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Home Publications Blogs CEPR Blog Low-wage Workers: Smarter, Older and Underpaid

Low-wage Workers: Smarter, Older and Underpaid

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Written by Janelle Jones and John Schmitt   
Monday, 22 July 2013 14:45

As we documented in an earlier post, the current value of the minimum wage is too low by every available historical benchmark. But, given the age and educational upgrading of the average low-wage worker over the last three decades, the level of the minimum wage is positively awful.

Economists generally believe that older, better-educated workers should earn higher wages than younger, less-educated workers. An older worker typically has more experience and on-the-job training, both of which increase skills. Education – whether it is a high school degree, an associate’s degree, a bachelor’s degree, or more – also increases workers’ skills and should be rewarded in the labor market. The falling value of the federal minimum wage, however, has failed to recognize substantial increases in the education and training of the workforce.

Table 1 summarizes the characteristics of low-wage workers by age and education, which we define as those earning less than or equal to $10.10 per hour (in inflation-adjusted 2012 dollars), the level of the minimum wage proposed by the Fair Minimum Wage Act of 2013.

lww-table

Between 1979 and 2012, the average age of a low-wage worker rose from 32.3 to 34.9 years old. This increase reflected the falling share of low-wage workers who are teenagers (down from 27.2 percent in 1979 to 12.3 percent in 2012) and a rising share of workers between the ages of 25 and 64 (from 47.5 percent of the low-wage workforce in 1979 up to 59.1 percent in 2012, see Figure 1).

lww-age

Low-wage workers are also much better educated today than they were three decades ago. The share of low-wage workers with less than a high school degree has dropped by more than half, from 40.9 percent in 1979, to 18.9 percent in 2012. Meanwhile, the share with more than a high school degree, but short of a four-year college degree, increased considerably, from 19.0 percent in 1979 to 34.2 percent in 2012. And, by 2012, one-in-ten (10.3 percent) low-wage workers had a college degree or more, compared to only about one-in-twenty (5.6 percent) in 1979 (Figure 2).

lww-education

While the low-wage workforce is older and much better educated today than three decades ago, it is working for substantially less today than at the end of the 1970s, when the country was much poorer than it is today.

Tags: age | education | labor | labor market | minimum wage

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written by Christina, July 22, 2013 6:15
Thank you for this interesting and thought-provoking article. However, I believe (if I am interpreting your findings correctly) you define "being educated" as receiving a certain level of education, rather than holding a certain knowledge base of information. To be clear, repeated studies have shown how far the American education system falls behind in terms of knowledge base (e.g., math and science instruction and comprehension) compared to other countries. In simple terms, there remains the question of quality over quantity. More individuals are graduating high school, a fact that could be applauded; however, employers remain frustrated that individuals obtaining a college education are unable to correctly construct a complete sentence.

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