TRANSCRIPT

RUSSELL SAGE FOUNDATION
FORUM ON THE FUTURE OF WORK

IS IT TIME FOR A NEW WAR ON POVERTY?

JANUARY 8, 2004

SHEILAH KAST: Thank you for coming to this first in a series of Russell Sage Foundation Forums on the Future of Work. I'm Sheilah Kast of NPR and PBS. I started a business show on public television called "This Week in Business" a few years ago, and I'll be moderating this afternoon's forum.

And to start, we have gathered on the 40th anniversary of Lyndon Johnson's declaration of the War on Poverty to talk about why work no longer works for many Americans, why it doesn't work to keep Americans out of poverty. One out of four American workers makes less than the level needed to lift a family of four above the poverty line. And we're here to talk about why that is, how it happened and perhaps what to do about it.

And to start off, let me introduce the president of the Russell Sage Foundation, Eric Wanner. Eric Wanner has been president of the Russell Sage Foundation since 1986. He's played a big role in developing the Foundation's research programs on poverty and inequality and on immigration in the United States, and most recently on the causes and consequences of the accelerating changes in the nature of work. Eric?

ERIC WANNER: Thanks very much, Sheilah, and thanks everybody for coming this afternoon. I want to say one word about Russell Sage. We're almost 100 years old now and we've been laboring in New York doing social research on problems that are, we think, of deep and of long standing variety, and trying in one way or another to get the country to pay a little bit of attention to the implications of the research that we support. So although we are essentially non-partisan, we do have a view, and in this case we're gathering to talk to you about our view of what poverty in this country is really all about.

And so it's a nice occasion, the 40th anniversary of the War on Poverty, to gather to try to think a little bit about what the War on Poverty was, how it's been characterized and what the country thinks about poverty, and where we really should be going. I think of LBJ and the State of the Union 40 years ago, announcing the War on Poverty at a moment of national generosity, national inclusiveness, maybe national embarrassment. After all, we were, as we are now, the richest country in history, and yet in 1964, 19 percent of our citizens were below the newly christened official poverty line.

LBJ announced, as all of you know, a series of programs in an effort to reorient social policy in order to reduce poverty in this country and eradicate this problem in which a large minority of our citizens were excluded from full economic participation in the affairs of the country. And the War on Poverty worked. The one thing that we kind of forget is that it was successful-- the poverty rate was 19 percent in 1964 and in only nine years it had gone down to 11 percent. But after that, progress on poverty basically stalled and it's never been below 11 percent in the succeeding 30 years.

And the question is, of course, why? And I think there's been an enormous political debate centered around trying to understand this history, and I begin this debate, with Ronald Reagan, who famously said, "In the War on Poverty, poverty won." What did he have in mind, and what do we all have in mind when we think about why the War on Poverty seems to have stalled? Well, one answer is the War on Poverty led to an enormous increase in social welfare. That social welfare, although it may have supported incomes in various ways, also created dependency: a dependent class of undeserving poor who are basically living off the state.

That view of why progress against poverty stalled led to welfare reform which went through several generations: one set of laws in the early '80s, another in 1988 and most recently in 1996, where basically we, in Clinton's words, ended welfare as we knew it. We time-limited welfare and we imposed work requirements. I think any fair estimate of the consequences of welfare reform has to say --at least superficially-- it was an astonishing success. The welfare roles have been rolled back roughly from five million families in 1996 to something like two and a half million families today.

So just in terms of ending welfare dependency, we did a very good job. But nevertheless we made very little if any progress against poverty. The poverty rate remains about what it was before welfare reform. Poverty went down for a while after welfare reform, but it was pretty clearly because of the very tight labor market at the end of the 1990s, not because of welfare reform.

Well, okay, so we're left with this residual problem of poverty, how should we understand this history? What really happened and can we get a new view of history which can lead us towards a better understanding of what to do? My short version of this, I go back to LBJ and his poverty warriors, sitting around in a council of economic advisors and I try to think what did they believe, how did they really think they were going to end poverty?

And it's pretty clear, waving aside lots of complexities which we can come to later, that they believed that economic growth was the fundamental anti-poverty weapon. That the way to end poverty in this country was to heat up the economy and to sustain a robust level of economic growth and have several kinds of programs to connect people to the economy better, so for example, anti-discrimination programs were in place to keep people from being locked out because of discriminatory hiring practices.

Education programs were adopted in order to equip people better to participate in the economy, and economic development programs like urban development were proposed in order to sustain -- in order to rev up the economy in locations where it had sort of sagged. But even with all those programs capturing our attention, the real belief of the LBJ antipoverty experts was that we would grow our way out of this problem. Why did they believe that? Because historically, if you just plot year-by-year economic growth against the poverty rate, what you see is that for every increment in economic growth in a given year, you get a detriment in poverty.

