Why Do Some Jobs Pay So Little?

(Photo: The Eyes Of New York)

A recent one-day strike by fast-food workers has called attention to the low wages in the industry. James Surowiecki offers one reason that the issue’s visibility has increased recently:

Still, the reason this has become a big political issue is not that the jobs have changed; it’s that the people doing the jobs have. Historically, low-wage work tended to be done either by the young or by women looking for part-time jobs to supplement family income. As the historian Bethany Moreton has shown, Walmart in its early days sought explicitly to hire underemployed married women. Fast-food workforces, meanwhile, were dominated by teen-agers. Now, though, plenty of family breadwinners are stuck in these jobs. That’s because, over the past three decades, the U.S. economy has done a poor job of creating good middle-class jobs; five of the six fastest-growing job categories today pay less than the median wage. That’s why, as a recent study by the economists John Schmitt and Janelle Jones has shown, low-wage workers are older and better educated than ever. More important, more of them are relying on their paychecks not for pin money or to pay for Friday-night dates but, rather, to support families. Forty years ago, there was no expectation that fast-food or discount-retail jobs would provide a living wage, because these were not jobs that, in the main, adult heads of household did. Today, low-wage workers provide forty-six per cent of their family’s income. It is that change which is driving the demand for higher pay.

Given that reality, Surowiecki writes, raising the minimum wage by a few bucks a hour won’t fix the problem. His prescription: more truly middle-class jobs and an expansion of the social safety net. “Fast-food jobs in Germany and the Netherlands,” he writes, “aren’t much better-paid than in the U.S., but a stronger safety net makes workers much better off.”


Barman

People are just not satisfied with a mcdonald job (which, among other benefits include two meals a day) while all they have on their CV is a useless liberal arts degree from a community college. Fair enough, for a population used to entitlements. But even with their low wage, people are too eager for the latest version of the iphone and samsung galaxy notes. I feel that anyone who can afford anything beyond basic biological necessity, is absolutely fine so far as wage goes and if he/she wants to earn more he/she should either get the appropriate skill or education or work harder, all instead of depending upon government mandates.

mtnme

Actually, I DON'T have a liberal arts degree, but I DO have two degrees. They weren't useless until wall street and their cronies crashed the economy. No doubt this was their plan all along. Get highly educated people, squeeze the jobs down to nothing and low paying at that. They'll be so desperate they'll take it. Then get faux news to spew a bunch of garbage about how all these folks are just lazy slugs, for which their fan base such as yourself will swallow it whole, hook, line and sinker.
And I don't have ANY of those toys of which you speak. Just trying to do the basics. Roof over head, food in 'fridge. No gas, the car died anyway. Can't afford to buy a new one. So biking and busing I go...
Stop re-spewing faux news word for word. How about you come up with some original thought? Or at the very least, some accurate ones.

Barman

I understand and appreciate your struggle. My description fits a vast majority of sympathy owners and if it doesn't fit you that's not an issue. I tried to point out the difference between people struggling and people trying to win sympathy and very often it's the later category whose voice is heard more frequently, it's the later category who get majority of government aids (through direct help or via senseless legislations). In any case, I feel that if a company lays off even 50% of its workforce, those 50% were the least competitive and hence most dispensable when things go tough. None of the corporations by themselves want to squeeze the jobs unless it's necessary because a reasonably wealthy, consumption happy population is the most essential part of any business. So your contention is fundamentally wrong. If you have a degree in whatever field, it's entirely your responsibility to make that useful, to stay ahead of your peers and develop your skills (which includes hard technical skills and soft skills to oil the right machines at right times) and to follow the rules of the game. If you think the game is unfair, rise to the top and change the game itself if you can. A lot of CEOs started as very ordinary employees and rose to the top when they finally had the authority to set the terms. Of course at that stage they faced newer constraints which they never thought existed, but that's beside the point here. In a nutshell, your struggle is entirely for your own sake. If you feel like you are a winner, good for you. If you feel like a loser, good luck and work harder. But please, don't be a loser and claim the rewards of a winner.

P. S. I never watched faux news and don't live in the US right now. However the socio cultural zeitgeist at my country seems pretty similar to what I am seeing in this forum, hence my opinion. Since apparently (according to you) certain aspects of my thought echoes with them doesn't mean that I am their fan.

