Luke Shaefer's article, "How should we define “low-wage” work? An analysis using the Current Population Survey," was published in the Monthly Labor Review, the flagship journal of the Bureau of Labor Statistics, in October 2016.
Introduction
Low-wage labor is a central topic in policy, scholarly, and popular discussions concerning the economic well-being of low-income Americans. Prominent U.S. social welfare programs, such as the Temporary Assistance for Needy Families (TANF) program (popularly termed “welfare”) and the Earned Income Tax Credit program, are designed to facilitate and incentivize labor force participation among the economically disadvantaged, linking antipoverty policy to the low-wage labor market. Municipalities such as Seattle and Chicago are experimenting with higher minimum wages in an effort to promote the well-being of low-wage workers. Low-wage labor has also moved to the forefront of public attention as a result of the 2014 fast-food worker movement, which sought to improve wages and working conditions for food service workers. Although the debates and developments surrounding low-wage work highlight the importance of understanding its scope and identifying the characteristics of, and the economic conditions experienced by, low-wage workers, no consensus exists regarding what constitutes low-wage work. How should low-wage work be defined? What is the incidence of low-wage work under different definitions, and do different definitions capture distinct pools of workers?
In this article, we examine three different hourly wage cutoffs for defining low-wage work. These cutoffs are based on what it would take a full-time worker to earn an income lifting his or her family above the federal poverty threshold for (1) a family of two; (2) a family of three; and (3) a family of three, with the cutoff set at 125 percent of the poverty threshold. We first estimate the proportion of workers, among the hourly workforce, considered low-wage workers by each definition, both cross-sectionally for the year 2013 and over time for the period 1990–2013. Next, to understand changes in the composition of the population of low-wage workers under different definitions, we use the wage cutoffs to “bracket” discrete groups of workers in 2013 and to describe and compare their characteristics. Overall, we find that raising the wage threshold increases the population of individuals considered low-wage workers, but does not create markedly different trends over time. In addition, altering the definition adds qualitatively different workers to the population. Workers in the discrete wage groups differ in terms of demographic characteristics, human capital factors (e.g., education), health insurance coverage, economic hardship, and use of public economic supports.