And if you just look at that function and projected it out into the future, there was every reason to believe that with a reasonable rate of economic growth, a couple of percentage points a year, we would have eradicated poverty by now. But of course we didn't. Why? And that's really what we want to talk to you about. The answer to that is, roughly, just about at the time that progress against poverty was stalling, inequality in this country was increasing. What does inequality mean? Inequality means that the fruits of GDP are no longer as equitably or evenly distributed as they once were.

So the whole distribution, the whole population is getting more wealthy year by year, but the lower tail of the distribution is being left behind. The lower tail of the distribution of course is where poverty resides, and that meant that if you plotted year by year GDP against the poverty rate, what had been a negative function, that is, as the GDP went up, poverty went down, flattened out, you were getting less poverty reduction for each increment of economic growth starting in the late '70s and going right through the '80s and into the mid '90s.

The Foundation became interested in this really around 1985, '86, '87 and we began to fund, initially, research on why this was happening. Why did inequality go up, why is it the case that GDP, economic growth, became a less effective antipoverty weapon? And we supported a lot of macroeconomic research aimed at answering this question, some of which we're going to tell you about today. In the early '90s we turned to another kind of research, mainly looking at business firms in a more specific way, in order to ask ourselves why is it the case that low wage workers are doing as poorly as they are? Why is it the case that jobs in these firms no longer pay the wages and the benefits and have opportunities for education and opportunities for advancement that they once did?

So a second wave of research was aimed at this more micro question of how firms are responding to the economic change that has increased in inequality in ways that are causing the quality of low wage jobs to deteriorate. What we want to talk to you about this afternoon then is some idea of what this research was like, and what kinds of answers we came to as far as why inequality was increasing, both at the macro level and at the micro level and what the implications of this research are for policy.
We hope that in a small way this gives you a kind of new way of understanding the history of the country's efforts against poverty and refocuses your attention on what we think is a more important way to think about the solution.

SHEILAH KAST: Thank you, Eric Wanner.

Now to the rest of our panel. We had planned to include Beth Shulman, who is the author of The Betrayal of Work: How Low Wage Jobs Fail More Than 30 Million Americans, published last fall by the New Press. Unfortunately, Beth Shulman was called away by a family health emergency, but we have two great panelists with us.

Let me introduce first Sheldon Danziger, a professor at the Gerald R. Ford School of Public Policy at the University of Michigan. He is the Henry J. Meyer Collegiate Professor of Public Policy and he is co director of the National Poverty Center there. Sheldon Danziger's research practices on transient poverty and inequality and the effects on disadvantaged people are changes in demographics, government social programs and the economy. His most recent book is Understanding Poverty. Professor Danziger, what changed in the economy to bring us to the point that Eric Wanner described to us?

SHELDON DANZIGER: Well, the economy was really thrown off the post World War II track by the oil shock of 1973. Basically from the late '40s to the early '70s, if you go back and look it was a period when the sound byte "a rising tide lifts all boats" really did play out and with minor recessions, average real wages at all points in the distribution sort of increased. Those at the bottom had more, 25 years later those at the top had more 25 years later and the patterns were quite similar, so we got dramatically falling poverty, particularly after the War on Poverty.

As Eric said, there are a number of changes. The oil shock sort of wreaked havoc on production processes, technological changes started making it possible to manufacture goods overseas and bring them back here more cheaply than had been the case. So a combination of globalization meant that many products which were historically produced in the United States could now be produced anywhere. Technological changes, particularly labor saving technological changes, became particularly important. There were also declines in the real value of the minimum wage, increases in competition for less educated workers from immigrants, declines in union membership, and basically we had a period of roughly two decades of falling real wages.

So Eric mentioned that the War on Poverty planners, if you would ask them in 1970 what's the wage going to be like 25 years from now, they would have said, well, it doubled in the last 25 years, it should double in the next 25 years. And in your handout I have a little chart from the Bureau of Labor Statistics website which basically shows that average wages of production workers in 2003 is still less than it was in 1973. So it's not that wages have doubled from $635 a week to $1200 a week, the average wage today is about $550 a week, less than in 1973.

The other part that Eric said is also in the charts, and that is this change in employer demand for workers meant that workers with the most education saw real wage increases, even though these were difficult economic times for the economy as a whole, and those at the bottom essentially fell behind, so that many workers, many more workers today earn less than the poverty line for a family of four than was true 25 years ago.

SHEILAH KAST: So the problem really has gotten worse, this part of the problem?

