longnarrative

LOW-WAGE WORK: THE BIG PICTURE

Following World War II, economic growth in the United States meant a shared prosperity as tens of millions of American workers moved into an emerging middle class. Starting in the mid-1970s, however, real wages stopped growing and even declined for certain groups in the labor force. This was a marked reversal from the postwar economic boom. In fact, the fortunes of those in the bottom rungs of the labor market declined drastically. Between 1973 and 1993, the real income of the lowest 20th percent of workers fell nearly 12 percent.

Today, one out of four workers in the United States holds a job that pays less than $8.70 an hour (around $18,100 working full-time), which is the official poverty line for a family of four. (See Beth Shulman, The Betrayal of Work: How Low-Wage Jobs Fail 30 Million Americans, The New Press, New York, 2003). Most experts estimate that it takes double that amount for families to make ends meet. (See studies by the Economic Policy Institute and Kathryn Edin and Laura Lein in Making Ends Meet: How Single Mothers Survive Welfare and Low-Wage Work, (Russell Sage Foundation, New York, 1997.) Low-paid U.S. workers have worse standards of living than comparable workers in Europe or Japan. (See Richard Freeman, ed. Working Under Different Rules, Russell Sage Foundation, New York, 1993, for comparison of U.S. low-earners and those in other industrialized countries.) Although the United States still leads the world in overall prosperity and productivity, the American way of organizing work and rewarding workers no longer provides many hardworking families a piece of the American dream.

High school graduates have been the hardest hit over the past quarter century of economic changes. Male high school graduates earned an average hourly wage (in 2001 dollars) of $16.16 in 1973. Since then, their average real wages fell by 17 percent, with the most rapid decline taking place during the 1980s. These changes were so profound that even the extremely tight labor markets of the late 1990s, which resulted in the lowest unemployment rates in 30 years, only allowed these workers to recover about one-third of their lost ground. They still face real wages markedly lower than those earned by their counterparts 20 years earlier. (For more information about the tight labor market of 1995-2000 and its sustainability see Alan B. Krueger and Robert Solow, eds. The Roaring Nineties: Can Full Employment Be Sustained, Russell Sage Foundation, New York, 2001.) Female high school graduates wages remained stable over the period between 1973 and 1989 and finally rose during the tight labor market of the 1990s. Yet their average hourly wage still remained consistently lower than their male counterparts. (For more in-depth discussion of the impact on single mothers see Kathryn Edin and Laura Lein in Making Ends Meet: How Single Mothers Survive Welfare and Low-Wage Work, Russell Sage Foundation, New York, 1997; see Katherine S. Newman, No Shame in My Game: The Working Poor in the Inner City, Alfred A. Knopf, New York, 1999 for an in-depth look at the difficulties facing inner city workers in low-wage jobs.)

Strong growth has usually been associated with rising wages and declining inequality. Yet most of the benefits of economic growth between 1973 and 2001 missed those who needed them most. The degree of inequality in wages between low-paid and high-paid U.S. workers grew by roughly 30 percent during the 1980s to levels of inequality not seen since the Great Depression.

What happened after the mid-1970s to produce these dramatic changes? The core feature of the past quarter century has been the long-term shift from a manufacturing to a service economy. Wal-Mart is now the largest creator of jobs. Less than 40 years ago, one out of every three nonfarm jobs was in the manufacturing sector. As recently as the 1970s, it provided jobs to almost one-third of men between the ages of 25 and 54 who did not attend college. Entering the 21st century, however, manufacturing comprises only 16 percent of the total economy, or one out of every six jobs, making it smaller than the retail trade industry. By the year 2008, it is estimated that it will comprise only 12 percent of the total U.S. labor force.

And what of the future? The expanding service sector will remain the dominant source of employment in the first decade of the century and the dominant source of economic output in the U.S. economy. It is projected that virtually all of the twenty-two million new jobs expected to be added through 2010 will be in the non-manufacturing industries with retail trade and low-end services expected to account for the large majority.

