Mark A. Sadowski said...
A partial repost:
The graph comes from this paper which is essentail reading:
http://www.cepr.net/documents/publications/low-wage-2012-01.pdf
To summarize, the paper argues there are five lessons:
Lesson 1:
Economic Growth is not a Solution to the Problem of Low-wage Work
Statistical analysis shows no relationship between economic growth and the incidence of low wage work. This should not be surprising given the recent US history of a disconnect between productivity and compensation.
Lesson 2: More “Inclusive” Labor-market Institutions Lead to Lower Levels of Low-wage Work
By "Inclusive" the paper is referring to collective bargaining coverage and the degree of socila benefits.
Lesson 3: The United States is a Poor Model for Combating Low-wage Work
Lesson 3A: The U.S. Minimum Wage is Set Too Low to Reduce the Share of Low-wage Work
In countries where the rate of low wage work is low the minimum wage is set closer to the low wage threshold. The US minimum wage is far below that rate (See Figure 7).
Lesson 3B: The Earned Income Tax Credit (EITC) has Contradictory Effects on the Volume of
Low-wage Work and on the Well-being of Low-wage Workers
The EITC has the perverse effect of expanding both the demand for and supply of workers at a level below the low wage threshold.
Lesson 4: Low-wage Work is Not a Clear-cut Stepping Stone to Higher-wage Work
Low wage work is "sticky."
Lesson 5: In the United States, Low Wages are among the Least of the Problems Facing Low-wage
Workers
U.S. workers have the lowest level of employment security in the OECD and no legal right to paid vacations, paid sick days, or paid parental leave. But the most critical problem facing low-wage workers is the lack of access to health care.
So the solutions are common sense and should be quite familiar:
1) Raise the minimum wage closer to the definition of low wage.
2) Raise the wage levels at which EITC applies correspondingly.
3) Expand the right to bargain colllectively.
4) Increase social benefits.
5) Increase the legal rights of workers with respect to job security, paid vacations, paid sick days, and paid parental leave.
6) Establish universal healthcare.
The graph comes from this paper which is essentail reading:
http://www.cepr.net/documents/publications/low-wage-2012-01.pdf
To summarize, the paper argues there are five lessons:
Lesson 1:
Economic Growth is not a Solution to the Problem of Low-wage Work
Statistical analysis shows no relationship between economic growth and the incidence of low wage work. This should not be surprising given the recent US history of a disconnect between productivity and compensation.
Lesson 2: More “Inclusive” Labor-market Institutions Lead to Lower Levels of Low-wage Work
By "Inclusive" the paper is referring to collective bargaining coverage and the degree of socila benefits.
Lesson 3: The United States is a Poor Model for Combating Low-wage Work
Lesson 3A: The U.S. Minimum Wage is Set Too Low to Reduce the Share of Low-wage Work
In countries where the rate of low wage work is low the minimum wage is set closer to the low wage threshold. The US minimum wage is far below that rate (See Figure 7).
Lesson 3B: The Earned Income Tax Credit (EITC) has Contradictory Effects on the Volume of
Low-wage Work and on the Well-being of Low-wage Workers
The EITC has the perverse effect of expanding both the demand for and supply of workers at a level below the low wage threshold.
Lesson 4: Low-wage Work is Not a Clear-cut Stepping Stone to Higher-wage Work
Low wage work is "sticky."
Lesson 5: In the United States, Low Wages are among the Least of the Problems Facing Low-wage
Workers
U.S. workers have the lowest level of employment security in the OECD and no legal right to paid vacations, paid sick days, or paid parental leave. But the most critical problem facing low-wage workers is the lack of access to health care.
So the solutions are common sense and should be quite familiar:
1) Raise the minimum wage closer to the definition of low wage.
2) Raise the wage levels at which EITC applies correspondingly.
3) Expand the right to bargain colllectively.
4) Increase social benefits.
5) Increase the legal rights of workers with respect to job security, paid vacations, paid sick days, and paid parental leave.
6) Establish universal healthcare.
EMichael said...
Little grammar correction needed here. Unless of course all of these workers are wroking at CBS News.
:)
:)
Richard A. said...