SHELDON DANZIGER: The labor market problem of particularly workers with a high school degree or less has gotten significantly worse over the last 30 years.

SHEILAH KAST: Okay. Thank you, Professor Danziger.

Let me introduce Rosemary Batt, she is at the Industrial and Labor Relations School of Cornell University. She's the Alice Cook Professor of Women and Work there. Her research interests include inequality in the labor market, productivity and competitiveness in the service sector, the organization of work and work and family balance. Among many published books, she is a co-contributor to Low Wage America: How Employers are Reshaping Opportunity in the Workplace, published last year by the Russell Sage Foundation.

Professor Batt, how have employers responded to the changes that Eric and Sheldon Danziger were talking about?

ROSEMARY BATT: Well, I'd like to start by first talking about what most employers have done and then talking about what some more creative people have done. What most employers have done, which is a well known story, is that they've competed by cutting costs rather than by doing things that are maybe harder, more innovative, require reorganization of work. And so they have typically frozen wages, cut jobs, cut training, cut healthcare, cut pensions and typically increased the use of contingent and part-time workers who typically don't earn a living wage.

So that's kind of a typical story. And there are some hidden costs that have also come out in a lot of the research which is that cutting jobs means fewer workers, it means higher workloads, longer work hours, higher stress, and spill over to families. And so when we talk about restructuring and what companies are doing, it's not just hitting individuals or individual or young people, but it's hitting working families in a very negative way and they're absorbing the costs of this restructuring. So that's the first point.

But it isn't always that way, it doesn't have to be that way, and so in the Low Wage America book, we as a group went out and we studied 25 industries, 500 firms. We did 1,700 interviews and we did surveys of 10,000 employees and their managers. So this is a very kind of wide and deep book that looks at the industries that are in those low wage sectors such as retail and healthcare and the like. And there are lots of rich examples, so I'm going to pick three, just to give you a few examples.

In hotels, housekeepers typically make $6 to $7 an hour. They have no benefits, no training, no job security. Their workloads have increased, so now they do between 16 and 20 rooms a day. It's backbreaking. There are increases in workers comp and that's one scenario. But in our case study firms in San Francisco and Las Vegas, what we found is, first of all there were unionized jobs, so that kind of closed off the low wage path. In other words, employers have to work harder at figuring out how to compete.

But the second part of the story was that they formed an employer consortia of all the hotels that were unionized, worked in a partnership with the union, created a training fund throughout the city, pooled the resources, did benchmarking around how to provide better customer service and so the result is better jobs and better service. And so that's an example of what you can do if you're creative and innovative.

Our second example was in healthcare, the same kind of story in New York. There are 300 employers in the hospitals in New York organized in a consortium with unions. They create a pooled training fund, an upgrading fund, workers can move across hospitals to get better jobs, they can -- they have healthcare, they have benefits and they provide good care.

A third example, call centers. Call centers are the 1-800 number you call and they're notorious for bad service, right, and to give you an example of two subcontractors. One subcontractor we went to provided no training and only minimum wage. The jobs were high turnover, workers handled 100 calls a day and you can imagine the kind of service you're getting in this kind of center. Three hundred percent turn over -- 300 percent. And the second contractor we went to, six weeks of training for workers, $15 an hour, benefits, work design -- work design in teams so that they're solving problems and figuring out how to bring new workers on and help them, and the result is terrific profit built on customer loyalty. Another example of good jobs, good service. And these are non-union employers.

Let me give you one more example and I'll stop. This is a non-union industry in North Carolina, hosiery manufacturers. Now we would think that hosiery left the shores of the United States a long time ago with all the other apparel manufactures, but it hasn't. So a group of non-union employers in North Carolina created an employer consortium, worked with community colleges to create training for their workers, applied for government funds so they could get technology upgrades, improve the plant and equipment. And this modernized technology and training strategy allowed them to use the fact that they are in the United States and so they're closer to the customers. Therefore, they can deliver their products much more quickly. That allowed them to compete while also paying good wages.

So, just to close, the point is it's hard to do. It's hard for employers to find alternative, more interesting, creative ways to compete, but the point is there are these examples of people who are doing it. They're doing it well, and what it takes is kind of the will and when there are policies and institutions that support this on the part of small employers then we get results that are better for workers and consumers as well. Thank you.

SHEILAH KAST: Thank you, Professor Batt. Let me ask -- let me follow up, ask either of your colleagues whether what Professor Batt just told us about the response of employers leads us to believe this is something the private sector will take care of, the problem that you laid out earlier. Is this something that we can count on the private sector to address?

