Why Are U.S. Wages So Weak?
|July 6, 2004||Posted by Staff under Progress Report, The Progress Report|
Economic Notes from the Labor Research Association
U.S. Wages Are Weak
This article comes from http://www.laborresearch.org
Walmart is not alone, and together with other large service sector employers is defining the new industrial landscape and the structure of the U.S. working class.
Although the portion of large companies in the U.S. has remained relatively stable over the past decade, the industrial composition of the largest companies has continued to shift dramatically from relatively high-wage, unionized industrials to low-wage, nonunion retailers.
New data from the U.S. economic census and private research groups bears out the stability in terms of size but the shift in industry composition and its impact on wages:
- The percentages of small, midsize and large companies and the share workers they employ have remained relatively unchanged over the past decade. Most firms are small employers. Of the nation’s 5 million employers, 75 percent employ fewer than 10 workers. These companies account for 12.3 million workers, or 10.7 percent of the total workforce of 115.1 workers.
- Large employers account for half of the workforce. Only 3.5 percent of all companies employ more than 500 workers, but this small percentage represents 57.7 million employees. Only 930 companies employ 10,000 workers or more, but these companies represent 31.4 million workers, or 27.3 percent of the workforce. The median number of workers for a Fortune 500 company is 26,000.
- The shift in industrial composition among the largest firms has depressed wages. The largest employer in the country is now Wal-Mart Stores, with 1.4 million workers. Wal-Mart’s workers earn an average of $18,000 a year. Until Wal-Mart emerged as the largest U.S. company three years ago, General Motors held that spot. A General Motors assembler earns three times more than a Wal- Mart worker.
- The ten largest U.S. employers represent 4.4 million workers. Five of the ten are low-wage retailers. McDonalds, the nation’s second largest employer, has almost half a million workers. Kmart employs more workers than United Technologies.
- Wage growth is stagnant in large firms. The proportion of workers with low income (less than 200 percent of poverty level) has declined in small and midsize firms with fewer than 500 employees, according to The Commonwealth Fund. But the proportion of low-income workers at large companies has remained the same — about 20 percent.
- Deunionization is occurring faster in large companies. The unionization rate declined by one- third in large firms between 1987 and 2001 — a greater decline than in small and midsize firms. In 2001, the proportion of large-firm workers who were union members was lower than the proportion in midsize firms of 100 to 499 workers, according to The Commonwealth Fund study.
- The decline in manufacturing has been greatest in the large firms. Between 1987 and 2001, the proportion of workers in manufacturing jobs declined by 2 percentage points in small firms, 8 percentage points in midsize firms, and 11 percentage points in large firms. Manufacturing accounted for only 11.4 percent of private hourly employment in the first quarter of 2004, down from 17.3 percent in 1990, according to the Bureau of Labor Statistics.
- The change in industrial composition and the drop in unionization has reduced benefit coverage. About 60 percent of the rise in both the proportion and rate of uninsured workers nationally who are employed by large firms can be attributed to the decline in manufacturing jobs and unionization rates, according to The Commonwealth Fund study.
- Average work hours are falling. As the shift away from manufacturing to the service sector continues, the average workweek has declined. All job growth has been concentrated in industries that employ a higher percentage of hourly and part-time workers and do not commonly use overtime for hourly employees.
- The 2001 recession and jobless recovery have accelerated the shift to low-wage work. A new survey of more than 1,000 workers by Rutgers University found that nearly one-fifth have been laid off since 2001. While 71 percent of these workers have found new jobs, half of them are earning less than they were before they were laid off.
- The chilling effect on wage demands created by layoffs is widespread. For workers who escaped layoffs, one in three worked at a company where layoffs occurred, according to the Rutgers study. In the period after their coworkers were laid off, 45 percent experienced increased fear of losing their own job.
- The Rutgers study found that 51 percent of workers who are currently employed are nonetheless very concerned about job security, up from 42 percent one year ago and nearly twice the share of workers who said the same in January 2000.
- Among workers earning less than $40,000 a year, almost two-thirds are very concerned about job security. Ongoing anxiety about job security is a primary factor in dragging down wages.
What conclusions do you draw? Tell your views to The Progress Report!