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.

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

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?

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

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

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

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

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

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

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

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