ERIC WANNER: I'll just jump in quickly and then see what Sheldon has to say. First, our reason for wanting to look at firms was to see how much variation there was within an industry. Were there some firms taking high roads versus some firms taking the low road, were they equally competitive? And one thing that comes out of the study is that there are alternate ways to compete.

The question, though, is how do you encourage firms to take the high road, the more innovative solutions which benefit workers as well as customers and, in a way, fence off the low road, if we, as a society, don't wish to accept the implications of the low road, which is that there will be a large percentage of our workforce which doesn't earn a wage that's capable of sustaining a family. We have to encourage this path by means of national policy. I don't think we can depend on the private sector to do it.

SHEILAH KAST: Professor Danziger?

SHELDON DANZIGER: What I would add is that I think even if you had a set of policies in place that encourage some firms to take the high road, not all the firms are going to be able to join consortium, invest in training. There are a lot of marginal firms that come into and out of business and I think there's definitely a role for government in making work pay. It's something that the planners of the War on Poverty thought economic growth would take care of. In an era when there's not much growth in wages at the bottom there are lots of things government can do.

Raising the minimum wage is a good example. The minimum wage was about 45 percent of the average wage in the U.S., it's fallen to about a third. There hasn't been much talk about raising the minimum wage since the last time it was raised in 1997, and that was one of the things that was talked about during the War on Poverty era. President Johnson also talked about reforming unemployment insurance, and then there were tax credits for the working poor and subsidized health care. So there are a lot of things that government could do in part because even if we are going to dramatically reduce the number of low wage jobs, there are still going be a lot of workers working in low wage jobs who are going to need support to raise their family income.

SHEILAH KAST: Okay, thank you.

Before I take your questions, I just want to follow up on one other point. Professor Batt, could you give us a broader -- we appreciate the specific examples you gave but in general, these jobs, these one out of four workers who work full time and still don't hit the poverty line, what -- who are they? Can you describe them to us and what role they play in our economy?

ROSEMARY BATT: Well, I think the myth is that they're marginal or that they're young. And in fact the typical worker in a low wage job has a high school degree, is an adult with a family and they're people that are at the heart of our economy and providing the kinds of valued services that we need. They're home healthcare workers, they are childcare workers, they are teachers assistants, they are, retail clerks and janitors and housekeepers providing basic services that we need. And in this sense they're not at all marginal, and that's why we think this issue is so important.

SHEILAH KAST: Okay. There's hands up already, so I will repeat your question so everybody can hear it.

QUESTION: Could you comment on the proposed Bush immigration policy from yesterday in terms of the context of the future of work?

SHEILAH KAST: The question is what about the proposed -- the administration's proposed new immigration policy in the context of the future of work?

ERIC WANNER: I'll start, but I think the two of you should also chime in. We talked about this today before the session because we thought someone might ask this question. And we agreed that it's really too soon to shoot from the hip because we need to understand this proposal in much better detail than we do now. But if there is high uptake of this program, that is if guest workers basically register for this program and it entrenches a larger flow of guest workers from outside the country, that is bad news, I'm afraid, for the present low wage workers in this country, and there's no way around that.

We already know that low skill immigrants have depressed the wages of low skilled native born workers. In general, the impact across all American workers has not been negative from immigration, but at the bottom it has been. And so if there are institutional changes which increase the flow of low wage, low skill immigrant workers, it will make the problem worse.

SHEILAH KAST: Okay, does either of the other panelists want to address that?

SHELDON DANZIGER: Yes, the only thing I was going to say is that the -- again if we're talking about the goals of the War on Poverty, one of the goals was increasing education of the next generation that a higher skilled workforce is one way to reduce poverty. And as Eric said, if you bring in lots of workers without high school degrees, then you're essentially not raising the average education of the workforce to the extent that you would be if you focused on War on Poverty programs like Head Start, Work Study, Basic Educational Opportunity grants and talked about the goal being to get increasing numbers of people forty years ago through high school, today through certificates in junior colleges and on to college.

SHEILAH KAST: Who else has a question? Yes?

QUESTION: Is there a race lens through which you might want to look at some of these issues? Surely given the role of race in this society, institutional racism, there have to be variations and explanations that are race oriented. I'm wondering what comment you would have on that one?

SHEILAH KAST: For those who couldn't hear it, the question was whether there are factors of race that ought to be looked at in explaining these trends?

SHELDON DANZIGER: Yes, I would just -- in my handout, chart three shows that this trend toward an increase in the number of men who fail to earn enough to support a family of four at the poverty line is there across the board for whites, African Americans and Hispanics. I actually think in looking there might be a problem on the chart, because I believe it actually dropped for all three groups, but it's obviously much higher for minority men. I believe there may be a problem on my chart. Yes, I've got 1993 and 2001, so it said -- the percentage of men who fail to earn this much doubled over the past 25 years for all the groups. It's much higher for minorities than for whites, holding education constant as well.