Perhaps an even more important question, however, is what the growth in services means for upward mobility and employment stability. With extremely flat job hierarchies, jobs at the bottom of the service sector provide few means to move up, effectively trapping workers in low-wage careers. At the forefront of this industry, employing an ever larger number of workers, is Wal-Mart. In this business model, part-time work is the norm, schedules shift constantly, wages are low and turnover high, and health insurance is too costly for most workers to afford, even after long wait periods for eligibility.

Until the mid-1970s, the American labor market continued to function according to a set of rules and norms put into place after World War II. For most people, the typical career pattern was to enter a firm at the bottom of a job ladder and to move up that ladder over time. Workers had a high degree of job security because both individuals and firms made mutual investments in each other (particularly in training). While the old labor market did contain a "secondary labor market" that provided unstable and low-wage employment and abided by few of the rules, there remained a central set of norms, behaviors, and institutions that structured the core of the labor market.

The ground rules from the late1940s to the mid 1970s included stronger regulation of industries and of labor markets, broader acceptance of unions and more insulation of the domestic economy from speculative international capital flows and internal wage competition. Consequently, low-wage workers had more bargaining power.

But by the late 1970s, the economic and institutional conditions that supported this system changed. (See an in-depth analysis of the changes that occurred from the 1940s to the 1990s in Frank Levy, The New Dollars and Dreams: American Incomes and Economic Change, Russell Sage Foundation, New York, 1999.) Major shifts in the American economy brought new pressures and challenges to companies and created enormous incentives for companies to restructure both the way they operated and their relationship with their employees. At the same time, social and corporate policies undercut the bargaining power of the average worker. Labor and economic regulation weakened. Industry began aggressively resisting unions. A new social contract strikingly different from that of the post-World War II economic boom evolved.

The decision to open global markets contributed to the economic pressures that American employers have faced over the last 20 years. Trade with less-developed countries forced American workers to compete with workers from low-wage developing countries who earned a fraction of U.S. wages and lacked even minimal legislative protections.

Advances in information technology (IT) also changed the workplace. Technological changes have led to the automation of routine tasks that were previously carried out by high school-educated American workers. Advances in IT have made it possible to relocate data entry and the work of customer services representatives anywhere in the world, where wages are far below even the most modest U.S. wages.

Deregulating industries such as telecommunications, financial services, airlines, and trucking increased price competition and intensified pressures on firms to reduce costs. As new nonunion, lower-wage operators entered the market, unionization rates dropped in these industries- as much as by one-half. This erosion of power led to significantly declining wages.

The U.S. corporate relationship with its employees has changed. Corporate responsibility no longer requires the balancing of the interests of employees, shareholders and other stakeholders, but merely maximizing shareholder wealth. Healthy companies laid off workers and gone was the rhetoric about treating employees like "family."

It is no accident that in the midst of these changes, America's poorest workers fared worse than those in other industrialized countries. Without institutions, laws and political allies to counterbalance these forces, workers, especially those at the low-end had little bargaining power. These dramatic changes in the institutional environment in which American firms operated greatly influenced their responses to these new competitive pressures.

Prime among these institutional changes is the well-documented weakening of the labor movement and its lessening of a worker voice. In 1973, 24 percent of American workers were union members. That figure had declined to 14 percent by 2002, and among private sector workers fell to nine percent.

The changing economy significantly affected the strength of unions. The increase in global trade and deregulation of major industries eliminated many unionized jobs in large-scale manufacturing industries. At the same time, the service sector that now constituted over 80% of the workforce was largely unorganized. Among the high-school graduate workforce, unionization rates fell by almost one-half.

