In Baltimore and across the country, attention has been drawn recently to a disturbing trend: the proliferation of low-wage jobs in the economy.
Last month, a federal commission on worker-management relations, chaired by former Labor Secretary John T. Dunlop, warned that the U.S. labor market had become "bifurcated," with an "upper tier of high-wage skilled workers and increasing 'underclass' of low-paid labor."
In Baltimore, the American Federation of State, County, and Municipal Employees (AFSCME) and Baltimoreans United in *T Leadership Development (BUILD) have formed an alliance to "organize the 'invisible' workers who clean Baltimore's hotels, offices, and schools" at minimum wages and without benefits.
BUILD has proposed a new "Social Compact," in which the city government would help pressure downtown hoteliers and office managers, many of whom have received public redevelopment subsidies, to pay a "living wage" to their employees.
How serious and widespread is the problem of low wages? Are we becoming an economy of low paid hamburger flippers, bellhops and waitresses? What are the causes of the problem, and is there anything public policy can do to alleviate it?
The national trend is unmistakable. A recent Census Bureau study showed that the number of year-round, full-time workers earning less than the poverty rate grew by 50 percent between 1979 and 1992. Almost one-fifth of all full-time workers now fall into this very-low-paid category. Controlling for inflation, average real hourly wages have declined 15 percent since 1973, and are now at levels reached in the mid-1960s.
Accounting for all workers and not just full-time, full-year employees -- and using a more realistic "low economy" threshold of $20,000 annual earnings instead of the poverty line to define low-wage employment -- it is clear that low-wage job-holders represent an alarming share of the work force in urban labor markets across the country.
In most major metropolitan areas, the low-wage component has grown since the 1970s. As Thomas J. Volgy, the former mayor of Tucson, Ariz., has written: "The crisis of low wages threatens to choke the future of most cities and destroy the quality of life in them."
Baltimore is very much part of the national trend. Between 1970 and 1990, low-wage employment accounted for almost half of the net job growth in the region, a trend that occurred even in prosperous, fast-growing employment centers such as Baltimore and Howard counties (which gained a combined 185,000 jobs).
In Baltimore City, only 20,400 net jobs were created between 1970 and 1990, and all of this net employment growth was in jobs paying either under $20,000 or over $40,000 annually (in 1990 constant dollars). It is this kind of labor market polarization, marked by the disappearance of middle-class, family-supporting jobs, that has spawned the BUILD-AFSCME campaign. The cliche, "the Two Baltimores," is alive and well in the city's labor market. We're creating many excellent jobs, numerous bad jobs, but not many in between.
Economists agree that most of the causes of these wage trends are national and international. Although its effects are often overstated, global economic integration has undoubtedly been important. It has increased the "supply" of low-wage labor available to American corporations and subjected a growing number of American companies to low-wage import competition -- all of which undercuts the wage levels and bargaining power of low- and moderate-skill workers in the United States.
As labor writer Harold Meyerson puts it: "The American economy's response to the globalization of markets has been to turn us into a nation of temps."
But trade remains a relatively small part of the U.S. economy, and most of our global commerce still involves countries with wage and skill levels similar to ours. Thus, most economists believe that the chief causes of the "crisis of low wages" are domestic. These include:
* Technological change. The introduction of sophisticated, computer-based technologies in the workplace gives a wage premium to skilled workers who can use them -- and places unskilled, low-wage workers at a strong disadvantage.
* Institutional factors. The "deunionization" of America, and the declining value of the minimum wage, have also been cited as prime culprits in eroding the wages of workers at the lower end of the wage distribution. Almost all studies demonstrate the importance of unions to the living standards of workers, and the unionized proportion of American workers has fallen from 27 percent to 14 percent since 1970. Meanwhile, the minimum wage -- an important bulwark for low-wage workers -- lost almost 40 percent of its real value between 1970 and 1990.
Local economic development policy, in Baltimore and elsewhere, also undoubtedly contributed to the crisis of low wages.
During the 1970s, for example, the administration of Mayor William Donald Schaefer made tourism a cornerstone of Baltimore's redevelopment strategy, an approach that has been jTC ratified by the current mayor, Kurt L. Schmoke.
Yet jobs in hotels, restaurants and retail trade -- the core sectors of the tourism industry -- all average less than $240 a week in earnings (approximately $12,480 a year, rarely including benefits). Cities need to find jobs wherever they can, but the deliberate nurturing of a low-wage sector of the economy seems a perverse way to raise living standards in the community -- ostensibly, the goal of local economic development.
There are, of course, no easy solutions to Baltimore's low-wage crisis, and the most important responses will require action in Washington. In the long term, wages can only rise if overall productivity grows. In the near-term, however, we can make trade policy more responsive to the impact of low-wage commerce; reform labor laws to enhance unionization; raise the minimum wage; and further expand the earned income tax credit. All of these measures would enhance the economic position of low-wage workers.
A national economic stimulus program, designed to promote full employment, would remove some of the slackness in urban labor markets and push wages upward. It is no accident that Boston, one of the few cities to achieve full employment during the 1980s, experienced a sharp reduction in the low-wage share of total jobs. Indeed, during the heyday of the "Massachusetts Miracle," McDonald's was offering starting wages of $7 an hour to attract workers in Boston.
In Baltimore, the BUILD-AFSCME campaign can help, especially if it succeeds in organizing workers and, perhaps more importantly, opening a debate on the responsibility of corporations to pay a living wage.
Critics of BUILD-AFSCME argue, incredibly, that nothing can be done: Baltimore's workers must accept low wages or face unemployment. Such a defeatist attitude, however, is more appropriate to a ruthless 19th-century capitalism than to a modern community that recognizes a healthy balance between workers' rights and management prerogatives.
Marc Levine is director of the Center for Economic Development at the University of Wisconsin-Milwaukee.