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Generating Jobs

Generating Jobs: How to Increase Demand for Less-Skilled Workers

Richard B. Freeman
Peter Gottschalk
Copyright Date: 1998
Published by: Russell Sage Foundation
Pages: 344
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  • Book Info
    Generating Jobs
    Book Description:

    The American economy is in danger of leaving its low-skilled workers behind. In the last two decades, the wages and employment levels of the least educated and experienced workers have fallen disastrously. Where willing workers once found ready employment at reasonable wages, our computerized, service-oriented economy demands workers who can read and write, master technology, deal with customers, and much else. Improved education and training will alleviate this problem in the long run, but educating the new workforce will take a substantial national investment over many years. In the meantime, we face increasingly acute questions about how to include low-skill workers in today's economy.

    Generating Jobstakes a hard look at these questions, and asks whether anything can be done to improve the lot of low-skilled workers by intervening in the labor market on their behalf. These micro demand-side policies seek to improve wages and employment levels-either by lowering the costs of hiring low-skilled workers through employer subsidies, or by raising wage levels, benefit levels, or hours of employment, or by providing employment via government jobs. Although these policies are not currently popular in the U.S., they have long been used in many countries.Generating Jobsprovides a clear-eyed assessment of this history, and asks if any of these policies might be applicable to the current problems of low-skilled workers in the United States.

    The results are surprising. Several recently touted panaceas turn out to be costly and ineffective in the American labor market. Enterprise zones, for instance, are an expensive way of moving jobs into areas of high unemployment, costing as much as $60,000 per job. Similarly, job-sharing, which has had uneven success in Europe, turns out to be ill-suited to conditions in the U.S., where wages are relatively low and workers need to work long hours to maintain income. On the other hand, a number of older, less flashy policies turn out to have real, if modest, benefits. Wage subsidies have increased employment among qualifying workers, and public employment policies can increase the number of workers from targeted groups working during the program.

    While acknowledging that many solutions are counterproductive, this definitive review of active labor market policies shows that many programs can offer real help. More than any rhetoric,Generating Jobsis the best guide to future action and a serious response to those who claim that nothing can be done.

    eISBN: 978-1-61044-220-6
    Subjects: Business, Economics, Sociology

Table of Contents

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  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-vi)
  3. Contributors
    (pp. vii-viii)
  4. Introduction
    (pp. 1-18)

    Less skilled and low-paid workers—those in approximately the lowest thirty percentiles of the earnings distribution—are in trouble in the United States. Their real wages fell during the 1980s, and their employment prospects have worsened. While workers in the middle parts of the earnings distribution have not fared well, the sharp drop in the rewards to those at the bottom has shocked many economists and analysts. One outcome of the fall in earnings for those at the bottom of the distribution has been that the gap between low-paid and the high-paid workers grew markedly through the 1980s, bringing the...

  5. Part I Wage Subsidies and Public Employment

    • Chapter 1 Wage Subsidies for the Disadvantaged
      (pp. 21-53)
      Lawrence F. Katz

      Growing disparities in the economic fortunes of American families over the past twenty years have been associated with large increases in wage inequality and rising gaps in labor market outcomes between highly skilled workers and those less skilled. The real earnings of many groups of workers, particularly less-educated young men, have fallen since the early 1970s. Much research suggests that a major contributor to these changes has been a substantial decline in the relative demand for the less educated and those who do more routinized tasks compared to the relative supply of such workers (see, for example, Bound and Johnson...

    • Chapter 2 The Spatial Dimension: Should Worker Assistance Be Given to Poor People or Poor Places?
      (pp. 54-71)
      Edward M. Gramlich and Colleen M. Heflin

      The basic trends in the 1980s job market suggest a giant mismatch—demand is growing for highly skilled workers and not growing for less skilled workers. Those workers with the requisite marketable skills then get good job offers and enjoy some combination of rapidly rising employment offers and real wage growth. Those on the other side of the skill distribution, without the requisite marketable skills, suffer the reverse fate—some combination of low employment possibilities and low real wage growth.

      For a long time now social scientists have wondered about the role of spatial factors in this process. While it...