Yet the wholesale assault on unions, beginning with President Reagan's firing of the striking air traffic controllers and destruction of its union led to its precipitous decline. All three branches of the national government in the last 20 years have exhibited greater hostility to unions than in earlier periods. Corporations took their cue from these government attitudes and in the last 30 years corporations have shown intense hostility towards their worker's attempts to form unions. As a 2000 Human Rights Watch Report documented, "workers who try to form and join trade unions to bargain with their employers are spied on, harassed, pressured, threatened, suspended, fired, deported, or otherwise victimized in reprisal for their exercise of the right to freedom of association." In 1950, the number of workers who suffered reprisals for trying to organize a union was in the hundreds each year. By 1990, more than 20,000 workers each year were victims of discrimination leading to back-pay orders. Today, one out of four representation elections result in at least one worker being illegally discharged.

The decline in union representation has reduced the ability of workers to negotiate with managers about responses to increased competition and to bargain over the distribution of gains from improved productivity. As a result, employers are now able to be more aggressive in setting wages and working conditions. Equally important to its impact on the unionized sector is the impact of debilitated unions on the much larger nonunion sector. With greater union density, there was a "threat effect" or "spillover" on nonunion employers who modified their actions either to avoid unionization or simply out of imitation. Today most employers are free to determine their employment conditions without fear of being organized.

During this same time, the real value of the minimum wage plummeted from $7.18 (in 2001 dollars) to $5.15, a decline of 28 percent. The decreasing real value of the minimum wage over the last thirty years meant that there had effectively been a deregulation of the wage-setting process. It has allowed firms to respond to economic pressures by cutting the real wages of their lowest-paid workers

Without counterbalancing institutions, most employers responded to increased economic pressure by reducing their workers' wages and benefits. (For an extensive examination of firms' responses to these new economic pressures and the factors that influenced their responses see Eileen Appelbaum, Annette Bernhardt, and Richard Murnane, Low-Wage America: How Employers Are Reshaping Opportunity in the Workplace, Russell Sage Foundation, New York, 2003.) Still other firms cut costs by firing or "downsizing" their workforce. More than one-half of the nations' largest corporations chose to cut costs by firing workers in 1991 and 1992. The proportion of prime-age male workers (ages 35-54) who were permanently displaced from their jobs almost doubled between the 1970s and the early 1990s. This job displacement shifted more people to the lower end of the income distribution as a majority of the displaced workers who found jobs took pay cuts. (See William J. Baumol, Alan S. Blinder, and Edward N. Wolff, Downsizing in America: Reality, Causes, and Consequences, Russell Sage Foundation, New York, 2003, for a complete description of the causes and effects of downsizing during this period.)

Another corporate strategy to cut costs has been the continual shift of costs and risks to workers by increasing health insurance premiums and deductibles and substituting pension plans in which the employer ensured workers a certain benefit upon retirement to ones in which benefits were dependent on market returns.

These economic, corporate and institutional changes created poorer quality jobs and worsened long-term wage growth for many workers. Median wage growth by mid-career fell by 21 percent in recent years, and the distribution of the remaining gains has become sharply more unequal. As a result, the heart of the middle class has been hollowed out. There are now 40 percent fewer workers in the central part of the wage growth distribution than there were three decades ago. (See Annette Bernhardt, Martina Morris, Mark S. Hancock, and Marc A. Scott in Divergent Paths: Economic Mobility in the New American Labor Market, Russell Sage Foundation, New York, 2001, for an in depth analysis of the changes in mobility in the lower end of the labor market.)

But it has been those in the lower part of the labor market that have suffered the most severe consequences. Trapped in a handful of industries such as retail trade, personal services, entertainment and recreation and business and repaid services, the prevalence of low-wage careers has more than doubled. These industries offer few opportunities for wage growth, promotion or training, which makes it difficult for workers to escape their grasp. (See Timothy J. Bartik, Jobs for the Poor: Can Labor-Demand Policies Help?, Russell Sage Foundation, New York, 2001, for discussion of job training and its impact on low-wage workers.) Career or skill ladders, never common in this sector, are even less common now and investment in training ranks the lowest among all industries.

