David Cooper is an economic analyst at the Economic Policy Institute. He conducts national and state-level research on a variety of issues, including the minimum wage, employment and unemployment, poverty, and wage and income trends.
This is true both because work provides a source of income and because, when jobs are plentiful, workers’ bargaining power is strengthened—making it easier for them to find higher-paying jobs or to negotiate wage increases at their current jobs. The potential to reduce poverty through work depends on the availability of jobs with adequate hours and decent wages.
Over the past 30 years, large shares of U.S. workers have had jobs that have paid wages so low that, even with full-time, year-round employment, their earnings would still fall below federal poverty guideline for their family size. Figure A, below, shows the share of workers overall, and the shares of men and women workers, who have been paid poverty-level wages since 1986—the first year for which Census microdata allow for this calculation.
A poverty-level wage is an hourly wage that would leave a full-time, full-year worker below the federal poverty guideline for their family size if they are the sole earner in the family. In 1986, 17.3 percent of workers overall (more than one in six U.S. workers) were paid poverty wages, including nearly one in four (23.2 percent of) women workers. By 2017, the share of all workers earning poverty wages had fallen to 11.4 percent. This is a significant decline from the 1995 peak of 17.6 percent, yet it still means that more than one in nine workers are being paid too little to escape poverty for their family size.
Since 1986, the largest declines in the share of workers earning poverty wages have occurred in periods when the labor market has been relatively tight, with low unemployment and jobs available for those that can work—such as from 1998 to 2001, and, more recently, from 2015 to 2017. From 2015 to 2017, the U.S. also had uncharacteristically low inflation, which made it easier for even tepid nominal wage growth to result in higher inflation-adjusted wages and thus fewer workers earning poverty wages.
Much of the overall decline has also been driven by a decrease in the share of women earning poverty wages. As women workers have grown as a share of the workforce, the relatively large improvement in their poverty-wage rate has had a growing impact on the overall poverty-wage rate. Indeed, the share of men earning poverty wages has been relatively flat. As recently as 2014, the share of men earning poverty wages was as high as it was back in 1986.
Any agenda to fight poverty should include labor market policies targeting each of the three factors affecting families’ incomes: jobs, hours, and wages. Higher minimum wages would boost hourly pay, especially for workers in low-income families; fair workweek policies would help to increase and stabilize workers’ hours; and monetary policy that prioritizes full employment, combined with a program of public job creation that targets areas of persistent high unemployment, would make jobs available to many more people.
This article was originally published on the website of the Economic Policy Institute . U nder federal law, employers of tipped workers are only required to pay their tipped staff a base wage of $2.13 per hour—an amount that has not been raised since 1991—provided that the sum of an employee’s weekly tips plus their base wage equates to an hourly rate of at least the minimum wage. Consequently, tipped work is overwhelmingly low-paying, even after accounting for tips. In 2013, the median hourly wage for tipped workers, including their income from tips, was $10.22 per hour, compared with a median hourly wage of $16.48 for workers overall. Low-paying tipped work disproportionately harms women: as the figure below shows, 67 percent of tipped workers are women, yet they still make less than their male counterparts—$10.07 for women at the median versus $10.63 for men. (These data include tips.) Economic Policy Institute CLICK HERE TO VIEW LARGER IMAGE. This loophole for tipped employers is...