CPR Conference Looks at Low-Wage Labor

By Tory Brykalski and Loren Michael Mortimer - On October 16, 2015 the UC Davis Center for Poverty Research hosted a conference entitled "Employment, Earnings and Inequality: Realities and Opportunities in Low-Wage Labor Markets." Presenters from across the U.S. convened to address questions related to low-wage labor markets, covering topics that included wage trends and shifts in occupations, policies that enhance wages, immigration, mobility, stigma and identity among low-skilled workers.

Jacqueline Hagan, Robert G. Parr Distinguished Term Professor at the University of North Carolina-Chapel Hill, presented her research on the human capital among Mexican migrants. She explained that typical metrics of the value of a worker’s particular skills—such as wages—do not adequately measure the full value of a worker’s human capital. “Skills must be recognized and valorized to achieve mobility,” Hagan argued. While migrants in the American workforce—particularly males—can learn metalworking or automotive skills that translate into better paying jobs in their home country, critical interpersonal and linguistic skills learned on the job do not lend themselves to economic mobility. Hagan called for the US to develop new labor classification schemes that take these “harder to measure” skillsets into account and enable low-wage workers to increase their earning potential.

Optimism at a cost 

Steven Lopez, Associate Professor of Sociology at Ohio State University, discussed the effects of the Great Recession on the identity of American workers who faced downward economic mobility. Laid-off managers and middle-wage workers both struggled with a diminished sense of self-worth when forced to take on low-skill/low-income work, but expressed a sense of optimism that their condition would improve once the economy recovered. By contrast, the Great Recession had a calamitous impact on lower income workers. In addition to competing with more skilled workers for fewer available jobs, they also faced devastating economic hardship as a result of job loss. Lopez concluded that “these findings highlight one important way the impact of the Great Recession may have fallen most heavily on those already at the bottom.”

Helping, not hurting

With the cities of Sacramento and Davis both set to debate raising their respective minimum wages this year, Ken Jacobs’ presentation “Raising Labor Standards at the Local Level” was both timely and necessary. Chair of UC Berkeley’s Labor Center, Jacobs presented a series of findings from cities across California, including Los Angeles and San Francisco, that recently passed new minimum wage laws. In doing so, he challenged the claim, made often by economists, that higher wages hurt rather than help the economy.

  • Who benefits? In California, the worker most likely to benefit from a higher minimum wage is an adult Latin@—probably their household’s sole earner. While the actual impact of a higher wage on this worker’s quality of life depends on where they live, evidence suggests that higher wages translate into higher household spending, meaning food, healthcare, and education.
  • Worker performance. According to Jacobs, a worker paid a fair wage is more likely to strive to perform well. Higher wages also appear to decrease employee turnover. Firms that raise pay therefore stand to benefit from a happier, more experienced workforce.
  • Operating costs. A higher minimum wage increases operating costs by less than 1 percent, with some variation across industries and locations. Much of this increase can be absorbed in the decreased employee turnover.
  • Unemployment. Despite frequent claims to the contrary, the data shows little to no changes in employment, even across different regions.
  • Prices. A recent study in San Jose found that a 10 percent increase in wages will cause approximately a 0.6 percent increase in prices. But while higher prices may impact demand, higher wages also enable workers to spend more money locally.
  • Public spending. California spends approximately $3.6 billion each year on public assistance for working families—money that could be spent elsewhere if those families earned higher wages.

Questions remain regarding the impact of minimum wage laws on healthcare, education, commercial rents, and enforcement institutions; the impact of job satisfaction and higher quality of life on the economy as a whole; and what to do, perhaps in terms of program benefits, if and when higher wages do begin to have a negative impact on the economy. While national movements like Raise the Wage and Fight for 15 have had a profound impact on “people’s sense of what is needed and what is possible,” social scientists can make significant contributions to the conversation—particularly, as Jacobs proved, with the extensive social and economic data now at their disposal.

Read the UC Davis Center for Poverty Research Special Report on the Minimum Wage, or learn more about Davis Raise the Wage and Sacramento Raise the Wage campaigns.

To discover more about the Employment, Earnings and Inequality conference, visit the Center for Poverty Research website.