As more and more workers are increasingly cut off from the chance of ever attaining a stable well-paying job, Harvard economist Richard Freeman warns of an emerging apartheid economy. "Left unattended, the new inequality threatens us with a two-tiered society… in which the successful upper and upper-middle classes live fundamentally different from the working classes and the poor. Such an economy will function well for substantial numbers, but will not meet our nation's democratic idea of advancing the well being of the average citizen. For many it promises the loss of the 'American dream'." (Freeman, 1997, p. 3).

While most employers chose the low-road model of freezing wages, reducing benefits, firing workers, using temporary workers, or relocating jobs to another part of the country or abroad, some employers have developed other ways to improve their financial performance by innovating their services, improving quality and training, and empowering their workers. (See David Ellwood, Rebecca M. Blank, Joseph Blasi, Douglas Kruse, William a. Niskanen and Karen Lynn-Dyson, A Working Nation: Workers, Work, and Government in the New Economy, Russell Sage Foundation, New York, 2000, for more in depth discussion of high-road strategies.)

Experience in other countries suggests that managers will be more inclined to choose the high road if there is a higher minimum wage, which sets a floor below which wages cannot be pushed and forces them to think more creatively about how to keep firms competitive. Perhaps most important of all, managers are more likely to choose the high road when a national culture treats driving down wages as unacceptable behavior, instead of rewarding such managers with ever more lucrative pay packages.

In the past 30 years our nation has made choices that resulted in declining economic opportunity for an increasing number of Americans. Although individual corporate decisions may make perfect sense for the individual actors, they may not be good for workers or our society, a classic problem in a political economy. Employers have wide discretion in how they respond to this changing economy.

Either we continue to stand by as millions of jobs fail to provide the basics of a decent life or we can decide that it is untenable for the richest country in the world to allow nearly one-third of working families with children to earn less than the amount needed to maintain a basic standard of living. Not acting threatens the social fabric of our society and the stability of our democracy. History has repeatedly shown that unregulated markets do not produce optimal outcomes for both workers and firms. We can make better choices that will ensure the long-term economic future of our society and provide a fair share to working Americans and their families.

