Declining Job Quality in the United States: Explanations and Evidence davId r. Howell and a rne l. Kalleberg The declining quality of jobs has emerged as a sharply rising overall wage inequality, and a key challenge for researchers and policymakers high and rising incidence of low pay. In con- in the twenty-first century. The growing realiza- trast to the egalitarian tendency during the first tion that the quality of jobs is central to ad- three postwar decades, post-1979 incomes have dressing a myriad of social and economic prob- either worsened or stagnated across most of the lems—such as economic development, family wage distribution, generating a growing polar- formation and social integration, poverty and ization between top 10 percent incomes and inequality, and individual well- being—has put the bottom 90 percent, and even more dramat- this age- old topic on the front burner for social ically, between the top 1 percent and the bot- scientists in the United States and around the tom 50 percent (Piketty, Saez, and Zucman world. This essay offers our perspective on the 2018; Acemoglu and Autor 2011; see also Sul- job quality problem and debate. We document livan, Warren, and Westbrook 2001; Atkinson changes in American job quality since the late and Brandolini 2011). Market incomes (before 1970s, survey leading explanations, and review taxes and benefits) for the average working- age the recent evidence. American adult actually fell between 1980 and After briefly reviewing the meaning of job 2014, reversing the strong upward trend of pre- quality, we describe American job quality, fo- vious decades. The incidence of low- wage and cusing on three dimensions of the post- 1979 very low- wage jobs (which we term poverty- low- wage crisis: stagnation or decline in real wage) grew, spectacularly so for young workers (inflation-adjusted) income and wage levels, (age eighteen through thirty- four) with less David R. Howell is professor of economics and public policy at the Milano School of Policy, Management, and Environment, the New School. Arne L. Kalleberg is Kenan Distinguished Professor of Sociology at the University of North Carolina at Chapel Hill. © 2019 Russell Sage Foundation. Howell, David R., and Arne L. Kalleberg. 2019. “Declining Job Quality in the United States: Explanations and Evidence.” RSF: The Russell Sage Foundation Journal of the Social Sciences 5(4): 1–53. DOI: 10.7758/RSF.2019.5.4.01. We thank the participants of the conference on Changing Job Quality held at the Russell Sage Foundation in June 2018 for their helpful input on this paper as well as the valuable feedback we received from three external reviewers. We especially appreciate the comments on earlier drafts that we received from Eileen Appelbaum, Alison Campion, Peter Cappelli, Maury Gittleman, Sabrina Howell, Jennifer Hunt, Lane Kenworthy, Jeffrey Madrick, and John Schmitt. Howell thanks the Washington Center for Equitable Growth for the support that helped make possible some of the empirical results that appear in the paper. Direct correspondence to: David R. Howell at [email protected], 72 5th Ave., #702, New York, NY 10011; and Arne L. Kalleberg at [email protected], CB #3210 Hamilton Hall, University of North Carolina, Chapel Hill, NC 27599. Open Access Policy: RSF: The Russell Sage Foundation Journal of the Social Sciences is an open access journal. This article is published under a Creative Commons Attribution- NonCommercial- NoDerivs 3.0 Unported Li- cense. 2 cHangIng job qual Ity than a college degree. The poverty-wage share employer demands for them as computeriza- even increased for workers with a college de- tion (and perhaps offshoring) transform the gree. Young workers also experienced sizable workplace, eliminating the need for humans to declines in their median wage (males after 1979, do routine tasks. women after around 2000). In contested market models, wage- setting Declines in nonwage benefits such as takes place in firms that operate in imperfect employer- paid health insurance and pensions markets, and under these conditions employ- have also been greater for lower- wage workers, ers typically have substantial bargaining (mon- another source of rising absolute and relative opsony) power and make use of strategic wage inequality in job quality. The expansion of low- policies to elicit optimal effort, leading to the wage jobs has often been linked to concerns existence of good and bad jobs for similarly about the growth of nonstandard jobs—for ex- skilled workers (for example, respectively, Man- ample, temporary help agency workers, on- call ning 2011; Lazear and Shaw 2007). This is a neo- workers, contract workers, and (especially) in- classical view in which market failures are seen dependent contractors or