Demand Shifts and Low-Wage Workers

Abstract

Conventional economic wisdom holds that labor demand in the U.S. labor market has shifted over the past few decades against low-skilled workers, contributing to the plight of the working poor. This result, however, is sensitive to how we define unskilled workers. If they are defined in terms of education levels, the negative demand shift is readily apparent. But if they are defined by the real wages they receive, then, at least for males, it appears that the demand for (or at least the utilization of) low-wage workers increased. The skill-based, as opposed to wage-based, demand shift argument led policy makers to consider education and training policies almost exclusively as the solution to the wage problems documented herein. While the importance of this supply-side approach should not be diminished, policy ideas intended to raise wages, such as monetary policy, unions, minimum wages, and trade policy are also important.Education; Low Skilled; Low Wage; Poor; Unskilled; Wage