Low-Wage America: How Employers Are Reshaping Opportunity in the Workplace

1. Low-Wage America:How Employers Are Reshaping Opportunity in the Workplace Eileen Appelbaum, Annette Bernhardt, and Richard Murnane Presented at: The Columbia University Seminar on Full Employment, Social Welfare and Equity, May 10, 2004; Institute of Industrial Relations, University of California-Berkeley, March 8, 2004 and University of California, Los Angeles, March 9, 2004; the Center for the Study of Inequality, Cornell University, November 14, 2003.

2. Backdrop • Economic pressures on employers • Globalization of capital markets and production • Advances in IT • Changes in financial markets • Institutional changes • Deregulation of industries • Decline in unions • Decline in minimum wage

3. Questions • How have firms responded to increased economic pressures and institutional changes? • How have front-line workers been affected as a result? • in terms of wages & benefits, skill requirements, opportunities for advancement, etc. • Is there variation in firms’ responses, and if so, what explains it?

4. 12 case studies • Spanning 25 industries that employ large numbers of workers without college degrees • In-depth research on 464 establishments • Interviewed 1,700 workers and managers, and surveyed more than 10,000 • “Controlled” research designs that compared firms in similar industries and facing similar competitive pressures, in order to isolate reasons for variation

5. Dominant competitive responses • Firms that focused on labor costs • Keep the same workers, but freeze wages, cut benefits, and increase workloads • Replace workers with temps, subcontract/outsource, or consolidate and relocate jobs to lower-wage areas • Firms that focused on technology • Automate routine tasks • And then either deskill remaining jobs, or shift them to higher skill workers

6. Alternative competitive responses • Use work reorganization to increase productivity and reduce turnover • Emphasize innovation and quality in products or services • Train entry-level workers for new technology • Link entry-level jobs to career ladders • Use temps to bring “marginal” workers into the fold

7. Unions • In some sectors unions still determine the quality of front-line jobs • Have prevented squeezing of labor costs, increased work loads, and mediated the reorganization of work • Strongest examples in service industries: hotels, health care, and telecommunications • Effect is greatest where union density is strong – especially in cities and high-end markets • Usually stems from innovative organizing of entry-level, immigrant workers

8. Regional labor market Institutions • Provide individual firms with resources they can’t get on their own • Plant modernization, technology upgrading • Pooled training & healthcare funds and joint classes at community colleges • Recruitment of new workforce and placement via hiring halls • Benchmarking and sharing of best practices • Allows firms to pursue alternative competitive strategies

9. Regulation • Declining real value of the minimum wage over last 30 years has effectively been a deregulation of the wage-setting process • Direct effects on front-line workers • Indirect effects: falling wage floor creates incentives for subcontracting • Industry deregulation in banking, telecomm, health care and others • Has allowed consolidation and relocation of front-line jobs • Often plays role in de-unionization of industry

10. Tight labor markets • Late 90s boom and low unemployment had positive effects on wages at the bottom of the distribution • But would be mistake to conclude that good things can happen only in tight labor markets • A high-productivity/high-wage model can work in normal times as well

11. Policy • Raise the minimum wage • Build regional labor market institutions • Public investments in plant and technology upgrading • Sectoral training systems • Reform U.S. labor law