SHEILAH KAST: Yes.

ROSEMARY BATT: Well, I would just like to also add -- there are non-targeted policies that will help everyone and they may disproportionately help racial minorities because they are disproportionately at the low end.. And things like raising the minimum wage, making sure that workers have a right to organize, dealing with the healthcare problems, regulating the temp agencies, a series of things that would help all workers at the bottom tackle that problem.

ERIC WANNER: We did one large study which Sheldon was involved in of four major American cities asking why minority workers in the urban core were faring so badly in the U.S. labor market. And there are a number of reasons. One is spatial, as the U.S. industries have moved out of the center city, that's been a problem. Another is skills. As intercity schools have deteriorated, it's harder and harder for them to generate the skills that needed for successful competition in the U.S. labor market. But there may be discrimination as well and the question is whether or not those firms that moved out of the cities, moved out of the cities in order to get away from those workers and there's some evidence that we found that that was true as well.

SHEILAH KAST: We have a question here.

QUESTION: Thank you. I'd like to know whether in your current or future research whether you've considered the demographic shifts that are both national and -- been national and global, and what I'm talking about specifically are the shifts related to the aging of the population in post industrial countries, the coloring of the nations and the fact that there are changes in family and household composition. And I think about something like AFDC, which of course was originally geared towards widows of primary earners, and of course that program has changed because of demographic changes over the decades. And then also the change of the ratio of workers to dependents. And finally my last issue has to deal with the multigenerational social contract of -- at the micro level of families, at the macro level of societies, we have employers versus employees and adults versus children.

SHEILAH KAST: Can anyone address any of those?

ERIC WANNER: Can you break that up into bite size pieces? Or maybe tick the most important parts?

QUESTION: Well, worker dependent ratios. What I mean by that is we have three populations: one's the people who are independent, people who have capital and wealth, and then you have the dependants like children, the disabled, and then the rest of us who have to get up and go to work.

SHELDON DANZIGER: Let me just say that one of the things I didn't mention is that over this period there's obviously been a tremendous increase in employment by women, so that the disconnect between what we're talking about today, the increasing number of people earning low wages and the fact that the poverty rate is constant, often means that many families are low wage workers but not income poor because they have two workers today or one and a half workers today relative to one in past yars. So certainly over the last 40 years, even though the elderly have retired basically much -- they're much more likely to retire today than they were 40 years ago, they're much less likely to be poor today than they were 40 years ago. That's due to the War on Poverty generated growth in government programs. There have been many more workers per adults and that's helped keep poverty from rising to the extent that it would have if we had only had these labor market changes.

QUESTION: So does it follow from that that jobs have deteriorated and individual effort by individual people has in part compensated?

SHELDON DANZIGER: Well, in a typical -- a family of typical high school graduates, you are much more likely today to see a husband earning less inflation adjusted than he earned 30 years ago offset by the fact that his wife is now working longer hours and earning higher wages. So the family has greater income but not greater income per hour of work.

SHEILAH KAST: Okay. A question here then a question over there.

QUESTION: When people are working at minimum wage which is inadequate to keep them going and they get food stamps, they get Medicaid and then they get earned income tax, and all these -- the monies for these come out of the federal government or other government sources, but who gets the profits?

SHEILAH KAST: Sorry, what profits are you talking about?

QUESTION: The profits of working at low wage, you know, to produce goods that they sell. It seems to me that the businesses that are not paying these people sufficient money are the ones who are profiting and we are all paying. Is that a good analysis?

SHEILAH KAST: Who wants to address that?

ERIC WANNER: I'll start but then you can think of a better answer. Yes, I've heard this argument before against the earned income tax credits that basically we're making life soft for all these companies who are paying low wages. But remember that these companies very often are in global competition with offshore companies who -- or with offshore production sources that are paying even much lower wages and therefore it can be very hard within the market to justify paying a higher wage unless you undertake some of the creative solutions that Rose Batt had talked about, or unless there are laws which cut off the possibility of paying lower wages.

But in the absence of having those kinds of laws and the degree of social agreement we would need to pass laws of that kind, the earned income tax credit is a way of making a socially -- a kind of social contract, which is that we don't want to live in a society which pays wages that are insufficient to support a family, and therefore we are willing as a society through our government to subsidize those wages, and that's what the earned income tax credit and food stamps and so forth do.

SHEILAH KAST: Does anybody else on the panel want to address this? Okay, we have a question here.

