Low-Wage Workers in the United States: Status and Prospects

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.

Abstract

This testimony before the U.S. House of Representatives Committee on Ways and Means Subcommittee on Income Security and Family Support describes the size and characteristics of the low-wage workforce and the jobs low-wage workers hold, the prospects for wage growth and upward mobility, and policies and programs that help support low-wage workers and their families.

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Testimony

Mr. Chairman, Mr. Weller, and distinguished members of the subcommittee, thank you for inviting me here to discuss the status and prospects of low-wage workers in the United States. The views I express are mine alone and should not be attributed to the Urban Institute, its trustees, or its funders. I will begin by describing the size and characteristics of the low-wage workforce and the jobs low-wage workers hold. Then, I will discuss the prospects for wage growth and upward mobility. Finally, I will say a few words about the policies and programs that help support low-wage workers and their families.

There is no official definition or consensus on how little a worker must earn to be considered low-wage or how much time he or she must put in on the job to be considered a worker. As such, you will find a number of different definitions of “low-wage worker” in the literature. For example, some researchers set the low-wage line relative to the federal minimum wage—Acs and Nichols (2007) use 150 percent of the federal minimum wage as their cutoff. Others compute the low-wage line in terms of how much it would take to keep a family of four out of poverty if a worker worked full time, year round (Schochet and Rangarajan 2004). Still others define low-wage workers as anyone in the bottom 20 percent of the wage distribution (CBO 2006); of course, this approach guarantees that exactly 20 percent of all workers are low-wage workers. And studies that focus on a wider swath of the population (say, everyone over age 16) find more low-wage workers than studies that focus on narrower subgroups (say workers age 18 to 61).

Despite these differences in how the low-wage line is defined and who is included in any particular analysis, the findings across studies are remarkably consistent. In today’s dollars, the low-wage line is about $10 an hour, and about a quarter of workers are low-wage workers.

Low-wage jobs are not necessarily bad things. Low-wage jobs serve as entry-level jobs for new workers and those returning to the labor market after long absences—the first step on a job ladder or a stepping stone to better, higher paying jobs. They provide earnings opportunities for secondary and tertiary workers in families with higher-wage primary workers, supplementing family incomes. Indeed, about half of all low-wage workers live in families with incomes over twice the federal poverty line (Acs and Nichols 2007). In other words, their family incomes are above $42,000 a year, most likely due to the earnings of higher-wage primary workers in the family. That’s the “half full” interpretation; on the flip side, half of all low-wage workers—more than one in ten workers—live in low-income families.

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

The views expressed are those of the author and should not be attributed to the Urban Institute, its trustees, or its funders.

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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