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

1
Low-Wage AmericaHow Employers Are Reshaping
Opportunity 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.

2
Backdrop

• 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

3
Questions

• 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?

4
12 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

5
Dominant 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

6
Alternative 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

7
Unions

• 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

8
Regional labor market Institutions

• Provide individual firms with resources they
  cant 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

9
Regulation

• 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

10
Tight 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

11
Policy

• Raise the minimum wage
• Build regional labor market institutions
• Public investments in plant and technology
  upgrading
• Sectoral training systems
• Reform U.S. labor law