A news article by Trevor Dobson and Michelle Unterbrink
On October 5th, 2007, Nobel laureate Dr. Robert Solow presented preliminary findings from his recent research on low wage work in the United States and parts of Europe as part of the Jefferson Society’s Fall Speaker Series. Dr. Solow’s research seeks to explain the differences in wage equity in industrialized, wealthy countries. Dr. Solow’s research draws on data from six countries, collected by the Russel Sage Foundation. The countries chosen were Denmark, France, Germany, the United Kingdom, the Netherlands, and the United States. For the purposes of the study, low-wage workers were defined as people who earn less than 2/3 of the median wage for their country. Solow emphasized that this measure of low-wage work is necessarily a relative measure. American economists generally measure wage levels in absolute terms, usually by comparing household income to a federally mandated poverty line.
Solow noted the high incidence of low-wage work in the United States, and the variation in treatment low-wage workers face. The study compared five jobs present in each of the countries: hotel cleaning staff, nurses’ assistant and hospital cleaning staff, supermarket and retail clerks, workers in food processing, and call-center operators. Solow described several major observations from the study.
Solow’s first observation conflicted with the traditional economic view that workers’ low wages reflect low individual productivity, which is caused by a lack of education and job-specific training. Solow found that unproductivity in many low wage jobs reflects the unskilled nature of the job itself, rather than the uneducated nature of the laborer. This suggests that the conventional solution to poverty, increased funding for education and training of workers, may not be effective, given that certain tasks like bed-making and janitorial work aren’t performed more efficiently by educated workers than by uneducated workers. Solow suggested that changes to institution and labor technology would be more efficient than educating low-wage, low-skill workers. He also noted that a certain amount of unskilled labor would always be necessary in any economy, and suggested that the best way of providing this labor would be for students to work while pursuing their educations.
Solow also noted that there is a great deal of variation in the amount of low-wage work. In the United States, about 25% of workers classified as low wage. The United Kingdom also had a large percentage of low-wage workers (22%), while countries like France (12.5%) and Denmark (8.5%) were noteably lower. Solow mentioned that increases in intensity of competition usually implied increases in low-wage work.
Solow’s third observation was that wage mobility varied among nations. In Denmark, nearly 100% of low-wage workers leave low-wage work within 5 years. 90% leave in France, 80% leave in Germany, and about 60% leave in the United States and United Kingdom. In Denmark, the average length of employment in low-wage work is 1.8 years, while in the United States it is 4.1 years.
Solow’s final observation was that types of education available to laborers affect the amount of low-wage work. France, the United Kingdom, and the United States have the highest levels of university education, but also have higher percentages of low-wage workers than the Netherlands, Germany, and Denmark, which have more students attending vocational schools and fewer attending universities.
UPDATE: A podcast of Dr. Solow’s lecture is available here, via the Jefferson Society.