Who Are Low-Wage Workers?

Abstract

This brief examines the size and characteristics of the low-wage workforce and whether low-wage workers experience wage growth. We define low-wage workers as workers whose hourly wage rates are so low that even if they worked full-time, full-year their annual earnings would fall below the poverty line for a family of four. This wage rate is $8.63 in 2001, equivalent to $10.50 in 2008. Almost one-third of all workers ages 16 to 64 are low-wage workers in 2001. From 2001 to 2003, we find some evidence that low-wage workers are moving to higher wage jobs. But, the majority of low-wage workers either remain in low-wage jobs or are not working at all.

Introduction

Over the last decade, American social policy has increasingly focused on encouraging and requiring work for those receiving government supports. Indeed, the earned income tax credit, the largest cash assistance program for low-income families, is available only to those who are working. And employment has been rising among some traditionally disadvantaged groups. For example, since the mid-1990s there have been dramatic increases in employment among single parents, from 59 percent in 1994 to 71 percent in 2004 (Lerman 2005). But much of this employment is in the low-wage labor market. As such, it is of great interest to policy makers to understand better the low-wage labor market and the factors that help low-wage workers attain higher wages and become self-sufficient. Towards this end, this brief examines who is in the low-wage labor market and whether they are experiencing wage growth.

The data for this analysis come from the 2001 panel of the Survey of Income and Program Participation. This study follows prior ASPE-funded work (Schochet and Rangarajan 2004) and defines low-wage workers as workers ages 16 to 64 whose hourly wage rate is such that even if they worked full-time, full-year their annual earnings would fall below the poverty line for a family of four. This wage rate is $8.63 in 2001, equivalent to $10.50 in 2008. Our analysis identifies low-wage workers in January 2001 and analyzes their progression to higher paying jobs between 2001 and 2003.

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