How many here think migrant farm workers are overpaid? Many of our political leaders do. Their solution to overpaid migrant farm labor is to grant agribusiness an expanded privilege to import foreign indentured labor as guest workers to put downward wage pressure on these workers. This scheme is coming from primarily Republicans who like to talk tough on the immigration issue. They don't do this for the Hispanic vote--that's just their cover story.
jonathan said...
I've found more striking that so much attention is paid to working conditions in China, notably at Foxconn, which seems to do better than other Chinese employers. It's weird because even a little digging shows working conditions in the US can be worse. E.g., a writer worked at the largest warehouse fulfillment center in the US. Even though the supervisors were friendly, they were driven by handheld computers that set standards which meant they were always behind. As in, the item isn't in the right bin so you have to scan every item in the bin to prove it but that doesn't come off your mandatory items "picked" quota. If you were even a minute late during the first weeks, you were fired. If you had to go into certain areas, you were shocked by contact with metal. The book area was constant static shocks. It's a better story that other countries mistreat workers because we don't want to believe that is true about ourselves.
John B. Chilton said...
10% of US born workers have less than a high school degree. Of people employed in the US and having less than 8 years of education 70% are immigrants here legally. Depending on the data source employees can include undocumented immigrants, and this may be 30% of all immigrants. I'm not convinced that for those of us born in the US the US is a low wage country. If a large portion of low wage jobs are held by immigrants does mean the US is a low wage country -- no, it means the US offers opportunities superior to what the immigrants find in their country of origin.
DrDick said...
"US has the highest share of employees performing relatively low wage work "
Along with an extremely wealthy elite, this is what we call "advanced capitalism."
Along with an extremely wealthy elite, this is what we call "advanced capitalism."
ken melvin said...
If cheap labor's the solution, why is ...?
Aaron said...
I wonder how much of this is due to an overvalued Euro, and what the bar chart would look like if the Euro where to depreciate against the dollar by 30 to 49 percent, or if you used the exchange rates from the fall of 2001.
Mark A. Sadowski said...
Low wage work is defined as work earning less than 2/3 of the median wage. Thus low wage work is not defined in absolute terms. It is a measure of income distribution.
A change in the exchange rate would be more or less irrelevant.
A change in the exchange rate would be more or less irrelevant.
pete said...
Low wage? Wow, and Baker and Krugman think wages are too high and sticky downward, with the solution being price inflation to drive up the marginal value of product above the wage rate. Firms are sure to hire more workers if wages rise? Check out the biggest issue, unending structural inner city unemployment. Here there is no demand for like 25% of the young labor market, even at the minimum wage, which in fact rose 20% during the great recession. This was kind of like wage hikes in 1937. So raising the minimum wage even more will surely make these folks more likely to be hired? This is really weird economics.
Paine said...
I suggest as social improvers
The pattern of change we should use:
Industrial wages from the 1920's to the 1950's
A 40 year period
If our service sector organizes itself like industry did back then
we could see similar improvement
I note
education is not a factor in either case
The pattern of change we should use:
Industrial wages from the 1920's to the 1950's
A 40 year period
If our service sector organizes itself like industry did back then
we could see similar improvement
I note
education is not a factor in either case
revelo said...
I fail to see the problem with large numbers of low wage workers. 50% of the workers must, of mathematical necessity, earn less than the median wage. So? What the chart above shows is the distribution of incomes is less concentrated in the US than in European countries, which is another way of saying we have more income inequality than elsewhere. No news here. Most regulars in this forum would probably agree that taxes should be raised at the top and lowered at the bottom, and other measures taken to reduce the income (and also wealth) disparities.
The bigger issue is whether higher wages (in real terms) is the way forwards for the average American worker. I would say no. Americans already consume too high a percentage of the world resources, which is another way of saying average American wages are too high in real terms and need to come down. The way forwards for raising the American standard of living is lower costs and lower consumption of resources, so that low wages are enough to buy a high standard of living, not higher wages together with high prices and high consumption of resources. More walking, less driving. More consumption of services (restaurants, gyms and other preventative healthcare, tourism) less consumption of goods that require huge amounts of energy to build and maintain (motor vehicles, McMansions). Most importantly, more part-time job, more leisure and less work, and especially less make-work (think defense, sickcare, edumacation, legal, prison and other industrial complexes) which merely raises everyone's costs without really improving the standard of living.