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LOW-WAGE WORK: THE BIG PICTURE Following World War II, economic growth in the United States meant a shared prosperity as tens of millions of American workers moved into an emerging middle class. Starting in the mid-1970s, however, real wages stopped growing and even declined for certain groups in the labor force. This was a marked reversal from the postwar economic boom. In fact, the fortunes of those in the bottom rungs of the labor market declined drastically. Between 1973 and 1993, the real income of the lowest 20th percent of workers fell nearly 12 percent. Today, one out of four workers in the United States holds a job that pays less than $8.70 an hour (around $18,100 working full-time), which is the official poverty line for a family of four. (See Beth Shulman, The Betrayal of Work: How Low-Wage Jobs Fail 30 Million Americans, The New Press, New York, 2003). Most experts estimate that it takes double that amount for families to make ends meet. (See studies by the Economic Policy Institute and Kathryn Edin and Laura Lein in Making Ends Meet: How Single Mothers Survive Welfare and Low-Wage Work, (Russell Sage Foundation, New York, 1997.) Low-paid U.S. workers have worse standards of living than comparable workers in Europe or Japan. (See Richard Freeman, ed. Working Under Different Rules, Russell Sage Foundation, New York, 1993, for comparison of U.S. low-earners and those in other industrialized countries.) Although the United States still leads the world in overall prosperity and productivity, the American way of organizing work and rewarding workers no longer provides many hardworking families a piece of the American dream. High school graduates have been the hardest hit over the past quarter century of economic changes. Male high school graduates earned an average hourly wage (in 2001 dollars) of $16.16 in 1973. Since then, their average real wages fell by 17 percent, with the most rapid decline taking place during the 1980s. These changes were so profound that even the extremely tight labor markets of the late 1990s, which resulted in the lowest unemployment rates in 30 years, only allowed these workers to recover about one-third of their lost ground. They still face real wages markedly lower than those earned by their counterparts 20 years earlier. (For more information about the tight labor market of 1995-2000 and its sustainability see Alan B. Krueger and Robert Solow, eds. The Roaring Nineties: Can Full Employment Be Sustained, Russell Sage Foundation, New York, 2001.) Female high school graduates wages remained stable over the period between 1973 and 1989 and finally rose during the tight labor market of the 1990s. Yet their average hourly wage still remained consistently lower than their male counterparts. (For more in-depth discussion of the impact on single mothers see Kathryn Edin and Laura Lein in Making Ends Meet: How Single Mothers Survive Welfare and Low-Wage Work, Russell Sage Foundation, New York, 1997; see Katherine S. Newman, No Shame in My Game: The Working Poor in the Inner City, Alfred A. Knopf, New York, 1999 for an in-depth look at the difficulties facing inner city workers in low-wage jobs.) Strong growth has usually been associated with rising wages and declining inequality. Yet most of the benefits of economic growth between 1973 and 2001 missed those who needed them most. The degree of inequality in wages between low-paid and high-paid U.S. workers grew by roughly 30 percent during the 1980s to levels of inequality not seen since the Great Depression. What happened after the mid-1970s to produce these dramatic changes? The core feature of the past quarter century has been the long-term shift from a manufacturing to a service economy. Wal-Mart is now the largest creator of jobs. Less than 40 years ago, one out of every three nonfarm jobs was in the manufacturing sector. As recently as the 1970s, it provided jobs to almost one-third of men between the ages of 25 and 54 who did not attend college. Entering the 21st century, however, manufacturing comprises only 16 percent of the total economy, or one out of every six jobs, making it smaller than the retail trade industry. By the year 2008, it is estimated that it will comprise only 12 percent of the total U.S. labor force. And what of the future? The expanding service sector will remain the dominant source of employment in the first decade of the century and the dominant source of economic output in the U.S. economy. It is projected that virtually all of the twenty-two million new jobs expected to be added through 2010 will be in the non-manufacturing industries with retail trade and low-end services expected to account for the large majority. Perhaps an even more important question, however, is what the growth in services means for upward mobility and employment stability. With extremely flat job hierarchies, jobs at the bottom of the service sector provide few means to move up, effectively trapping workers in low-wage careers. At the forefront of this industry, employing an ever larger number of workers, is Wal-Mart. In this business model, part-time work is the norm, schedules shift constantly, wages are low and turnover high, and health insurance is too costly for most workers to afford, even after long wait periods for eligibility. Until the mid-1970s, the American labor market continued to function according to a set of rules and norms put into place after World War II. For most people, the typical career pattern was to enter a firm at the bottom of a job ladder and to move up that ladder over time. Workers had a high degree of job security because both individuals and firms made mutual investments in each other (particularly in training). While the old labor market did contain a "secondary labor market" that provided unstable and low-wage employment and abided by few of the rules, there remained