-lack of access to information networks.

What Types of Barriers Do Disadvantaged Workers Face?  Disadvantaged workers can face several barriers including: skills mismatch, spatial mismatch, discrimination, and insufficient information networks, according to Holzer's analysis. When there are changes in demand for workers, adjustments in the types of labor available (supply) often lag by as much as several years, and many workers may not be well positioned to compete for jobs in the interim. Education/skills need to change to meet the new job demands. Where workers live needs to change to match the new job locations. And both these adjustments may be impeded by gender or racial discrimination and by lack of access to information networks.

Even for relatively low-skilled jobs, employers tend to seek basic skills such as job readiness, social skills, and basic cognitive skills, in addition to any job-specific skills. In a survey asking employers about what worker characteristics they look for in hiring entry-level workers, about half said they would not hire someone without a steady work history, two-thirds said they would not hire someone with a criminal record, and three-quarters said a high school diploma was "absolutely necessary" or "strongly preferred." Even for these basic job requirements, Holzer finds skills mismatch is a serious barrier for many disadvantaged workers. For example, 60 percent of long-term welfare recipients lack a high school diploma or GED, most score among the bottom 20 to 25 percent of aptitude test takers, and some studies estimate that at least 30 percent would not meet the basic job readiness requirements of employers. In addition, one-third of African American men ages 16 to 34 have a criminal record, with the rate rising to over 60 percent among young African American men who dropped out of school.

How important are spatial barriers? The big concern here is that disadvantaged workers living in central cities may have trouble getting to jobs in the suburbs. The importance of this factor, known as spatial mismatch, is in debate. But Holzer concludes that the majority of evidence indicates that African American employment rates are depressed by spatial mismatch (which includes lack of transportation as well as residential mismatch).

How Much Does Access to Information Networks Matter?  Learning about job opportunities is a potential challenge for many disadvantaged workers, not only because of the geographic distance separating them from employers, but also because many disadvantaged workers do not have access to the types of information networks employers use in seeking new hires.

Henly notes that informal networks are, indeed, one of the most widely used methods of job placement, accounting for between 25 and 60 percent of hires. Such informal networks are particularly important for entry level hires, jobs that do not require college education, blue collar jobs, and jobs with small employers. The earnings potential of a job appears very dependent on the characteristics of its referral networks, which is not simply a method for exchanging information, but a means for employers to screen applicants.

Such networks tend to be tightly knit and ethnically homogeneous, according to Henly, and African American workers are typically excluded from them. Because the networks are so important in the entry-level market, they may serve not only to help particular groups, but to exclude disadvantaged workers from entering the more favorable employment niches and ensure that they are retained in the less promising ones.

Formal employment agencies and other intermediary organizations have not been important sources of hires in the past. But Henly notes that since passage of welfare reform, intermediaries have become more common, reflecting a hope that they can play an important role in brokering employment for disadvantaged workers. Because such organizations provide screening (as well as training and other services at times), they can help fill the role of informal networks. Some organizations are showing promise in working with hard-to-serve populations such as ex-offenders. While some observers may be optimistic about the potential role of intermediaries, Henly cautions that the current strong labor market may be responsible for what might seem like the effectiveness of intermediaries.