Wage Differentials, Skills, and Institutions in Low-Skill Jobs

Abstract

The typical study of wage differentials examines workers at all educational levels and attends closely to the link between education and wages. Little research has looked at determinants of wage differentials specifically among workers with low educational attainment. This study, using the 1998–2002 Bay Area Longitudinal Surveys and the 2001–2003 Occupational Information Network, examines which skills and labor market institutions affected wages in jobs for individuals with a high school education or less and little work experience. The author finds that jobs demanding office/clerical skills, mechanical skills, or the “new basic” skills of reading, math, problem-solving, and communication paid higher wages, on average, than did other low-skill jobs, especially those in which physical skills were relatively important. Also positively associated with wages for these low-skilled workers were union representation and location in an industry containing relatively few low-skill jobs.