Low-Wage America:Low-Wage America:How Employers Are Reshaping How Employers Are Reshaping Opportunity in the WorkplaceOpportunity in the Workplace

Eileen Appelbaum, Annette Bernhardt, and Richard Murnane

Presented at:

The Columbia University Seminar on Full Employment, Social Welfare and Equity, May 10, 2004; Institute of Industrial Relations, University of California-Berkeley, March 8, 2004 and University of California, Los Angeles, March 9, 2004; the Center for the Study of Inequality, Cornell University, November 14, 2003.

BackdropBackdrop

• Economic pressures on employers Globalization of capital markets and production

Advances in IT

Changes in financial markets

• Institutional changes Deregulation of industries

Decline in unions

Decline in minimum wage

QuestionsQuestions

• How have firms responded to increased economic pressures and institutional changes?

• How have front-line workers been affected as a result?

in terms of wages & benefits, skill requirements, opportunities for advancement, etc.

• Is there variation in firms’ responses, and if so, what explains it?

12 case studies12 case studies

• Spanning 25 industries that employ large numbers of workers without college degrees

• In-depth research on 464 establishments

• Interviewed 1,700 workers and managers, and surveyed more than 10,000

• “Controlled” research designs that compared firms in similar industries and facing similar competitive pressures, in order to isolate reasons for variation

Dominant competitive responsesDominant competitive responses

• Firms that focused on labor costs Keep the same workers, but freeze wages, cut benefits,

and increase workloads

Replace workers with temps, subcontract/outsource, or consolidate and relocate jobs to lower-wage areas

• Firms that focused on technology Automate routine tasks

And then either deskill remaining jobs, or shift them to higher skill workers

Alternative competitive responsesAlternative competitive responses

• Use work reorganization to increase productivity and reduce turnover

• Emphasize innovation and quality in products or services

• Train entry-level workers for new technology

• Link entry-level jobs to career ladders

• Use temps to bring “marginal” workers into the fold

UnionsUnions

• In some sectors unions still determine the quality of front-line jobs

Have prevented squeezing of labor costs, increased work loads, and mediated the reorganization of work

Strongest examples in service industries: hotels, health care, and telecommunications

• Effect is greatest where union density is strong – especially in cities and high-end markets

• Usually stems from innovative organizing of entry-level, immigrant workers

Regional labor market Regional labor market InstitutionsInstitutions

• Provide individual firms with resources they can’t get on their own

Plant modernization, technology upgrading

Pooled training & healthcare funds and joint classes at community colleges

Recruitment of new workforce and placement via hiring halls

Benchmarking and sharing of best practices

• Allows firms to pursue alternative competitive strategies

RegulationRegulation

• Declining real value of the minimum wage over last 30 years has effectively been a deregulation of the wage-setting process

Direct effects on front-line workers

Indirect effects: falling wage floor creates incentives for subcontracting

• Industry deregulation in banking, telecomm, health care and others

Has allowed consolidation and relocation of front-line jobs

Often plays role in de-unionization of industry

Tight labor marketsTight labor markets

• Late 90s boom and low unemployment had positive effects on wages at the bottom of the distribution

• But would be mistake to conclude that good things can happen only in tight labor markets

• A high-productivity/high-wage model can work in normal times as well

PolicyPolicy

• Raise the minimum wage

• Build regional labor market institutions

• Public investments in plant and technology upgrading

• Sectoral training systems

• Reform U.S. labor law