The Rise of the New Low-Wage Class

OxFam America just released a (very disturbing) random survey of low-wage workers (PDF). It’s packed with so much “stuff” that I’m not sure where to begin. It kind of validates my theory on rent seeking behavior of labor for hours, but there’s so much more “red meat” in it. So I’ll get to some “selected” cuts – the more meaty parts; and it’s not pretty sociologically or economically.

  • 59% of respondents state that they are just meeting basic needs (another 17% say that cannot meet basic needs)
  • 51% spend more than half of their income on housing (rent/mortgage)
  • 66% have used some sort of public assistance in the past 2 years.
  • 76% of respondents feel that most Americans are falling OUT of the middle class
  • 61% of respondents feel that they are the same, or worse off than before the recession
  • 67% feel wages are too low
  • 40% think that there’s not enough work hours
  • 36% complain of irregular work hours
  • 51% cite too much debt as preventing them from climbing out of low wage jobs
  • 64% say that a bad economy is preventing them from climbing out of low wage jobs

And the Big Macro, 52% report making less now than before the recession.

There’s plenty more; such as only 12% believe that they will rise to the middle class, and other perceptions. I’ll leave the Max Weber stuff for later.

So let’s ask the first question, are low-wage workers borrowing money to pay for basic needs? We know that 66% have gotten public assistance. The survey doesn’t ask that question directly, but here’s some Fed data to help:

Credit to PCE

Something strange is happening: for the first time in history PCE (personal consumption expenditures that include food and gasoline) is correlating with credit outlays (I ran a Pearson just for fun). That means that the answer to this question is that “It’s quite possible”. The Fed data only helps, because we know from the M2 and Credit velocity that credit is pretty frozen, especially to low-wage workers, but it’s still a bad sign.

Now let’s ask the second question from this survey: How much of Society is represented by Low-Wage workers? Well, there are two things to look at. One is the rise of retail, food, and “hospitality” workers, and then compare that to traditional “middle class” manufacturing:

Retail levels

Retail vs Man

Retail jobs surpassed manufacturing jobs a long time ago. And from the Fed data, we know that Retail, food service/hospitality is making up most of the “job creation”. These are the lowest paid jobs with the least amount of available hours.

This is a social and economic phenomena, that reflects public policy (what’s supposed to be the role of politicians) driving a new Low Wage Class. If people cannot meet basic needs, and there are some disagreements in society over what “basic” needs are, then will this new low-wage class essentially become a new wage-slave class?

I couldn’t find anything wrong methodologically with the survey. The sample was drawn from a random pool and used pretty standard control measures. In other words, this may truly be the face of the rising low-wage class.

What we do know is that the Economics of the Great Recession has changed all the rules of Economics, as Economists are scrambling for new models to explain things almost on a daily basis. The same old Sociological rules will probably still be around. Where the new low-wage class will fit into the strata is something that’s still evolving. Seeing the birth of this new class though – it’s a once in a lifetime process.

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This entry was posted in Economics, Political Economy, Poverty, Socioeconomics, Sociology, Wages. Bookmark the permalink.

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