Declining job quality in the United States: Explanations and evidence

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WP-Declining Job Quality in the United States-Howell and Kalleberg

A revised version of this paper was uploaded on March 25, 2019.

Authors:

David R. Howell, The New School
Arne L. Kalleberg, University of North Carolina, Chapel Hill


Abstract:

This paper documents changes in American job quality since the late 1970s, surveys leading explanations, and reviews the recent evidence. At the heart of widespread concern over worsening job quality is the payment of low wages. We characterize the increase in the low-wage problem to epidemic proportions in the last forty years in three dimensions: stagnation and decline in real wage levels, sharply rising wage inequality, and the increasing incidence of low pay. We show that other key dimensions of job quality, such as nonwage benefits and working conditions, vary systematically with wage levels across four wage contours, from poverty-wage to good-wage jobs. We suggest that leading explanations for worsening wage quality can be organized into three broad views of how the labor market works. Wages in the competitive market model are set by supply and demand for skills in highly competitive external labor markets. The low-wage problem is the outcome of technology-driven demands for skills by employers that have outpaced their supply by workers. In contested market models, wage-setting takes place in firms that operate in imperfect markets and under these conditions employers typically have substantial bargaining (monopsony) power and make use of strategic wage policies to elicit optimal effort, leading to the existence of good and bad jobs for similarly skilled workers. The low-wage problem reflects rising monopsony power and human resource practices that push wages below competitive market levels. Social-institutional approaches share this perspective on bargaining power within the firm, but broaden the relevant terrain by underscoring the importance of social, political, and structural forces, the effectiveness of protective labor institutions, and workplace culture and conflict. The low-wage problem is rooted in deregulation and technological advances that have increased employer power, manifested in firm restructuring and adversarial labor practices aimed at cutting labor costs as the countervailing power of labor institutions collapsed. We review recent evidence for these explanatory approaches for the United States, but also discuss cross-country evidence on the relative importance of cognitive skill mismatch and institutional protections for wage outcomes. We conclude by summarizing policy recommendations for improving job quality that follow from these views of the post-1979 American labor market.

March 12, 2019

AUTHORS:

David Howell Arne L. Kalleberg

Topics

Bargaining Power

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