Thursday, January 26, 2012

CEPR Report on Low Wage Work

CeprThe Center for Economic and Policy Research, a progressive economic thinktank, has issued a report on low wage work in rich countries. Low Wage Lessons compares the percentage of the workforce in low wage work, the strength of collective bargaining, and the level of social safety net, among other things, in developed countries. From the press release:

The experience of the United States stands primarily as a model for how not to succeed in reducing low-wage work. The United States has the lowest unionization rate among rich countries, a weak minimum wage, a stingy benefits system, and the highest rate of low-wage work among rich economies. About one-fourth of U.S. workers are in low-wage jobs, according to the standard international definition of low-wage work of earning less than two-thirds of the national median wage. (The median wage is the wage received by the worker exactly in the middle of the wage distribution.)

In the United States, the minimum wage and the Earned Income Tax Credit (EITC) are the two most important policies in place to fight low pay. But, the report argues that they have largely been ineffective.

"The minimum wage and the EITC could be excellent tools to fight low-wage work," [John] Schmitt[, the author of the report,] said, "but, they have been set far too low to make a difference."

The report also emphasizes that low pay is only the most obvious problem facing low-wage workers in the United States. Low-wage workers are also far less likely to have health insurance, paid sick days, paid family leave and other benefits that are common in higher-wage jobs.

And from the web summary of the report, 

Over the last two decades, high – and, in some countries, rising – rates of low-wage work have emerged as a major political concern. According to the Organization for Economic Cooperation and Development (OECD), in 2009, about one-fourth of U.S. workers were in low-wage jobs, defined as earning less than two-thirds of the national median hourly wage (see first figure below). About one-fifth of workers in the United Kingdom, Canada, Ireland, and Germany were receiving low wages by the same definition. In all but a handful of the rich OECD countries, more than 10 percent of the workforce was in a low-wage job.

If low-wage jobs act as a stepping stone to higher-paying work, then even a relatively high share of low-wage work may not be a serious social problem. If, however, as appears to be the case in much of the wealthy world, low-wage work is a persistent and recurring state for many workers, then low-wages may contribute to broader income and wealth inequality and constitute a threat to social cohesion. This report draws five lessons on low-wage work from the recent experiences of the United States and other rich economies in the OECD.

Lots of interesting data and analysis.

MM

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