Robert Solow

Low-Wage Workers in High-Income Countries

Thursday, 2 September 2004
14:45 - 15:20 CEST


Even the rich countries of Europe and North America have substantial numbers of low-wage jobs, occupied by those members of the labor force with the least skill and education. In the absence of drastic—and perhaps impractical—redistribution, those workers have—absolutely and relatively—low incomes.

The composition of the low-wage labor force, by nativity, ethnicity, mobility, gender, age, schooling and other characteristics may differ from time to time and place to place. In many cases the nature of low-wage work may be fairly standard. This poses an interesting question for economic research: what are the alternative ways in which a society can arrange for its low-wage work to be done? Some of those ways seem socially more desirable than others. An egalitarian, for example, would approve of a system in which the “dirty” jobs were shared by everyone, perhaps at a specified age. Of course we do not observe modern economies that operate in this way.

Some research in the United States seems to suggest that different firms in the same industry and in different industries deal with their low-wage work and low-wage workers differently. The issue may arise when firms are forced by market developments to reduce their costs. The suggestion is that some firms respond by lowering wages, especially the wages of unskilled workers; other firms make a more determined effort to raise productivity. If this contrast turns out to be systematic, it would be important to investigate which social institutions, organizational circumstances, and public policies tend to favour adoption of the “low-road” approach, and which the “high-road” approach.

This talk will first briefly describe some findings of research on low-wage labor markets in the U.S. It will then go on discuss a recently-launched project involving carefully designed parallel comparative research in five European countries.
The goal is to understand how a specified set of low-wage jobs is organized in each of those countries (and the U.S.), and to try to detect how any differences in outcomes are related to background differences in institutions, circumstances and policies. In each case there will also be an overview paper describing the evolution and status of the broader low-wage labor market in each of the selected countries. In slightly more theoretical terms, the question is whether “high-road” and “low-road” business strategies can both be equilibrium outcomes, of that is indeed the case.

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