a central set of norms, behaviors, and institutions that structured the core of the labor market. The ground rules from the late1940s to the mid 1970s included stronger regulation of industries and of labor markets, broader acceptance of unions and more insulation of the domestic economy from speculative international capital flows and internal wage competition. Consequently, low-wage workers had more bargaining power. But by the late 1970s, the economic and institutional conditions that supported this system changed. (See an in-depth analysis of the changes that occurred from the 1940s to the 1990s in Frank Levy, The New Dollars and Dreams: American Incomes and Economic Change, Russell Sage Foundation, New York, 1999.) Major shifts in the American economy brought new pressures and challenges to companies and created enormous incentives for companies to restructure both the way they operated and their relationship with their employees. At the same time, social and corporate policies undercut the bargaining power of the average worker. Labor and economic regulation weakened. Industry began aggressively resisting unions. A new social contract strikingly different from that of the post-World War II economic boom evolved. The decision to open global markets contributed to the economic pressures that American employers have faced over the last 20 years. Trade with less-developed countries forced American workers to compete with workers from low-wage developing countries who earned a fraction of U.S. wages and lacked even minimal legislative protections. Advances in information technology (IT) also changed the workplace. Technological changes have led to the automation of routine tasks that were previously carried out by high school-educated American workers. Advances in IT have made it possible to relocate data entry and the work of customer services representatives anywhere in the world, where wages are far below even the most modest U.S. wages. Deregulating industries such as telecommunications, financial services, airlines, and trucking increased price competition and intensified pressures on firms to reduce costs. As new nonunion, lower-wage operators entered the market, unionization rates dropped in these industries- as much as by one-half. This erosion of power led to significantly declining wages. The U.S. corporate relationship with its employees has changed. Corporate responsibility no longer requires the balancing of the interests of employees, shareholders and other stakeholders, but merely maximizing shareholder wealth. Healthy companies laid off workers and gone was the rhetoric about treating employees like "family." It is no accident that in the midst of these changes, America's poorest workers fared worse than those in other industrialized countries. Without institutions, laws and political allies to counterbalance these forces, workers, especially those at the low-end had little bargaining power. These dramatic changes in the institutional environment in which American firms operated greatly influenced their responses to these new competitive pressures. Prime among these institutional changes is the well-documented weakening of the labor movement and its lessening of a worker voice. In 1973, 24 percent of American workers were union members. That figure had declined to 14 percent by 2002, and among private sector workers fell to nine percent. The changing economy significantly affected the strength of unions. The increase in global trade and deregulation of major industries eliminated many unionized jobs in large-scale manufacturing industries. At the same time, the service sector that now constituted over 80% of the workforce was largely unorganized. Among the high-school graduate workforce, unionization rates fell by almost one-half. Yet the wholesale assault on unions, beginning with President Reagan's firing of the striking air traffic controllers and destruction of its union led to its precipitous decline. All three branches of the national government in the last 20 years have exhibited greater hostility to unions than in earlier periods. Corporations took their cue from these government attitudes and in the last 30 years corporations have shown intense hostility towards their worker's attempts to form unions. As a 2000 Human Rights Watch Report documented, "workers who try to form and join trade unions to bargain with their employers are spied on, harassed, pressured, threatened, suspended, fired, deported, or otherwise victimized in reprisal for their exercise of the right to freedom of association." In 1950, the number of workers who suffered reprisals for trying to organize a union was in the hundreds each year. By 1990, more than 20,000 workers each year were victims of discrimination leading to back-pay orders. Today, one out of four representation elections result in at least one worker being illegally discharged. The decline in union representation has reduced the ability of workers to negotiate with managers about responses to increased competition and to bargain over the distribution of gains from improved productivity. As a result, employers are now able to be more aggressive in setting wages and working conditions. Equally important to its impact on the unionized sector is the impact of debilitated unions on the much larger nonunion sector. With greater union density, there was a "threat effect" or "spillover" on nonunion employers who modified their actions either to avoid unionization or simply out of imitation. Today most employers are free to determine their employment conditions without fear of being organized. During this same time, the real value of the minimum wage plummeted from $7.18 (in 2001 dollars) to $5.15, a decline of 28 percent. The decreasing real value of the minimum wage over the last thirty years meant that there had effectively been a deregulation of the wage-setting process. It has