In other words, the Walmart way is the way forwards, given the realities of global competition. Part-time jobs and low wages for most people, but rock-bottom prices that allow those low wages to go a long way.
The bigger issue is whether higher wages (in real terms) is the way forwards for the average American worker. I would say no. Americans already consume too high a percentage of the world resources, which is another way of saying average American wages are too high in real terms and need to come down. The way forwards for raising the American standard of living is lower costs and lower consumption of resources, so that low wages are enough to buy a high standard of living, not higher wages together with high prices and high consumption of resources. More walking, less driving. More consumption of services (restaurants, gyms and other preventative healthcare, tourism) less consumption of goods that require huge amounts of energy to build and maintain (motor vehicles, McMansions). Most importantly, more part-time job, more leisure and less work, and especially less make-work (think defense, sickcare, edumacation, legal, prison and other industrial complexes) which merely raises everyone's costs without really improving the standard of living.
In other words, the Walmart way is the way forwards, given the realities of global competition. Part-time jobs and low wages for most people, but rock-bottom prices that allow those low wages to go a long way.
mrrunangun said...
US median family income last year was $31,000 and median in France was $19,000. Rough numbers. only in the USA would an income of $20,000 be regarded as poverty.
Inequality is the issue of course. Raising the minimum wage is good for unionized workers with contracts tied to minimum wage. Not so good for the inexperienced undereducated low-skilled kids trying to get on the first rung on the ladder.
Weakening of collective bargaining laws did not send our neighbors' jobs to the American South in the seventies, Japan in the eighties, Mexico in the nineties, or to China over the past 20 years. Collective bargaining contributed to that. We midwesterners got the idea that the companies were our greatest enemies because they resisted our wage demands. In fact our greatest enemies were the guys in other places whom we had never heard of who ended up with our jobs. Strengthening collective bargaining will only work if we protect our production from low wage producers.
It's not 1965 anymore. Collective bargaining, higher taxes, higher inflation, etc will not bring 1965 back. The country has almost twice the population to support and it has competition to contend with that has much more competent government than we have. That competition knows that there is a game on while our elites remain in denial regarding the limits of our resources and the consequent need to make difficult choices about how to deploy those resources.
The steadily worsening degree of corruption in government has left it open to capture by small well-financed groups who use the government to exploit the citizenry. As long as the populace regards partisan election victory as more important than keeping corruption closer to the necessary minimum, the corrupters will thwart well-intentioned attempts to improve the well-being of the general public.
Inequality is the issue of course. Raising the minimum wage is good for unionized workers with contracts tied to minimum wage. Not so good for the inexperienced undereducated low-skilled kids trying to get on the first rung on the ladder.
Weakening of collective bargaining laws did not send our neighbors' jobs to the American South in the seventies, Japan in the eighties, Mexico in the nineties, or to China over the past 20 years. Collective bargaining contributed to that. We midwesterners got the idea that the companies were our greatest enemies because they resisted our wage demands. In fact our greatest enemies were the guys in other places whom we had never heard of who ended up with our jobs. Strengthening collective bargaining will only work if we protect our production from low wage producers.
It's not 1965 anymore. Collective bargaining, higher taxes, higher inflation, etc will not bring 1965 back. The country has almost twice the population to support and it has competition to contend with that has much more competent government than we have. That competition knows that there is a game on while our elites remain in denial regarding the limits of our resources and the consequent need to make difficult choices about how to deploy those resources.
The steadily worsening degree of corruption in government has left it open to capture by small well-financed groups who use the government to exploit the citizenry. As long as the populace regards partisan election victory as more important than keeping corruption closer to the necessary minimum, the corrupters will thwart well-intentioned attempts to improve the well-being of the general public.
We can do the same
Of course that doesn't change two present trends
The upper 5% of the job force taking a larger share of the total job compensation aggregate
And that aggregate slowly losing share of total value added to non work income sources
Ya ya
You need to see all that non work share as a sy
Urplus extracted by an exploitation mechanism
To really get burned over this
But leaving it as just household income inequality is growing
And fighting over a the present size of the gap and how fast its growing and is it acceletating
misses the pressure points the lines of cleavage
Which are really between the non work income sources and the income that essentially pays to guard expand and secure the present system of exploitation