The voices of Urban Institute's researchers and staff
July 23, 2018

Six ways the changing nature of work challenges the safety net

The debate over work requirements in social safety net programs has focused on whether program beneficiaries should be required to work as a condition of participation. The Council of Economic Advisers recently called for an expansion of work requirements in noncash assistance programs. But this discussion has glossed over the reality for many low-income people that work alone does not always lead to economic security and keep poverty at bay. 

Changes in the nature of work, as we explore in our new brief, mean that the broad social safety net—a combination of employer-sponsored and public benefits—no longer functions for many workers, particularly low-wage workers. From the post–World War II period to the 1970s, workers without a college degree could depend on their wages and benefits from employers to make a good living. Now, that is rarely the case. 

These changes, borne out of long-term economic and labor market trends, also mean more workers need the social safety net combined with their wages to provide for themselves and their families. Here are six ways the nature of work is changing:  

1. Wages and earnings have remained flat, particularly for less educated, low-wage workers.  

Data from 1985 to 2017 indicate that hourly wage growth for workers at the middle and bottom of the wage distribution has been stagnant. For workers at the bottom, or below the 20th percentile of the distribution, wage growth has been essentially flat for more than 30 years.  

Comparing earnings for workers with different levels of educational attainment, we find that wage growth for workers who have completed a four-year college degree outpaces wage growth for those who have completed some college, have a high school diploma, or have not finished high school.

2. Access to employer-sponsored benefits is declining.

Fewer private-sector workers are getting such benefits as health insurance or retirement plans through their employers than in previous decades. On average, high-wage workers are more likely to have access to these benefits than low-wage workers because low-wage workers are more likely to be employed by companies that don’t offer these benefits, or these workers are ineligible because of short tenure or part-time hours.

Across several benefits—health insurance, retirement benefits, paid sick leave, and paid vacation—workers in the bottom 25 percent of the wage distribution have lower access than workers in the top 25 percent.

3. A more “fissured” workplace means fewer safeguards for workers.

Contracting or outsourcing has become common practice for many US companies looking to contain costs. Large companies often contract out core functions such as information technology, accounting, and janitorial or facilities services, leading to more “fissured workplaces.”

Some workers are classified as “independent contractors” and are no longer company employees and therefore might not enjoy the same benefits or health, wage, and safety protections afforded to employees. In other cases, subcontracted firms are in highly competitive, low-profit-margin environments that lead them to not provide employee benefits or to bend or break laws meant to protect employees.

4. Many low-wage jobs involve variable or nonstandard work hours.  

Although flexible hours can give workers more control over their schedule, this is true more for professional, salaried workers than for workers earning an hourly wage. Data are limited on how widespread variable scheduling (work hours that change from week to week with limited notice) is, but some estimates show that 10 percent of full-time workers have an irregular work schedule or on-call shifts. The share is double for part-time workers. About one-third of early-career workers are given a week or less notice of their schedule by employers.

Unpredictable schedules and no guarantee of work hours make it difficult for low-income families to depend on stable earnings and test their ability to maintain work-life balance. Variable scheduling could also make it difficult for workers receiving benefits from programs where work requirements might be introduced or intensified to meet the required number of work hours each month.

5. Low-wage occupations are on the rise.

While low-wage workers earn less, have less predictable schedules, and have less access to benefits than high-wage workers, occupations that rely on low-wage workers are predicted to grow significantly over the next decade. Among the top 15 occupations expected to add the most jobs, 10 pay annual wages of less than $37,690, the 2017 median annual wage. The fastest-growing occupation—personal care aide—has a median annual wage of $23,100.

6. Labor force participation is declining, especially for men ages 16 to 24.

The rate at which both men and women are either working or actively searching for work has been steadily declining since the 1990s, although the rate for men ages 16 to 24 has seen a sharper decline.

The reasons for people disconnecting from the workforce are complex and multifaceted, but evidence suggests that higher rates of disability or health issues might be associated with reduced labor force participation among men in their prime working years. One study found that half of working-age men not in the labor force have a serious health condition that is a barrier to work.

Policymakers and employers need to address these barriers while acknowledging that for some, work that provides economic security might not be possible.

Strengthening safety net programs to help families meet these challenges

The ways in which the nature of work, particularly low-wage work, is fundamentally changing hold major implications for the social safety net and call for alternative models by which low-income working families can meet their basic needs and access benefits outside their employers.

Federal assistance programs, such as the Supplemental Nutrition Assistance Program (SNAP), housing assistance programs, child care subsidies, and Medicaid, provide vital supports to low-wage workers both when they have jobs and during periods of unemployment. Medicaid expansion under the Affordable Care Act, for example, contributed to a substantial decline in people without health insurance, particularly those in low-wage occupations.

But funding in some programs is insufficient to match the need. Only one in five eligible renter households accesses housing assistance, and the maximum SNAP benefit falls short of low-income meal costs in 99 percent of US counties. Strengthening these programs could help families in low-wage jobs meet their basic needs.

Other reforms, such as portable benefits, a prorated unemployment insurance program for low-wage and part-time workers, and an expansion of the earned income tax credit  to a greater number of workers without dependents, could improve the safety net for those who need it most.

Photo by Alvarez/Getty Images.

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