    • Chapter 3 The Impact of Changes in Public Employment on Low-Wage Labor Markets
      (pp. 72-102)
      Peter Gottschalk

      With government employing roughly 15 percent of the workforce, this sector could have a substantial impact on the labor markets for less skilled workers. Government is simply too big an actor in the labor markets to be ignored. More modest in size are the highly targeted public service employment (PSE) programs that have been used to deal directly with the labor market problems of specific groups, such as welfare recipients and unemployed youth.

      PSE jobs have now almost disappeared, but they were a major tool of New Deal legislation and played a prominent role in the legislation of the mid-1970s.¹...

  6. Part II Changes in Modes of Pay

    • Chapter 4 Profit-Sharing and the Demand for Low-Skill Workers
      (pp. 105-153)
      Douglas L. Kruse

      Unemployment is a major difficulty of low-skill workers. Lower levels of education are associated with higher unemployment rates,¹ reflecting in part a higher risk of job displacement among low-educated workers (Seitchik 1991); in addition, after displacement workers with low levels of education have longer periods of joblessness than do more educated workers (Swaim and Podgursky 1991). Policies that lower unemployment and increase job security would have particular benefit for low-skill workers.

      One proposed solution to the problem of high unemployment is widespread employee participation in profit-sharing. It has been theorized that profit-sharing decreases unemployment levels and the severity of recessions...

    • Chapter 5 The Effects of Employer Mandates
      (pp. 154-192)
      Susan N. Houseman

      The wages and benefits of less educated workers have fallen both in absolute terms and relative to the wages and benefits of more educated workers over the last fifteen years. At the same time, there has been a large trend increase in the unemployment rate and a large trend decline in the labor force participation rate of less educated men. The decline in the real wages and benefits of less educated men and women and the decline in the rate of employment among less educated men have been accompanied by a dramatic increase in income inequality and poverty in the...

  7. Part III Employment Regulations

    • Chapter 6 Work-Sharing to Full Employment: Serious Option or Populist Fallacy?
      (pp. 195-222)
      Richard B. Freeman

      Work-sharing, the practice of reducing hours worked to increase employment, is controversial. Many economists and policy analysts reject work-sharing as ineffective owing to its potential adverse effects on labor costs. But other analysts favor work-sharing, stressing the benefits of distributing joblessness more evenly. In periods of high unemployment, governments often look favorably on the practice. In the 1980s, several European countries tried work-sharing schemes, and Canada and sixteen states in this country extended unemployment insurance to short-time workers to reduce layoffs. In the 1930s, President Hoover encouraged firms to reduce hours, and the Roosevelt administration enacted the time-and-a-half overtime provision...

    • Chapter 7 Employer Hiring Decisions and Antidiscrimination Policy
      (pp. 223-257)
      Harry J. Holzer

      In the past few decades, the employment and earnings of young blacks have deteriorated significantly, especially among the less educated. This deterioration has occurred in spite of efforts to protect and enhance their employment status through a variety of governmental antidiscrimination efforts, such as federal equal employment opportunity (EEO) laws and affirmative action programs for government contractors. Furthermore, the employment and earnings of females have improved during the same period, and even less educated females have made gains relative to less educated males.

      A fairly large body of research suggests that various changes on the demand side of the labor...

    • Chapter 8 Contingent Work in a Changing Labor Market
      (pp. 258-294)
      Rebecca M. Blank

      The recent structural changes in the U.S. labor market have generated growing concern about the increasing use of nonstandard employer-employee contracts, often referred to as “contingent work.” In this chapter, I use the term “contingent work” to refer to all jobs that involve nonstandard employer-employee contracts where a standard contract is assumed to be a full-time, permanent employment relationship. Contingent work typically includes part-time work, work performed by independent contractors and on-call workers, and work done by temporary workers, hired either directly for limited-duration projects or through temporary help firms. Various authors have claimed that employers are increasingly dividing their...

  8. Part IV National Differences

    • Chapter 9 The Collapse in Demand for the Unskilled: What Can Be Done?
      (pp. 297-320)
      Stephen Nickell

      In the United States, the poor are getting poorer. In Germany,¹ by contrast, the poor are getting richer. Britain is in between. The rich, on the other hand, are getting richer in all three countries.

      Across the OEED, changes in technology and trade patterns have led to a significant decline in the demand for workers without skills. This fact is at least partly responsible for the wage changes in the three countries discussed in this chapter. So we are left with something of a puzzle. Given that shifts in technology and trade patterns are much the same in all developed...

  9. Index
    (pp. 321-336)