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Low-Wage Work in the Wealthy World
As global flows of goods, capital, information, and people accelerate competitive pressure on businesses throughout the industrialized world, firms have responded by reorganizing work in a variety of efforts to improve efficiency and cut costs. In the United States, where minimum wages are low, unions are weak, and immigrants are numerous, this has often lead to declining wages, increased job insecurity, and deteriorating working conditions for workers with little bargaining power in the lower tiers of the labor market. Low-Wage Work in the Wealthy World builds on an earlier Russell Sage Foundation study (Low-Wage America) to compare the plight of low-wage workers in the United States to five European countries―Denmark, France, Germany, the Netherlands, and the United Kingdom―where wage supports, worker protections, and social benefits have generally been stronger. By examining low-wage jobs in systematic case studies across five industries, this groundbreaking international study goes well beyond standard statistics to reveal national differences in the quality of low-wage work and the well being of low-wage workers. The United States has a high percentage of low-wage workers―nearly three times more than Denmark and twice more than France. Since the early 1990s, however, the United Kingdom, the Netherlands, and Germany have all seen substantial increases in low-wage jobs. While these jobs often entail much the same drudgery in Europe and the United States, quality of life for low-wage workers varies substantially across countries. The authors focus their analysis on the "inclusiveness" of each country's industrial relations system, including national collective bargaining agreements and minimum-wage laws, and the generosity of social benefits such as health insurance, pensions, family leave, and paid vacation time―which together sustain a significantly higher quality of life for low-wage workers in some countries. Investigating conditions in retail sales, hospitals, food processing, hotels, and call centers, the book's industry case studies shed new light on how national institutions influence the way employers organize work and shape the quality of low-wage jobs. A telling in the United States and several European nations, wages and working conditions of front-line workers in meat processing plants are deteriorating as large retailers put severe pressure on prices, and firms respond by employing low-wage immigrant labor. But in Denmark, where unions are strong, and, to a lesser extent, in France, where the statutory minimum wage is high, the low-wage path is blocked, and firms have opted instead to invest more heavily in automation to raise productivity, improve product quality, and sustain higher wages. However, as Low-Wage Work in the Wealthy World also shows, the European nations' higher level of inclusiveness is increasingly at risk. "Exit options," both formal and informal, have emerged to give employers ways around national wage supports and collectively bargained agreements. For some jobs, such as room cleaners in hotels, stronger labor relations systems in Europe have not had much impact on the quality of work. Low-Wage Work in the Wealthy World offers an analysis of low-wage work in Europe and the United States based on concrete, detailed, and systematic contrasts. Its revealing case studies not only provide a human context but also vividly remind us that the quality and incidence of low-wage work is more a matter of national choice than economic necessity and that government policies and business practices have inevitable consequences for the quality of workers' lives. A Volume in the Russell Sage Foundation Case Studies of Job Quality in Advanced Economies
505 pages, Hardcover
First published January 1, 2009
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November 23, 2011
Despite the density of its content and the somewhat confusing method of its presentation, the research findings reported Low-Wage Work in the Wealthy World by John Schmitt, Jerome Gautie, and their collaborators should be the starting point of any informed discussion of low-wage work in the United States and Western Europe. Specifically, the authors should be recognized for debunking two particularly hoary and wrong-headed claims about low-wage work in the age of neoliberal globalization: that increasing educational attainment is the royal road to raising workers’ earning power; and that the existence of a large-scale low-wage sector is inevitable in an era of intensified international competition. States have not been stripped of their power to effectively regulate their national labor markets and protect the needs and interests of their working classes. The extent of a country’s low wage sector is a result of conscious policy choices, not the inexorable workings of natural economic laws.
It is an article of faith among U.S. economists that in an era of rapid technological innovation, increasing the educational attainment (and therefore, presumably, the skills) of workers is the key to reducing the incidence of low-wage work. To be sure, in the U.S. there is a clear correlation between one’s level of educational attainment and one’s earning power. According to almost every measure, the income of U.S. workers increases the higher they go on the educational ladder, and vice versa. If this were all one knew about the relationship between educational attainment and income, one would be justified in advocating the expansion of educational opportunities as the focus of anti-poverty policy. However, as the authors demonstrate, such close correlation between educational attainment and earning power simply does not exist in other wealthy countries. As reported in Chapter 4, while the U.S. ranked rather highly on skill indicators as measured by schooling and educational attainment, it had the largest low-wage sector out of the six countries in the study. France ranked second-lowest in terms of years of schooling and tied for lowest in qualifications held above the secondary level, but has one of the smallest low-wage sectors among the advanced industrialized economies (and it has shrunk in recent years). Such cross-national comparisons show that there is “no evidence of a correlation between the size of the less-skilled labor force and the share of workers on low wages” using the authors’ definition of low-wage work, which they set at two-thirds of a country’s median hourly gross wage. (149)
This finding constitutes a crucial component of the authors’ larger argument, specifically their contention that the global trends that have reshaped national political economies over the last three decades do not necessarily result in the growth of a country’s low-wage sector. Policymakers in all of the six countries in the study have faced the same trends but have chosen to confront them in different ways. As the authors report at the beginning of the book, “national shares of low-wage work do not appear to be correlated with a country’s GDP per capita, GDP growth rate, hourly labor productivity, productivity growth rate, or a range of long-term demographic factors, including female employment rates.” (6) “Globalization” per se is also not related to an expansion of the low-wage sector. Indeed, the most “inclusive” country in the study – Denmark – is among the countries most exposed to the pressures of international competition but has managed to maintain many of its extensive social welfare provisions. The same is true of the other Scandinavian economies, whose labor market institutions are similarly inclusive and have very high rates of unionization and collective bargaining coverage. To be sure, these achievements have been partially eroded in recent years. But they have played a crucial role in helping the Scandinavian countries avoid the worst effects of the Great Recession while many of their counterparts throughout the wealthy world continue to suffer from high levels of unemployment and expanding inequality and poverty.