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Clancy

Sure, a minimum wage hike won’t fix all the problems, but that’s no reason not to do it. It will help some people for sure, and it will provide a boost to the economy because the money is going to the people most likely to spend it (by taking it away from large corporations most likely to sit on a pile of cash)
Middle class job creation and strengthening the safety net would be great, but there’s no way you could even start talking about it in the obstructionist political environment we are in. A minimum wage hike seems unlikely, but there’s at least some chance of it happening.

Ryan

Increasing the minimum wage is a terrible economic policy. One of two things happens:
1) The McDonalds of the world keep prices the same, pay the higher wage and employ less people
or
2) The McDonalds of the world raise prices, pay the higher wage and employ the same amount of people.

McDonalds won't take the hit, either consumers or workers will. Raising the minimum wage is effectively a tax.

Clancy

That doesn’t make any sense economically. If the minimum wage is raised, it cuts into their profits. They Could respond to that by trying to increase profits by laying off workers or increasing prices, but if they could do that They Would Have Done It Already! Your scenarios imply that McD’s and others are leaving money on the table and that raising the minimum wage would just remind them they should grab it.
It could be the case that if you raised the MW too much, many restaurants would no longer be profitable at all and they might close, but looking at the history of the minimum wage, Fast food has clearly been profitable with a higher MW in the past, so there’s likely considerable room to raise wages before it becomes a problem.

Charlie

A safety net helps when people fall, not when they are just paid poorly. If low-wage workers are subsidized by the government you are not providing a safety net; you are providing a subsidy to the industries that employ low-wage workers. That's the worst of all worlds!
Any real solution to the problem has to come from empowering workers. The safety net really should be there, so that workers can tell their employer to shove it, not so the employer can pay less than a living wage and get away with it.
This problem doesn't go away, though, until we decide that we can't afford to lose kids during their early education. All of the research is pretty consistent in demonstrating that by the time we're discussing 'workers' the game is already up. We need to be spending WAY more time and resources figuring out how to keep ten-year-olds from failing. Then wage laws will become less important.

Szlachta

Most of this conversation is wrong. The solution to our problems isn't an OR equation it's an AND equation. We need a higher living wage for all workers. We know this works because working people spend nearly 100% of their income back into the economy.

Perhaps we don't truly understand what the social safety net is in Europe. Above all else it is a guarantee of health care. Our system is so incompatible with other rich countries that you cannot extract individual elements and compare.

Until the USA decouples health care from employment and guarantees it to all citizens, minimum wage discussions or policy changes will have little real effect.

Rod

Ever think the reason the US economy has done such a poor job of creating middle-class jobs is that government has been offering financial incentives to workers (minimum wage) and subsidies for employers (expansion of the social safety net) to encougage and sustain minimum wage jobs?

Pseudonym

No, I never thought that. It's clearly not the case in Europe, Australasia etc, so if it's true, there must be something deeply unusual about the USA.

James

The fact that some workers in fast food & similar jobs are no longer unskilled teenagers &c does not change the fact that this work could still be done by unskilled teenagers. So if you mandate paying more for such unskilled labor, 1) What does that do to the rest of the market; and 2) What do we do with the really unskilled teens who can't find fast-food jobs any more, because some adult is collecting a "living wage" for doing them?

Enter your name...

Answer: the teens go unemployed.

From a politician's perspective, though, what he's got is jobless teen non-voters vs voting adults whose lives haven't turned out as well as they dreamed and whose leisure activity (TV) reminds them everyday of the Hollywood standard of living and encourages them to feel deprived. The politician's job is to get re-elected. If that means addressing the low-income voters' economic dissatisfaction, then that's what he'll do.

Brian O

One of the things that needs to be done is to regulate the cost of fuel. Every time fuel goes up it gives owner/operators of other businesses an excuse to jack up their prices anywhere from 5 to 20%. It will not matter what the minimum wage is as long as prices continue to rise. I have been working for the same exact salary for the past 7 years. In that time, food costs have gone up at least 60% and in some cases a 100%. Pretty soon, the minimum wage will have to be what I make in a year.

Surowiecki is absolutely correct in saying that there must be more truly middle class jobs. However, today's federal education reform movement is driven exclusively by big business who wants to get more people focusing on skills necessary to do high-tech, math intensive jobs. They are doing this so they will have a wider pool to employ for those jobs in order to reduce the amount they pay for those workers. So, our government is really helping to eliminate the middle class jobs that already exist instead of creating more.

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Ryan

How do you regulate fuel cost? That sounds terrible. See Egypt.