QUESTION: I think my question was -- I think it was partially answered which was on chart two that you have here on the mean annual earnings. My question was have you broken that down by hours because my sense is that workers are working longer and longer hours, so just checking what their income is, income per hour has reduced and at the same time with more women in the workforce the cost of benefits and many of these workers don't have benefits, demands have increased things like not having access to sick leave and now you have two parents in the workforce, so somebody has to take unpaid leave, child care and I just want to know if you had any more figures on that or had broken it down?

SHELDON DANZIGER: Sure, send me an e-mail and I'll send them to you. But basically for women, you have rising real wage rates and rising hours of work. For men, these are at the bottom, you have declining real wage rates and declining hours of work. So we haven't talked about a large part of the male earnings problem -- it's not in this picture, these are males with earnings -- and particularly the question about race. There are a large number of men in the working age years shown here who are not in the labor force that's grown over this period. It's grown particularly among the minorities where having an incarceration record is a very negative tag for employers and again the Russell Sage Foundation has some books coming out on the effect of incarceration on the labor market.

So if you put all this together, you know, when the Census Bureau comes out with numbers every year, one of the positive trends of the last 30 years is that women have gone on average from earning about 60 percent of that of men, to 75, 76, 77 percent, some of that is because they have real wage increases, but some of that is because the men's wages have actually gone down.

SHEILAH KAST: Anybody else?

QUESTION: I find it fascinating that starting -- that your comment on the export of manufacturing jobs sort of leaped over the discussion to your answer which was the rise in service jobs and maybe that's because you assume everyone in the room knows the relationship in the last 30 years of what's happened. But the decline in manufacturing jobs I have to assume is very directly related to the flatness of the relationship between growth in the economy and good jobs. Here's my question: I find myself thinking about the trends that you're all talking about and tying it to the trends in the general workforce because so often policy change comes when there is a middle class demand that may reach into the lower wage levels.

I find myself thinking often about that issue of people who say the whole idea of a job is going to disappear completely, not just for people who suddenly can only be temporary and contingent workers, but for professionals and for everybody on up the ranks. And so the idea of the future of work being something that is parceled out but not in the context of a job -- benefits that go with that job, weekends or whatever -- if that trend were to continue for middle class and everybody else and you were going to advise the next president who says this is the War on Poverty that I'm going to take forward, what would your recommendation be for policy change?

ERIC WANNER: Well, first I think you're dead right that if you look at the history of policy change in this country, particularly on this kind of issue, it's when it begins to impact the middle class that you get real change. So if you look in the 1930s it's when you had 25 percent unemployment that you got the first real reform in labor law for example. You got Social Security, you got AFDC. So that is definitely true politically. Do we know how far this is going to reach up into the middle class and how fast that's going to occur? No, I don't think we do, although I'd be interested if my colleagues have some -- we all have examples of this happening.

You know, you can look in the paper today and see IBM cutting programmers jobs and so forth, and a lot of that's being externalized now and programmers in India are paid one tenth of what they're paid here, so you can see examples. But I don't think we're yet ready to say from the statistics what the slope of those trends really is like and how long it's going to take to impact the middle class. Is it the case that these trends are inexorably going to eventually impact the middle class, will work become more flexible and sort of just -- you know, will we treat labor the way we treat just in time inventory and so forth. Well, that is an implication of a current business model and pressing the logic of the current business model.

If there were a really tight labor market, I think it would stop. That is, if we got to the point where there was more demand for workers than there were supply of workers, you would suddenly see workers needs for security, their desire for benefits etcetera, to become much more strongly entrenched in the standard labor contract than they are now. So if we had a tight labor market some of these things could change.

ROSEMARY BATT: Yes, I would just add that I think we've seen a lot of examples of employer strategies that used to be considered for blue collar workers now creeping up. And so, you know, electronic monitoring, everyone is electronically monitored because we're all hooked to computers. There's a lot of pressure to always be available, so you're basically on call all the time. There are increased pressure for productivity, poor health and welfare packages. You have 401(k)s rather than a decent pension plan. So there are a lot of these examples that have crept up to higher, you know, people in the labor market.

I think a good example of where -- a recent example of where these kinds of pressures have had an effect is in work family policy. Work family issues are on the table, and I think it has a lot to do with the professional couples in the '90s working 80 hour jobs each and having to really deal with all of the stresses and strains around balancing family. So we haven't had good work family policy yet. But you could imagine a policy agenda that's a policy agenda for working families. And that covers not only people at the low end, but a broad swath of people that would be -- would benefit not only women, men in terms of child care, in terms of a whole range of supports around the concept of working families. And that's where I could see a really positive direction, with the middle class really supporting something that would be broad.

SHEILAH KAST: You said you have a question?

