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Russell Sage Foundation Case Studies of Job Quality in Advanced Economies

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Russell Sage Foundation Case Studies of Job Quality in Advanced Economies

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Low-Wage America

How Employers are Reshaping Opportunity in the Workplace

About 27.5 million Americans—nearly 24 percent of the labor force—earn less than $8.70 an hour, not enough to keep a family of four out of poverty, even working full-time year-round. Job ladders for these workers have been dismantled, limiting their ability to get ahead in today’s labor market. Low-Wage America is the most extensive study to date of how the choices employers make in response to economic globalization, industry deregulation, and advances in information technology affect the lives of tens of millions of workers at the bottom of the wage distribution. Based on data from hundreds of establishments in twenty-five industries—including manufacturing, telecommunications, hospitality, and health care—the case studies document how firms’ responses to economic restructuring often results in harsh working conditions, reduced benefits, and fewer opportunities for advancement. For instance, increased pressure for profits in newly consolidated hotel chains has led to cost-cutting strategies such as requiring maids to increase the number of rooms they clean by 50 percent. Technological changes in the organization of call centers—the ultimate “disposable workplace”—have led to monitoring of operators’ work performance, and eroded job ladders. Other chapters show how the temporary staffing industry has provided paths to better work for some, but to dead end jobs for many others; how new technology has reorganized work in the back offices of banks, raising skill requirements for workers; and how increased competition from abroad has forced U.S. manufacturers to cut costs by reducing wages and speeding production. Although employers’ responses to economic pressures have had a generally negative effect on frontline workers, some employers manage to resist this trend and still compete successfully. The benefits to workers of multi-employer training consortia and the continuing relevance of unions offer important clues about what public policy can do to support the job prospects of this vast, but largely overlooked segment of the American workforce. Low-Wage America challenges us to a national self-examination about the nature of low-wage work in this country and asks whether we are willing to tolerate the profound social and economic consequences entailed by these jobs.

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Low-Wage Work in Denmark

The Danish economy offers a dose of American labor market flexibility inside a European welfare state. The Danish government allows employers a relatively high level of freedom to dismiss workers, but also provides generous unemployment insurance. Widespread union coverage and an active system of collective bargaining help regulate working conditions in the absence of strong government regulation. Denmark’s rate of low-wage work—8.5 percent—is the lowest of the five countries under analysis. In Low-Wage Work in Denmark, a team of Danish researchers combines comprehensive national registry data with detailed case studies of five industries to explore why low-end jobs are so different in Denmark. Some jobs that are low-paying in the United States, including hotel maids and meat processors, though still demanding, are much more highly compensated in Denmark. And Danes, unlike American workers, do not stay in low-wage jobs for long. Many go on to higher paying jobs, while a significant minority ends up relying temporarily on income support and benefits sustained by one of the highest tax rates in the world.  Low-Wage Work in Denmark provides an insightful look at the particularities of the Danish labor market and the lessons it holds for both the United States and the rest of Europe.

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Low-Wage Work in France

In France, low wages have historically inspired tremendous political controversy. The social and political issues at stake center on integrating the working class into society and maintaining the stability of the republican regime. A variety of federal policies—including high minimum wages and strong employee protection—serve to ensure that the low-wage workforce stays relatively small. Low-Wage Work in France examines both the benefits and drawbacks of this politically inspired system of worker protection. France’s high minimum wage, which is indexed not only to inflation but also to the average increase in employee wages, plays a critical role in limiting the development of low-paid work. Social welfare benefits and a mandatory thirty-five hour work week also make life easier for low-wage workers. Strong employee protection is a central characteristic of the French model, but high levels of protection for employees may also be one of the causes of France’s chronically high rate of unemployment. The threat of long-term unemployment may, in turn, contribute to a persistent sense of insecurity among French workers. Low-Wage Work in France provides a lucid analysis of how a highly regulated labor market shapes the experiences of workers—for better and for worse.

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Low-Wage Work in Germany

In recent years, the German government has intentionally expanded the low-wage work sector in an effort to reduce exceptionally high levels of unemployment. As a result, the share of the German workforce employed in low-paying jobs now rivals that of the United States. Low Wage Work in Germany examines both the federal policies and changing economic conditions that have driven this increase in low-wage work. The new “mini-job” reflects the federal government’s attempt to make certain low-paying jobs attractive to both employers and employees. Employers pay a low flat rate for benefits, and employees, who work a limited number of hours per week, are exempt from social security and tax contributions. Other factors, including slow economic growth, a declining collective bargaining system, and the influx of foreign workers, also contribute to the growing incidence of low-wage work. Yet while both Germany and the U.S. have large shares of low-wage workers, German workers receive health insurance, four weeks of paid vacation, and generous old age support—benefits most low-wage workers in the U.S. can only dream of. The German experience offers an important opportunity to explore difficult trade-offs between unemployment and low-wage work.