Such observations beg an important question: why do some countries have more inclusive labor market institutions than others? The biggest flaw of Low-Wage Work in Wealthy World is that it offers little insight regarding the historical and political developments that have driven these cross-national variations. They did not fall from the sky, but the authors tend to describe them as if they did. As such, the data presented here would acquire additional purchase by putting them into a dialogue with one or more of the major approaches to analyzing welfare state development as described by Daniel Béland in What is Social Policy? I would argue that the adoption of a power resources approach to understanding these cross-national variations in labor market institutions and their social and economic outcomes is most appropriate for this task. Such an analysis would likely show that the inclusiveness of a nation’s labor market institutions is closely correlated with the strength of its socialist/social democratic parties and labor movements. I don’t think it’s a coincidence that Denmark, the most inclusive country in the study, is also the country in which social democracy has won its biggest and most enduring political-ideological victories. Similarly, it is not surprising that the U.S., the only nation in the study without of a popular left or a formidable labor movement, is easily the least inclusive.
The data presented by the authors have clear political implications. If the size of the low wage sector in this country is to be reduced, the expansion of unionization and collective bargaining needs to be a major part of the policy program advanced by a renewed U.S. left. The emergence of the Occupy Wall Street protests and the repeal of SB5 in Ohio are a modest but encouraging start.
It is an article of faith among U.S. economists that in an era of rapid technological innovation, increasing the educational attainment (and therefore, presumably, the skills) of workers is the key to reducing the incidence of low-wage work. To be sure, in the U.S. there is a clear correlation between one’s level of educational attainment and one’s earning power. According to almost every measure, the income of U.S. workers increases the higher they go on the educational ladder, and vice versa. If this were all one knew about the relationship between educational attainment and income, one would be justified in advocating the expansion of educational opportunities as the focus of anti-poverty policy. However, as the authors demonstrate, such close correlation between educational attainment and earning power simply does not exist in other wealthy countries. As reported in Chapter 4, while the U.S. ranked rather highly on skill indicators as measured by schooling and educational attainment, it had the largest low-wage sector out of the six countries in the study. France ranked second-lowest in terms of years of schooling and tied for lowest in qualifications held above the secondary level, but has one of the smallest low-wage sectors among the advanced industrialized economies (and it has shrunk in recent years). Such cross-national comparisons show that there is “no evidence of a correlation between the size of the less-skilled labor force and the share of workers on low wages” using the authors’ definition of low-wage work, which they set at two-thirds of a country’s median hourly gross wage. (149)
This finding constitutes a crucial component of the authors’ larger argument, specifically their contention that the global trends that have reshaped national political economies over the last three decades do not necessarily result in the growth of a country’s low-wage sector. Policymakers in all of the six countries in the study have faced the same trends but have chosen to confront them in different ways. As the authors report at the beginning of the book, “national shares of low-wage work do not appear to be correlated with a country’s GDP per capita, GDP growth rate, hourly labor productivity, productivity growth rate, or a range of long-term demographic factors, including female employment rates.” (6) “Globalization” per se is also not related to an expansion of the low-wage sector. Indeed, the most “inclusive” country in the study – Denmark – is among the countries most exposed to the pressures of international competition but has managed to maintain many of its extensive social welfare provisions. The same is true of the other Scandinavian economies, whose labor market institutions are similarly inclusive and have very high rates of unionization and collective bargaining coverage. To be sure, these achievements have been partially eroded in recent years. But they have played a crucial role in helping the Scandinavian countries avoid the worst effects of the Great Recession while many of their counterparts throughout the wealthy world continue to suffer from high levels of unemployment and expanding inequality and poverty.
Such observations beg an important question: why do some countries have more inclusive labor market institutions than others? The biggest flaw of Low-Wage Work in Wealthy World is that it offers little insight regarding the historical and political developments that have driven these cross-national variations. They did not fall from the sky, but the authors tend to describe them as if they did. As such, the data presented here would acquire additional purchase by putting them into a dialogue with one or more of the major approaches to analyzing welfare state development as described by Daniel Béland in What is Social Policy? I would argue that the adoption of a power resources approach to understanding these cross-national variations in labor market institutions and their social and economic outcomes is most appropriate for this task. Such an analysis would likely show that the inclusiveness of a nation’s labor market institutions is closely correlated with the strength of its socialist/social democratic parties and labor movements. I don’t think it’s a coincidence that Denmark, the most inclusive country in the study, is also the country in which social democracy has won its biggest and most enduring political-ideological victories. Similarly, it is not surprising that the U.S., the only nation in the study without of a popular left or a formidable labor movement, is easily the least inclusive.
The data presented by the authors have clear political implications. If the size of the low wage sector in this country is to be reduced, the expansion of unionization and collective bargaining needs to be a major part of the policy program advanced by a renewed U.S. left. The emergence of the Occupy Wall Street protests and the repeal of SB5 in Ohio are a modest but encouraging start.
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