What would be your advice about education? Don't get the math education that is in demand? Then do what? If math/technical job wages are going down, you can bet the wages of those with out it are also falling. Educational premium should exist where future innovation is bound to come from. The facts are science drives innovation, innovation drives wealth. Not a lot of Philosophy majors pioneering the next Fortune 500. Thems the breaks.

Follow the money...

Enter your name...

Maybe.

On the other hand, I worked for a corporate IT org whose top management (head of the department and the two people under him) all had degrees in psychology. Your college major is not your destiny.

Gary

Let's identify who tied this Gordian Knot. It's been layer after layer of short-sighted governmental policy designed to socially and fiscally engineer some desired outcome that has so distorted the basic economy that too many people are under-employed for the skills they have. Until Congress simplifies and reduces these inhibiting forces, no amount of tinkering with individual components will get the machine working properly at full speed. This isn't an argument for uninhibited laissez-faire. It is an argument for ceasing the constant efforts to give advantages to special groups of all sorts.

Brad

If you pay a living wage - and this means bare minimum to put a roof over your head, feed and clothe yourself, get basic health care, etc., not the ability to buy the latest Air Jordans and iPhones - then you do not need as large a safety net. That means lower taxes for everyone. Would you rather pay an extra $.25 for a hamburger or an extra $.50 in taxes for the required safety net?

Lower taxes + more money in the economy = a more resilient economy and more economic growth.

MikeC

Your argument doesn't fly. It leaves you open to the extreme example of paying no taxes and having no safety net with business free to abuse labor, monopolize markets, causing havoc, eliminating the middle-class, resulting in a society in which we have a tiny number of people with power and wealth, and most who have nothing, a chaotic society. Or as as its commonly known - Haiti.

You contribute to society what those who represent us in government deem is sufficient to offer the people a stable, healthy public with few needs. If that means an extra 50¢ or 75¢ for burgers so that we don't have overloaded emergency rooms, common outbreaks of septic diseases, an uneducated public/workforce, crumbling infrastructure, uncontrolled crime and corruption, no natural disaster relief, etc., then we have to weigh the financial costs against the resulting social ills.

Right now much of the world's poorest nations' leaders seem happy with much of that in their countries, we in the USA seem to be happy with a society that has some of that, and most of the G20 is happy with much less and more government controls.

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Nick

That is a problem I've had for a long time. I had some college education but not a degree. I was working low-paying jobs struggling to get by & trying to get back into school, but because of my low-income I couldn't afford classes & because of my parents' income I didn't qualify for any kind of aid. I was basically stuck in limbo working a crap job trying to make ends meet.

I was just recently accepted into a union job & my income is about to quadruple. Plus I'll have health/dental for the first time in over 8 years.

Clint

A Mcdonalds employee in Florida earns 3$ less an hour than an undocumented worker who you can hire out in front of home depot. (I have tested this myself). If a McDonald's employees were truly concerned about their wages, then they would all just switch to manual labor and make more money. To me, this indicates that a person who works at McDonalds past the age of say 18, either has some serious problems, has made some bad life choices, or doesn't want to put in the work that an illegal immigrant does.

I live in Florida (TONS of unskilled labor here). Somehow the millions of illegal immigrants here manage to survive without a "fair living" wage and a safety social net. Just sounds to me like a lot of "entitled" people are crying.

Kelly

Perhaps the food service employees, being citizens, don't want to break the laws that we, as citizens, live by. Perhaps they would rather not get into legal trouble with the IRS since they cannot just run back across the border when they attract attention. Illegal immigrants have already proven they have no problem breaking our laws.

Joe J

Except those jobs are perectly legal. Construction is legal. There are many low skill, but hard well paying jobs, that people just ignore.

Julien Couvreur

I agree that understanding why jobs are not getting created fast enough is the key. Parts are probably due to the bubble/bust (so understanding what makes those happen, such a credit expansion, is important), and other parts probably due to regulatory constraints and uncertainty (Obamacare is one example of many). It is not just a lack of creativity on the part of entrepreneurs or a supposed Keynesian "demand slump".

It is hard to see a stronger safety net as a solution, as Europe won't be able to sustain their safety net for long, despite the fact they most countries there don't have as high a military spending level as the US.
For instance, the French safety net provided an illusionary solution while the demographics supported the ponzi scheme, but conditions have been steadily deteriorating and the economic reality (no free lunch) is catching up. It worries me for my friends and relatives who still live there (they are stuck with the bill from earlier generations).

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John Smith

Is the title a serious question? I literally have to say every fast food order 3 times because the person taking the order is too dumb or illiterate to understand what is being said. At this point, a monkey randomly pushing keys would almost be as good at that job. Yet you wonder why they don't make more money?

