The economy is growing and leaving low-wage workers behind

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Americans are expected to spend more than ever this holiday season, and it’s not hard to understand why. Continuing the longest job expansion in history, the labor market beat expectations in November as it added 266,000 jobs. The associated real wage growth over the last few years is the first many workers have seen in decades.

Yet among workers picking up second shifts or working multiple jobs this holiday season—the cashiers, stock clerks, warehouse workers, and delivery people—the rosy economic headlines might be hard to believe. Our recent report found that 44 percent of American workers, a whopping 53 million people, earn low wages. These workers’ median hourly wage is $10.22, and they earn annual pay of just $17,950.

The sheer number of low-wage workers is hard to reconcile with top-line economic statistics. The declining U.S. unemployment rate, which hit 3.6 percent in October, should augur prosperity for the nation’s workers. Certainly the president is banking his reelection campaign on workers feeling the net job gains and wage growth.

The gains and growth are real in the aggregate, but they mask the longer run changes under the surface that are splitting the labor market and trapping low-wage workers; their opportunity for advancement through job changes is limited. We find low-wage workers are the most likely to remain stuck in their wage bracket when they switch occupations. But even workers in the middle class are more likely to move down the occupational ladder than up.

Low-wage work is often precarious, marked by unpredictable schedules, reduced benefits, and unsteady employment. Growing industry concentration and weakened unions erode workers’ capacity to bargain for higher wages or redress labor disputes.

Technological advancement, by way of big data and artificial intelligence, has made it easier for companies to closely monitor workers’ productivity and to break jobs into tasks that can more easily be contracted away. As a result, contract work now encompasses a third of the workforce and excludes many from benefits, training, and a career ladder that firms typically offer full-time employees.

Our institutions have not responded with the urgency required by these challenges. Federal investment in training programs is meager. Other developed countries spend four times more than the United States. Funding for workforce development has been slashed to a fifth of what we spent in the ’70s (from $24 billion in the ’70s to $5 billion in 2017). Lack of investment leaves our current education and reskilling infrastructure available to too few, benefiting those already successful at navigating labor markets.

Upgrading the prospects of low-wage workers requires more than a hot business cycle and an uptick in wages. Solutions will require a community-wide and systems-based approach. Leaders at the local level can link their economic development and workforce strategies. Reskilling organizations can lean on historical pathways of upward job-to-job transitions to tailor programs and meet the needs of the most vulnerable populations. As an example, we find that financial clerks and office machine repairers, two occupations in decline, offer a likely avenue to computer system administration, a growing and high-paying job. Companies can use similar in-house data to target and improve reskilling programs that can lead to promising careers. We also need a new social scaffolding to help workers in a time of rapid displacement.

Economists note the positive spillovers of having a skilled, upwardly mobile workforce to justify the role of public policy. But perhaps the holiday season can serve as a reminder that the reason we want a rising GDP is to increase opportunities that would benefit all. The growing economy should encourage us to act rather than shirk responsibility. Labor market policies are more effective increasing wages and employment when the economy is doing well. And the next economic downturn is likely to affect low-wage workers with increased severity. Now is the time to boldly address workers’ mobility and resilience.

This article was originally published on Brookings.

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Ken Zapiniski | Director of Research and Public Policy |
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