QUESTION: Yes, several times you've mentioned globalization and early on and a few minutes ago, and how do you feel about backing off of it: protective tariffs, protecting our industries, a reversal of where we've been going in terms of, you know, full throttle in support of GATT and NAFTA and those kinds of policies?

SHEILAH KAST: Who wants to address that?

SHELDON DANZIGER: Well, I don't think you're going to put either the technological genie or the globalization genie back into the bottle, and I think maybe I just haven't mentioned technological change enough. I came in this morning and logged on and printed my boarding pass off my home computer so I didn't have to stand in line at the airport and, you know, bought my ticket on the web and so there are fewer people selling tickets on the telephone and checking tickets. So a lot of the change in labor force is driven by technological changes. The technological changes obviously contribute to globalization. As Eric said, you can now hire programmers around the world.

In some cases it promotes productivity, it lowers prices, it gets better products. Again I'm not -- Rose is the expert on what goes on in firms, but I live in Detroit and I've heard about how the Ford people design cars with avant-garde designers in Italy and basically they've got a 24-hour production cycle which is more effective because they've got designers working in Japan, in Detroit and in Italy on the same project. So I don't think we can put the technological or globalization genie back in the bottle because I don't think we know what to protect and what not to protect. I think we can think --

Well, I don't want to get -- what I think we do know how to do and other countries know how to do, we know how to offset the changes. All of these changes have winners and losers. So I'm a winner from not having to stand in line at the airport but somebody's a loser. And there's a way, if government wants to, that's really what the spirit of the War on Poverty was about, is that we could put into place a set of policies, a lot of which are discussed in the low wage work book that we're talking about today and a lot of other Russell Sage books. There are a lot of things government can do to protect the losers and still allow the productivity gains that do increase our access to goods and services and lower prices for a lot of goods.

SHEILAH KAST: For any of you, in other industrialized countries, do they have the same problem? Do they also have a significant segment of workers who are not at the poverty level even though they are working full time?

SHELDON DANZIGER: Well, most other countries make different political choices. The continental Europeans tend to have much more of the kind of policies that Rose was talking about that keep wages and benefits, they have higher unionization rates, they have higher wages. They have higher unemployment, some people think as a result, but then they also have a safety net that makes it less painful to be unemployed. So they've made one set of choices.

The U.K. is closer to the U.S. but they've recently introduced a minimum wage which was higher than ours. They have something that looks like our earned income tax credit, which is higher than ours, so they have a low wage labor market which might look like ours, but their government policies do more to cushion those low wage workers. So we tend to have higher child poverty rates, higher working poverty rates, than other industrialized countries.

SHEILAH KAST: Okay. We have a question here.

QUESTION: I have two questions. The first is that the living wage movement seems to me one of the most visible efforts, politically grass roots efforts to deal with the issue of low wage work, and I'm interested either from an empirical or a theoretical point of view how effective you think that those living wage movements might be. And the other is that, in the source of factors that you talked about in the changing economy that led to a low wage work force, you didn't really talk about the tax system and I'm interested in whether you think the tax system has or has not been a major factor in the growing inequality in the American wage.

ERIC WANNER: I'll take a little crack at the living wage and then maybe someone can pick up the tax question. We've recently supported a couple of studies of living wage ordinances in particular cities. One thing to remember -- I agree with you totally that politically it's been a way of mobilizing public attention on the problem of low wages and getting political groups to actually effectively create change at the city level. So presumably many of you know what this means is that these living wage ordinances within cities require that any contractors doing business with the city and getting a city contract, pay a certain minimum wage to their workers, so it's a limited minimum wage.

What we discovered was that even though there's been these successful movements, it's still tiny. It's a matter of a several hundred thousand workers who are now covered by living wage ordinances, all over the country, total. So it's really been quite small. What we're trying to find out is whether or not these ordinances create displacement. That is, if I am a contractor and I have to pay a higher wage because I have a city contract, do I therefore get rid of my lower wage workers because I now have to pay, say, $9 an hour instead of $6 an hour and I can afford to hire somebody with a better education? So we're looking specifically to see if there's displacement of that kind.

Notice that that displacement could happen because there's only a limited coverage, a small number of firms have to play under these ordinances. If the wage were uniform, if it was the minimum wage that went up to $9 an hour, then everybody would be forced to move up to that wage floor and there wouldn't be displacement.

SHEILAH KAST: Anyone want to address the tax question, whether taxes have been a factor?

SHELDON DANZIGER: Which taxes are you --

QUESTION: Federal taxes.

ERIC WANNER: I guess he means in family income --

SHEILAH KAST: Income or payroll or both?

QUESTION: Payroll taxes.

