Better Workers for Better Jobs

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Abstract

Low-wage workers in the United States are falling further and further behind their higher-earning counterparts. This brief examines a discussion paper for The Hamilton Project, proposing a new federal funding stream to identify, expand, and replicate the most successful state and local worker advancement initiatives. Under the proposed Worker Advancement Grants for Employment in States (WAGES ) program, the federal government would offer up to $5 billion annually in matching funds
for increases in state, local, and private expenditures on worker advancement initiatives.

Introduction

Low-wage workers in the United States are falling further and further behind their higher-earning counterparts. In response to the growing problem of wage inequality, many promising state and local initiatives have emerged to offer much needed training, financial supports, and job placement assistance to low-income workers. But these initiatives are often too small to have a significant effect on poverty or on employment rates, and they lack the rigorous evaluation methods needed to determine their effectiveness and allow sound information on what works to be spread more widely.

In a discussion paper for The Hamilton Project, Harry J. Holzer of the Georgetown Public Policy Institute and the Urban Institute proposes a new federal funding stream to identify, expand, and replicate the most successful state and local worker advancement initiatives. Under the proposed Worker Advancement Grants for Employment in States (WAGES ) program, the federal government would offer up to $5 billion annually in matching funds for increases in state, local, and private expenditures on worker advancement initiatives. This amount would supplement the current $3 billion in federal funding spent on worker advancement. Initially, the WAGES program would require states to compete for federal grants, encouraging innovation and knowledge sharing among states. Holzer argues that the program would significantly increase the lifetime incomes of low-wage workers while developing and disseminating high-quality data on successful program design.

Although low-wage jobs exist in every society, the disparities between low-income and higher-income workers in the United States are growing more rapidly than in other countries. New technologies, increased globalization, and the weakening of policies and institutions designed to protect workers have contributed to income inequality. The inflation-adjusted incomes of workers with less than a high school education have declined since 1980, while the earnings of workers with at least some college education have risen. The loss of relatively well-paying manufacturing and clerical jobs has caused a “hollowing out” of the middle of the income distribution. The 20 million low-wage workers in the United States have largely been excluded from the prosperity enjoyed by other Americans.

Holzer defines low-wage workers as those who earned less than $7.73 an hour in 2003, or roughly half the average hourly wage. At this wage a family of four would fall below the poverty line even with one wage earner working full-time and year-round. Yet in 2003 fully 22 percent of all workers made less than this amount. To be sure, some of these workers were teens or young adults whose wages have since grown or are expected to grow, or they were the second or third wage earners in their families. But 61 percent of low-wage workers were 30 years or older, and about half of low-wage workers—11 percent of all workers—lived in families whose total income was less than twice the poverty line.

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The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.

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