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Low-Wage Work in the Netherlands

The Dutch economy has often been heralded for accomplishing solid employment growth within a generous welfare system. In recent years, the Netherlands has seen a rise in low-wage work and has maintained one of the lowest unemployment rates in the European Union. Low-Wage Work in the Netherlands narrows in on the causes and consequences of this new development. The authors find that the increase in low-wage work can be partly attributed to a steep rise in the number of part-time jobs and non-standard work contracts—46 percent of Dutch workers hold part-time jobs. The decline in full-time work has challenged historically powerful Dutch unions and has led to a slow but steady dismantling of many social insurance programs from 1979 onward. At the same time, there are hopeful lessons to be gleaned from the Dutch model: low-wage workers benefit from a well-developed system of income transfers, and many move on to higher paying jobs. Low-Wage Work in the Netherlands paints a nuanced picture of the Dutch economy by analyzing institutions that both support and challenge its low-wage workforce.

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Low-Wage Work in the United Kingdom

The United Kingdom's labor market policies place it in a kind of institutional middle ground between the United States and continental Europe. Low pay grew sharply between the late 1970s and the mid-1990s, in large part due to the decline of unions and collective bargaining and the removal of protections for the low paid. The changes instituted by Tony Blair's New Labour government since 1997, including the introduction of the National Minimum Wage, halted the growth in low pay but have not reversed it. Low-Wage Work in the United Kingdom explains why the current level of low-paying work remains one of the highest in Europe. The authors argue that the failure to deal with low pay reflects a policy approach which stressed reducing poverty, but also centers on the importance of moving people off benefits and into work, even at low wages. The U.K. government has introduced a version of the U.S. welfare to work policies and continues to stress the importance of a highly flexible and competitive labor market. A central policy theme has been that education and training can empower people to both enter work and to move into better paying jobs. The case study research reveals the endemic nature of low paid work and the difficulties workers face in escaping from the bottom end of the jobs ladder. However, compared to the United States, low paid workers in the United Kingdom do benefit from in-work social security benefits, targeted predominately at those with children, and entitlements to non-pay benefits such as annual leave, maternity and sick pay, and crucially, access to state-funded health care. Low-Wage Work in the United Kingdom skillfully illustrates the way that the interactions between government policies, labor market institutions, and the economy have ensured that low pay remains a persistent problem within the United Kingdom.

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Low-Wage Work in the Wealthy World

As global flows of goods, capital, information, and people accelerate competitive pressure on businesses throughout the industrialized world, firms have responded by reorganizing work in a variety of efforts to improve efficiency and cut costs. In the United States, where minimum wages are low, unions are weak, and immigrants are numerous, this has often lead to declining wages, increased job insecurity, and deteriorating working conditions for workers with little bargaining power in the lower tiers of the labor market. Low-Wage Work in the Wealthy World builds on an earlier Russell Sage Foundation study (Low-Wage America) to compare the plight of low-wage workers in the United States to five European countries—Denmark, France, Germany, the Netherlands, and the United Kingdom—where wage supports, worker protections, and social benefits have generally been stronger. By examining low-wage jobs in systematic case studies across five industries, this groundbreaking international study goes well beyond standard statistics to reveal national differences in the quality of low-wage work and the well being of low-wage workers. The United States has a high percentage of low-wage workers—nearly three times more than Denmark and twice more than France. Since the early 1990s, however, the United Kingdom, the Netherlands, and Germany have all seen substantial increases in low-wage jobs. While these jobs often entail much the same drudgery in Europe and the United States, quality of life for low-wage workers varies substantially across countries. The authors focus their analysis on the “inclusiveness” of each country’s industrial relations system, including national collective bargaining agreements and minimum-wage laws, and the generosity of social benefits such as health insurance, pensions, family leave, and paid vacation time—which together sustain a significantly higher quality of life for low-wage workers in some countries. Investigating conditions in retail sales, hospitals, food processing, hotels, and call centers, the book’s industry case studies shed new light on how national institutions influence the way employers organize work and shape the quality of low-wage jobs. A telling example: in the United States and several European nations, wages and working conditions of front-line workers in meat processing plants are deteriorating as large retailers put severe pressure on prices, and firms respond by employing low-wage immigrant labor. But in Denmark, where unions are strong, and, to a lesser extent, in France, where the statutory minimum wage is high, the low-wage path is blocked, and firms have opted instead to invest more heavily in automation to raise productivity, improve product quality, and sustain higher wages. However, as Low-Wage Work in the Wealthy World also shows, the European nations’ higher level of inclusiveness is increasingly at risk. “Exit options,” both formal and informal, have emerged to give employers ways around national wage supports and collectively bargained agreements. For some jobs, such as room cleaners in hotels, stronger labor relations systems in Europe have not had much impact on the quality of work. Low-Wage Work in the Wealthy World offers an analysis of low-wage work in Europe and the United States based on concrete, detailed, and systematic contrasts. Its revealing case studies not only provide a human context but also vividly remind us that the quality and incidence of low-wage work is more a matter of national choice than economic necessity and that government policies and business practices have inevitable consequences for the quality of workers’ lives.

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