Accounting for Differences in Low-Wage Work across Cities

Background: As U.S. cities slowly emerged from the aftermath of the Great Recession, the prospects of working people in urban America continued to look grim. Dubbed the “low-wage recovery,” new opportunities for middle-class employment remained scarce, reinforcing the pattern of growing economic inequality and downgraded work (Doussard, 2013). Although pundits and scholars alike often describe low-wage work as a feature of the new economy—and now of the new post-recessionary economy—surprisingly little research examines the urban patterning of low-wage work or the geographic variation of the low-wage workforce. Cities reflect different local economies, labor market institutions, political claims-making processes, and policy contexts. From the rise of the living wage movement in the 1990s to the recent wave of strikes by fast food workers across U.S. cities, most political and policy activity aimed at low-wage work has been local. On the policy side, this urban mobilization has led to various forms of local labor market regulation, including living wage, worker retention, paid sick day ordinances, and city minimum wage ordinances. These may matter for attenuating levels of low-wage employment.

This study evaluates the distribution of low-wage work across U.S. cities, focusing on the characteristics of local labor markets that may mediate the likelihood of low-wage employment. We illustrate the large geographic variation of low-wage work across U.S. cities, examine the demographic characteristics of low-wage workers, and analyze the effects of a city’s urban economy and regulatory climate on the probability of low-wage employment.

 Method: Using a multilevel analysis, we evaluate whether individual characteristics alone account for low-wage employment, or whether a metropolitan region’s characteristics might matter, too. For example, would the same immigrant worker experience the same likelihood of low-wage employment whether she resides in Los Angeles or Chicago or San Francisco? We utilize the Current Population Survey Outgoing Rotation Group file that provides a rigorous measure of hourly wages and sizable sample counts across the largest 27 metropolitan labor markets in the U.S.

Results: We find that local regulatory effects such as the unionization rate and metropolitan minimum wages significantly reduce the likelihood of low-wage employment for less-educated workers. These same workers in urban economies with larger shares of retail and food services employment—engines of the low-wage economy—are more likely to be employed in low-wage work. 

Conclusion/Implication: In this study, we find that local labor market regulation reduces the likelihood that less-educated workers will be employed in low-wage work. These regulatory mechanisms, whether labor market institutions such as unions or policies such as city minimum wages, raise standards in local labor markets and reduce the likelihood of low-wage employment.

Doussard, Marc. (2013). Degraded work: The struggle at the bottom of the labor market. Minneapolis: University of Minnesota Press.