Better Workers for Better Jobs

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.

The text below is an excerpt from the complete document. Read the full paper in PDF format.

Abstract

This paper proposes a new federal funding stream to identify, expand, and replicate the most successful state and local initiatives designed to spur the advancement of low-wage workers in the United States. In the 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. To gain funding, states would have to develop local advancement “systems,” partnerships would be developed between local training providers and financial supports for the working poor—including child care, transportation, and stipends for working students—would have to be funded. Initially, the WAGES program would require states to compete for federal grants; states would have an incentive to innovate and use information from other initiatives. The federal government would provide substantial technical assistance and oversight.

Introduction

There have been low-wage workers in virtually every labor market that has ever existed. Historically, economic growth has lifted the real wages of all workers, particularly in more developed countries like the United States, but many factors have influenced the degree of inequality (or difference in relative wages) between those at the bottom and those at the middle and top of the earnings distribution.

In recent years the difficulties experienced by relatively low-wage workers in the United States have grown, at least along some dimensions. Figure 1 plots the real wages of male and female workers with different levels of education since 1979. The earnings of both male and female workers without high school diplomas fell throughout much of the 1980s and 1990s, relative to those with more education (that is, the gap between their wages widened). The same is true for workers with high school diplomas but without college, again for both female and male workers. The earnings of male high school dropouts and even high school graduates not only declined in relative terms but were stagnant or declining in absolute terms throughout much of this period. After the mid-1990s the real wages of these groups rebounded somewhat, but today the wages of less-educated males remain not much higher than they were in the 1970s.

The reasons for stagnant wages among less-educated workers and for rising labor market inequality have been thoroughly analyzed in the economics literature. New technologies, globalization, and the weakening of policies and institutions that protect workers have all contributed.

Recent evidence also suggests that there has been some “hollowing out” of the middle of the earnings distribution since the 1990s, with greater growth in employment (and even in wages) at the top and the bottom of the labor market relative to the middle (Levy and Murnane 2004; Autor, Katz, and Kearney 2005). Employment at the bottom of the labor market has grown rapidly in recent years; although high-paying jobs for less-educated workers in manufacturing, the clerical workforce, and other sectors have diminished in number, low-paying service jobs have rapidly expanded. The number of workers at the bottom has also risen somewhat in recent years, as improvements in the educational attainment of American workers have stalled while new groups of unskilled workers—particularly single mothers and immigrants—have entered the job market.

(End of excerpt. The entire paper is available in PDF format.)

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.

Usage, posting and reprint of materials on the UI web site:

Most publications may be downloaded free of charge from the web site in PDF format. This information may be used and copies made for research, academic, policy or other non-commercial purposes. Proper attribution is required.

Copyright of the written materials contained within the Urban Institute website is owned or controlled by the Urban Institute. Posting UI research papers on other websites is permitted subject to prior approval from the Urban Institute—contact paffairs@urban.org.

If you are unable to access or print the PDF document please contact us or call the Publications Office at (202) 261-5687.