If low-wage jobs act as a stepping stone to higher-paying work, then even a relatively high share of low-wage work may not be a serious social problem. If, however, as appears to be the case in much of the wealthy world, low-wage work is a persistent and recurring state for many workers, then low-wages may contribute to broader income and wealth inequality and constitute a threat to social cohesion.
This report draws five lessons on low-wage work from the recent experiences of the United States and other rich economies in the OECD. (p.1)
(Abstractor: Author and Website Staff)
Major Findings & Recommendations
"The experience of the last few decades suggests that we have a pretty good idea of how to reduce the size of the low-wage workforce. - “Inclusive” labor-market institutions that extend the pay, benefits, and working conditions negotiated by workers with significant bargaining power to workers with less bargaining power appear to be the most effective general remedy for low-wage work. - Greater public social spending may be another way to increase the “inclusiveness” of national industrial relations systems since a generous social safety net improves the bargaining position of low-wage workers relative to their employers. - The United States, as one of the least “inclusive” OECD countries, primarily offers cautionary lessons when it comes to low-wage work. Union coverage rates in the United States are the lowest among comparable OECD economies, providing little in the way of protections for the large majority of low-wage workers. (p.10-11) - United States has had an Earned Income Tax Credit (EITC) that effectively tops up the earnings of some low-wage workers in lower-income families...which has the greatest impact on the earnings of low-wage, single parents with children. Taken together, the minimum wage and the EITC could act as an effective tool to combat low-wage work in the United States. (p.6-8) - For some workers, low-wage work is a stepping stone to better things. For an important share of low-wage workers, however, a low-paid job is not much better than unemployment and can even harm their long-term wage and employment prospects.... the relatively low levels of mobility out of low-wage work argue against seeing an expansion of low-wage employment as a straightforward solution to the problems of poverty or wage inequality" (p.10-11). (Abstractor: Author and Website Staff)