allowed firms to respond to economic pressures by cutting the real wages of their lowest-paid workers Without counterbalancing institutions, most employers responded to increased economic pressure by reducing their workers' wages and benefits. (For an extensive examination of firms' responses to these new economic pressures and the factors that influenced their responses see Eileen Appelbaum, Annette Bernhardt, and Richard Murnane, Low-Wage America: How Employers Are Reshaping Opportunity in the Workplace, Russell Sage Foundation, New York, 2003.) Still other firms cut costs by firing or "downsizing" their workforce. More than one-half of the nations' largest corporations chose to cut costs by firing workers in 1991 and 1992. The proportion of prime-age male workers (ages 35-54) who were permanently displaced from their jobs almost doubled between the 1970s and the early 1990s. This job displacement shifted more people to the lower end of the income distribution as a majority of the displaced workers who found jobs took pay cuts. (See William J. Baumol, Alan S. Blinder, and Edward N. Wolff, Downsizing in America: Reality, Causes, and Consequences, Russell Sage Foundation, New York, 2003, for a complete description of the causes and effects of downsizing during this period.) Another corporate strategy to cut costs has been the continual shift of costs and risks to workers by increasing health insurance premiums and deductibles and substituting pension plans in which the employer ensured workers a certain benefit upon retirement to ones in which benefits were dependent on market returns. These economic, corporate and institutional changes created poorer quality jobs and worsened long-term wage growth for many workers. Median wage growth by mid-career fell by 21 percent in recent years, and the distribution of the remaining gains has become sharply more unequal. As a result, the heart of the middle class has been hollowed out. There are now 40 percent fewer workers in the central part of the wage growth distribution than there were three decades ago. (See Annette Bernhardt, Martina Morris, Mark S. Hancock, and Marc A. Scott in Divergent Paths: Economic Mobility in the New American Labor Market, Russell Sage Foundation, New York, 2001, for an in depth analysis of the changes in mobility in the lower end of the labor market.) But it has been those in the lower part of the labor market that have suffered the most severe consequences. Trapped in a handful of industries such as retail trade, personal services, entertainment and recreation and business and repaid services, the prevalence of low-wage careers has more than doubled. These industries offer few opportunities for wage growth, promotion or training, which makes it difficult for workers to escape their grasp. (See Timothy J. Bartik, Jobs for the Poor: Can Labor-Demand Policies Help?, Russell Sage Foundation, New York, 2001, for discussion of job training and its impact on low-wage workers.) Career or skill ladders, never common in this sector, are even less common now and investment in training ranks the lowest among all industries. As more and more workers are increasingly cut off from the chance of ever attaining a stable well-paying job, Harvard economist Richard Freeman warns of an emerging apartheid economy. "Left unattended, the new inequality threatens us with a two-tiered society… in which the successful upper and upper-middle classes live fundamentally different from the working classes and the poor. Such an economy will function well for substantial numbers, but will not meet our nation's democratic idea of advancing the well being of the average citizen. For many it promises the loss of the 'American dream'." (Freeman, 1997, p. 3). While most employers chose the low-road model of freezing wages, reducing benefits, firing workers, using temporary workers, or relocating jobs to another part of the country or abroad, some employers have developed other ways to improve their financial performance by innovating their services, improving quality and training, and empowering their workers. (See David Ellwood, Rebecca M. Blank, Joseph Blasi, Douglas Kruse, William a. Niskanen and Karen Lynn-Dyson, A Working Nation: Workers, Work, and Government in the New Economy, Russell Sage Foundation, New York, 2000, for more in depth discussion of high-road strategies.) Experience in other countries suggests that managers will be more inclined to choose the high road if there is a higher minimum wage, which sets a floor below which wages cannot be pushed and forces them to think more creatively about how to keep firms competitive. Perhaps most important of all, managers are more likely to choose the high road when a national culture treats driving down wages as unacceptable behavior, instead of rewarding such managers with ever more lucrative pay packages. In the past 30 years our nation has made choices that resulted in declining economic opportunity for an increasing number of Americans. Although individual corporate decisions may make perfect sense for the individual actors, they may not be good for workers or our society, a classic problem in a political economy. Employers have wide discretion in how they respond to this changing economy. Either we continue to stand by as millions of jobs fail to provide the basics of a decent life or we can decide that it is untenable for the richest country in the world to allow nearly one-third of working families with children to earn less than the amount needed to maintain a basic standard of living. Not acting threatens the social fabric of our society and the stability of our democracy. History has repeatedly shown that unregulated markets do not produce optimal outcomes for both workers and firms. We can make better choices that will ensure the long-term economic future of our society and provide a fair share to working Americans and their families. Home