ERLW

Maybe you don't speak clearly... I'm just saying, a conversation is a two-way street. If the employee says "pardon" once, that's probably on them; if they say it twice maybe you should work on your enunciation.

John Smith

Shouldn't we pay McDonalds workers $100 an hour. Because then they could live really well. I mean, a burger would cost $20, but it's not about business, it's about fairness to workers, right?

Pseudonym

If we paid McDonald's workers $100 an hour, all the economists would quit their tenured professorships and start working there because of rational choice. As a bonus, the kitchen would be run extremely efficiently and everyone would be incentivized to wash their hands. On the downside, you'd still have to give your order to them three times.

John Smith

I've been to the Netherlands and to Germany. The prices are almost double what they are here for the same basic fast food. But let's not worry about where the extra money really comes from when paying workers more. Liberals like to believe it's all magically created and free.

pawnman

So the fast food costs twice as much, and the workers are paid twice as much...meaning their marginal increase in income is basically nothing.

David Bley

If companies could, they would reduce their labor costs to zero in order to maximize profit for shareholders. It is simply supply and demand (and minimum wage) that makes them pay anything at all for labor.

mike

Patrons of these places need to get use to paying a little more for dinning out or fast food to help provide a living wage and some type of bennifits. if not eat at home . Most grocerie stores provide decent wages and bennifits...exsept for the big elephant in the room, wallmart,

Paul M.

Wait, so he is advocating for a taxation program to support a better safety net, as opposed to just requiring that employers pay higher wages, making the "improved safety net" unnecessary? Isn't that just saying "We know you are paying a completely unlivable wage, but we are going to let you do it as long as we can fund the programs that will, incompletely by the way, replace that absence of increased wages"?

Why is he suggesting jumping the fence, running around the house, and entering through the window when we have a key to the front door?

caleb b

Living wage: please define it first. Enough for one person to pay rent in a decent apartment, plus a car, insurance, health care, food, gas, and clothes (retail or thrift store prices)?

The concept of a living wage is too subjective for me. In Dallas, all that stuff could cost $30k/yr (easily). For 40hr/week, 52 weeks a year (I'm assuming a living wage shouldn't include 2 weeks paid vacation, but maybe I assume too much), that is $14.42/hr. Is that a living wage?

Or is it that a living wage should support a family of four?

Phil Persinger

Caleb--

Your question is a very good one-- because the answer "depends."

Try this link

http://livingwage.mit.edu

and see how she runs. If I'm doing the math correctly, the living wage for a single adult in Dallas comes to $19.3k; for 2 adults & 2 kids it's $40.4k. Your $30k annual wage will support two childless adults.

Your sense of the cost of living in Big D is not far off the mark...

caleb b

Maybe some people should understand that if you have no skills and no education, you will probably need to work (gasp!) MORE than 40 hrs/week. I've checked, it is not illegal to have TWO jobs, or three. FYI - "rich" people work more than 40 hrs/week all the time.

KO

Yes but are these 'rich' people (based on the income bracket that certain professions tend to occupy) actually contributing to society?' Where is that money going' is a good question to start with but 'where it should go is a better one'
http://www.youtube.com/watch?v=CKCvf8E7V1g

Mike MacDonald

Pardon me, but isn't this an economics blog? People are paid what they are worth - PERIOD. If people are underpaid they need to brush up on skills other than two opposable thumbs. If posters are unhappy with what fast-food workers are paid, let them open "Living wage burgers" and charge twenty dollars for a quarter pounder with cheese, and let us all know how it works out!

Tong

@Mike-that's very mean of you. I deserve to earn more at a McD job because I have a PhD in theatre in the Victorian era even though what I do at the counter can be done faster and in a more efficient way by a young teenager. When I went to college, I was never concerned about job prospect, I never thought of brushing up skill sets for other jobs, I never thought of saving because I knew that either a minimum wage bill will pass or the taxpayers will take care of my food stamp. I allowed myself to delve deep in victorian age romance (on which I could still lecture you for a few minutes if I could remember a few words from my thesis) and rest of the time I spent partying, travelling. Now you say that I don't deserve minimum wage? I don't care whether it's subsidised by the government, or passed to the consumers to bear or comes from the company's pocket. I need it, so I want it, so someone gotta pay for it. If you say otherwise, you are a mean, insensitive jerk.

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samiam

Spot.On.Satire, my friend.