SHELDON DANZIGER: Our payroll taxes are relatively low which -- I think what the path the U.S. economy takes is it's relatively easy to hire part time workers at low wages with low benefits because you don't have -- say France is at the other extreme, where you have very high hours requirements, wage requirements and social insurance rates, so that the cost of creating jobs are much higher. So our tax system has both encouraged employment, but it also encourages low wage employment.

SHEILAH KAST: Okay, I think we have time for one or two more questions.

QUESTION: I wonder whether any of you have -- or all of you, have thought about this sweeping overtime proposal that the Bush administration has been pushing ahead quickly on? They're saying that they may enact it as early as March. My reading of this would indicate that a lot of low wage workers including people who work at call centers could be redesignated as ineligible for overtime pay. I'd like to know if any of you have looked at the regulations in any depth and have given any thought to the effect it would have on workers of all income levels, but particularly low wage workers?

ROSEMARY BATT: I haven't looked at the regulations in depth, but the issue of overuse of overtime is a very important one, because what the research shows is that employer strategies around hours of work have become kind of polarized. So we have a lot of people working more than 40 hours a week, and then we have a lot of people working much less than 40 hours. People at both ends are doing it involuntarily. The people who are working 70 hours a week or 80 hours a week would rather work less, and the people working 20 or 30 hours a week would want to work more.

So this overtime proposal essentially makes it even easier for employers to go with higher hours, work overload, rather than trying to spread the employment more broadly.

SHEILAH KAST: Okay, we have a last question here.

QUESTION: Yes, I was wondering if you could speak to some of the challenges that young adults and adolescents, especially those living under the poverty level, will be facing in the next, like, two to five years?

SHEILAH KAST: Challenges in particular of what sort?

QUESTION: As far as workforce, finding jobs, keeping jobs, their level of pay and how education is going to impact that. I mean obviously beyond getting education, staying in school, stuff like that?

SHEILAH KAST: Does anyone have an insight here?

ERIC WANNER: I think the key issue is the extent of education, that we know that high school dropouts do badly and they've done increasingly worse. We know that college graduates do much better, and in the long run they've certainly done much better in real terms. To the extent that the coming cohort is relatively small relative to the baby boom cohort that's retiring, one would think that, you know, if lots of people my age retire and fewer people your age are entering the labor force there'll be increasing employer demands and your wages will be bid up. A lot of that will depend, then, also on the extent of immigration and how that affects the cohort.

But this may tie back to the demographic change. The fact that a large number of the population in the baby boom will be retired over the next 10 to 20 years and that the cohorts behind are smaller, presumably should increase demand for well-educated, well-skilled young people.

SHELDON DANZIGER: The demographics I've seen actually suggest that it would be hard to sustain the growth in the supply of college educated workers at the rates that we have developed them over the last 20 years. That suggests that inequality actually could get worse not better because there will be fewer college educated workers to meet this increasing demand.

SHEILAH KAST: Quick final wrap up. If we were to have a new War on Poverty to be effective today, what does it need to accomplish?

ERIC WANNER: Well, let me try just a kind of slogan first, and then maybe my colleagues can fill in with more details. I wouldn't frame it as a new war on poverty. I would frame it as a war on low wage work. And that's because it would refocus our attention away from the poor and problems of dependence and transfers to the poor, and focus our attention instead on the system, which is generating increasing numbers of jobs which don't pay a wage on which a family can be supported.

And I would, in my fondest political dream, hope that we could mobilize a new national movement, not unlike the movement in the mid '60s which would take this on as a national problem and say, we understand, there are large market forces that have reshaped the nature of capitalism and are reshaping the nature of society and we want to resist. We want to find ways in which we can build an inclusive society, even though the market is twisting against, shifting against workers with limited education at the bottom of the labor market.

SHEILAH KAST: Okay. Professor Batt?

ROSEMARY BATT: Well, I think we've talked about a number of the solutions and we know from past experience from state and local examples that there are lots of policies that would raise the bottom, including such things as raising the minimum wage, dealing with the healthcare insurance issues, dealing with child care supports and making the low road less possible. And then there are things we can do that really support small and medium sized firms such as providing technical assistance, doing the supports to help firms modernize their technology, improve training and the like. So there are both, you know, the kind of ways to reduce the low wage, but also ways to support business as well.

SHEILAH KAST: Great, this is a great note on which to end. I know there's still some questions out there. We promised you an hour of this so I'm going to cut it off. Our panelists said they would stay around for a few minutes if you want to ask them a particular question. Thank you for taking part in this Russell Sage Foundation Forum on The Future of Work. We'll look forward to seeing you again at future forums about the policy options and choices America faces on this issue. See you then.