California has a serious low-wage jobs problem, and it’s only gotten worse over the past 15 years.
In a new analysis my colleagues and I found that fully a third of our state’s workers earned low wages in 2014 – less than $13.63 an hour. That’s about 4.8 million workers, the large majority of them adults and many of them working full-time and supporting families. Yet their median earnings are only $15,300 a year; only a quarter have health insurance or pensions from their employer; and many are at risk of wage theft.
The result is a profound lack of economic security across the state, especially in immigrant communities and communities of color.
What makes these statistics especially troubling is that California’s low-wage workers are older and more educated than they were 35 years ago. Only 5 percent are teenagers, down from 16 percent in 1979, and 48 percent have some college experience or more, up from 39 percent in 1979. Because they’re more skilled, experienced and educated, we’d expect them to be better paid. But even as worker productivity in the U.S. has increased over the last four decades, the earnings of low-wage workers, after adjusting for inflation, have declined in our state and across the country.
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California is not going to be able to educate itself out of the low-wage jobs problem because the link between more education and higher pay is becoming more tenuous. Wages for college graduates have declined by 6.5 percent in real terms since 2000. And official projections show that 7 out of the top 10 growth jobs over the next decade will be low-wage occupations.
As a country we are beginning to acknowledge our inequality crisis, with growing and legitimate concern about the share of income – and political power – going to the top 1 percent. But the flip side of the story is the millions of low-wage jobs that trap workers and their families in never-ending cycles of economic insecurity.
Every part of our state’s economy is affected, ranging from restaurants and retail to the critical caregiving sector, where home care and child care workers who do some of the most important jobs in our society can barely support their own loved ones.
The inequality debate often focuses on globalization and new technology, but we know that the decline of unions and the falling real value of the minimum wage have also played critical roles. And we’re just beginning to understand the effects of financialization and how Wall Street’s incessant demand for short-term profits leads companies to stop making long-term investments in their workers.
While many of these causes are complex and will take years to address, there is low-hanging fruit in terms of policy solutions. Raising and enforcing the minimum wage sits at the top of that list. A robust state minimum wage, combined with higher wage rates in expensive cities, can begin California’s pivot off the inequality path and change a job and pay structure that is hollowing out our middle class.
Staying on our current path toward greater inequality is not sustainable. The cost to low-wage workers and their families includes the immediate strain of constantly having to choose whether to pay for food, housing or electricity, as well as the longer-term effects of poorer health outcomes, shorter life expectancies and lower educational attainment for their children.
And when jobs don’t pay enough, low-wage workers and their families are often forced to turn to public assistance to make ends meet – we estimate costing about $14.3 billion a year in California in state and federal programs. Programs such as the Earned Income Tax Credit, Medicaid and food stamps provide vital support to fill the gap left by employers who pay low wages.
It’s been six years since the end of the Great Recession, and California has shown solid gains in terms of employment growth and fiscal stability. It’s time to confront the Achilles heel of low-wage jobs and the short-sighted business models that create them.
Annette Bernhardt is a senior researcher at the UC Berkeley Center for Labor Research and Education, as well as a visiting professor in Berkeley’s sociology department. The UC Berkeley Center for Labor Research and Education’s new chartbook on low-wage work in California can be found at laborcenter.berkeley.edu/lowwageca.