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Giving Compass' Take:
• Michael A. Schultz presents research suggesting that impoverished low-wage workers are less likely to move to better wages than low-wage workers who are more financially stable.
• How can research on low-wage work and poverty explore the nuances of individuals' relationships with the resources available in their household?
• Read more about improving economic mobility.
Although eighty percent of low-wage workers are not in poverty, low-wage work and poverty are often conflated. I distinguish the two and investigate how household conditions affect workers’ mobility out of low-wage work. I argue households are central labor market organizations, parallel to firms, occupations, and unions in explaining labor market inequality. I define households as contested and resourced organizations. I analyze data from the Panel Study of Income Dynamics using discrete-time event history analysis. Low-wage workers in poverty in the previous year are less likely than other low-wage workers to move to better wages. I extend dynamic monopsony theory to account for household search frictions: First, workers with less resources have less to spend on job search and they may spend more resources making ends meet. Second, falling into poverty introduces new search frictions as settled patterns of household tasks are re-negotiated. My results confirm these hypotheses.
Read the full article about the economic mobility of low-wage workers by Michael A. Schultz at Equitable Growth.
Poverty research focuses on households in deep poverty, particularly unpartnered mothers, and the effectiveness of traditional welfare cash assistance (see Tach and Edin 2017; Desmond and Western 2018). Other studies highlight the labor market trajectories of minimum wage workers and workers with the least education (see Bernhardt et al. 2001; Andersson, Holzer, and Lane 2005; Boushey 2005). These research programs reinforce the notion of a strong link between low-wage work and poverty. Yet 80 percent of low-wage workers in the U.S. are not in poverty households in any given year. The link between low-wage work and household poverty is weaker than we imagine. Why are we surprised to learn that the majority of low-wage workers are not in poverty households?