freelancers—and as essential features of product and labor mar- though the question of the extent of the in- kets, and as a result, corrective institutions can crease in the share of nonstandard jobs re- improve efficiency and well-being. The low- mains controversial, evidence (and perception) wage problem reflects rising monopsony power is considerable that many dimensions of job and, reflecting this power, the growing use of quality have worsened for both standard and human resource practices that push wages be- nonstandard workers. In short, as measured by low competitive market levels. these and other indicators of job quality, the last Social- institutional approaches share the four decades have been characterized by un- contested market vision of the centrality of bar- shared—even extractive—economic growth.1 gaining power within the firm, but broaden the We consider leading explanations for these relevant terrain by underscoring the impor- striking changes in job quality and labor mar- tance of social, political, and structural forces; ket inequality by grouping them into three per- the effectiveness of protective labor institu- spectives concerning how labor markets work. tions; and workplace culture and conflict (for At one end of the theoretical spectrum is the example, Kaufman 1988, 2004; Osterman 2011). mainstream economist’s competitive market This is a political economy vision in which the model, which explains the wage distribution power wielded by different key stakeholders strictly in terms of the interaction of the supply generates the institutional configuration and and demand for worker skills in highly com- organizational diversity that in turn helps de- petitive external labor markets (for example, termine key outcomes, including not just wages Goldin and Katz 2007; Acemoglu and Autor and nonwage job quality but also the nature 2011, 2012; Autor and Dorn 2013). In this view, and use of available production technologies. protective labor institutions, like labor unions, The low- wage problem is rooted in deregula- are inefficient interventions, but skill-biased tion and technological advances that have in- production technologies are reducing their im- creased employer power, manifested in firm portance, making the perfect competition restructuring and adversarial labor practices model an increasingly good approximation for aimed at cutting labor costs as the countervail- how labor markets work. The result is the law ing power of labor institutions collapsed. In of one wage, in which workers in the same skill this view, the decline in post- 1979 job quality group are paid the same wage in similar jobs can be explained by a declining willingness to no matter where they work. The low-wage prob- pay decent wages by lead firms with consider- lem is explained by the failure of worker skills able market power and a declining ability to pay (college degrees) to keep pace with increases in decent wages by their suppliers and other firms 1. By extractive growth, we mean unshared growth in which increasing inequality is characterized not just by a growing gap between top and bottom parts of the wage-income distribution, but by absolute declines in inflation- adjusted wages or incomes at the bottom. rsf: the russell sage foundation journal of the social sciences declInIng job qual Ity In t He un Ited states 3 confronted with increasingly competitive prod- countries that face similar technological ad- uct markets (Appelbaum 2017). vances and globalization pressures. These three perspectives assign different Researchers who see the labor market roles for markets, institutions, and conflict. In through the lenses of the two bargaining power contested market and social- institutional ap- approaches have focused on evidence of rising proaches, large shifts in labor demand and sup- monopsony power, increases in employment ply can be important sources of wage and other restructuring to reduce labor costs through out- job quality outcomes. For example, a surplus sourcing nonessential tasks formerly done in pool of workers vying for jobs can be expected house, and the eroding power of countervailing to undermine their bargaining power, as Adam labor institutions (such as laws governing the Smith argued centuries ago (discussed further labor process, collective bargaining protec- later). But the same is not the case for the role tions, and minimum wage legislation). In ad- of protective institutions (formal and informal) dition, social- institutional scholarship has in the textbook competitive market explana- pointed to the effects of changes in national tion. Here the wage is set in the external labor and local public policies that affect human re- market by supply and demand, and wage in- source practices