Arnold Kling  

Not Necessarily Bad News

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Mark Thoma reports,


The US Has the Highest Share of Employees in Low Wage Work

Check out his chart, which shows that other OECD countries have a smaller share of employees doing low-wage work.

This seems like bad news for the U.S. However, that might not be the case, depending on the causal factor.

Suppose, for example, that one place has a higher minimum wage than another. The higher minimum wage will reduce the low-wage share of the work force, but that does not necessarily mean that low-skill workers are better off.

What you want to know is:

1. Where do policies best facilitate the acquisition of skills by workers?

2. For a given mix of skills, where do policies best facilitate employment and earnings?

It could be that the U.S. does poorly at both. However, (1) is difficult to answer (among other things, you have to separate out the effect of public policy from the effects of demographics and other factors that affect skill levels). And (2) historically has favored the U.S., because of we used to have less onerous burdens on employers (I am not sure this is still true, given what we spend on employer-provided health insurance).


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CATEGORIES: Labor Market



COMMENTS (5 to date)
Floccina writes:

It would be good to see the unemployment rates along side the low wage percentages.

Better to be working at a low wage that not working at all. That reminds me of the guy in a video who said "I do not want a job but I would take a career". Working at the lowest job at McDonald's has a career path. Burger flipper to Cashier to assistant manager to manager to regional manager to corporate to operations and possibly all the way to CEO.

That is one of the reason that I think a wage subsidy would be better than most other forms of welfare.

Kevin H writes:

I remember hearing somewhere that in Scandinavia that the burden of government is so high that people paint their own homes and fix their own houses because they have the non-work time to do it but not the money to hire someone else. The effect would be to price low-wage jobs like painter and handy-man out of the market.

Of course, I could be completely wrong.

Glen Smith writes:

Floccina,

That it is better to be working at a low wage than not at all is not necessarily true. I am assuming that by work you mean renting your work out as opposed to using your work to accomplish some personal goal like playing basketball or becoming the best x-box player you can be. If the opportunity costs of that work exceed what you are being paid than economically it would make no sense. This would be the argument for wage subsidies as opposed to other forms of welfare since other forms of welfare tend to increase costs of working while often reducing the value of that work. Of course, wage subsidies are just paying one person to dig a hole and then another to fill it in.

Brandon Berg writes:

The definition of "low wages" varies from country to country, because it's defined as less than two-thirds of the median. Knowing that, and that of the countries on that chart, only Norway and Australia come within 15% of the United States' median income on a PPP-adjusted basis, causes one to see those figures in a completely different light.

Any economic statistic on which the Czech republic is ostensibly dramatically outperforming the US is automatically suspect.

Also, would it be too indelicate to point out that racial demographics and immigration probably play a role here?

Eric Hosemann writes:

The traditional minimum wage story, the one I subscribe to, says that minimum wages favor skilled workers over unskilled workers. But the question I ask, in the context of Arnold's post, is: "skilled" compared to what? It could be the case that, given the right mixture of factors such as purchasing power, demand for labor, etc., that jobs paying minimum wage attract marginal workers from higher paying jobs-workers whose marginal productivity fell short of their wage.

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