The Numbers

Number of low-wage workers in California

One of every three California workers earns low wages

32% of California workers earned less than $14.35 in 2017

This is down from 33% in 2014, but up from 30% in 2000

That translates into 4,900,000 low-wage workers

Defining low-wage work

Definition

We define low-wage workers as those earning less than two-thirds of the median full-time wage in California.

In 2017, this means workers making less than $14.35 per hour are considered low-wage workers.

Sample

We limit this analysis to California workers, ages 18-64, who were not self-employed.

For more documentation

See Data and Methods for more details.

Growing inequality

California has seen steep growth in wage inequality since the late 1970s.

Workers at the bottom and in the middle of the wage distribution have seen their earnings stagnate in real terms, after adjusting for inflation, while high-wage workers have seen their earnings rise sharply.

Worker Profile

Age

The large majority of California’s low-wage workers are adults, not teens.

The average age for low-wage workers is 36, compared to 40 for all workers.

Age over time

California’s low-wage workers are older than in previous eras.

Education

California’s low-wage workers are less educated than the overall workforce.

But, 45 percent have at least some college experience, and about one in eight has a bachelor’s or advanced degree.

Education over time

California’s low-wage workers are more educated than ever.

Between 1990 and 2017 the percentage without a high school degree declined by one-third, while the percentage with some college experience or a college degree increased by more than one-third.

Race and ethnicity

Workers of color constitute the majority of California’s workforce.

This is especially true for the state’s low-wage workers: for example, 56 percent are Latinx, compared with 39 percent for all workers.

Nativity

A higher proportion of California’s low-wage workforce is foreign born (40 percent) as compared to the proportion of all workers (33 percent).

Gender

Overall, slightly more than half of California’s low-wage workers are women, but there is substantial variation across demographic groups.

For all groups except Latina workers, women make up a disproportionate share of low-wage workers.

Rates of low-wage work

It is also useful to examine the proportion of low-wage workers within major demographic groups (ie. the rate of low-wage work).

Rates of low-wage work are above average among young workers, women, Latinx, black, and foreign-born workers.

Workers without a college degree also have high rates of low-wage work.

Families

Family income

Even when combining the wages of all workers in the family, the median family income of California’s low-wage workers was about , less than half of the state’s overall median.

Family poverty level

Low-wage workers are much more likely to live in families with incomes below the Federal Poverty Level (FPL) as compared to the overall California workforce.

More than half of low-wage workers live in families under 200 percent of the FPL.

Family structure

Close to half (46 percent) of low-wage workers have children, and 40 percent are married.

Economic insecurity for families

Low-wage workers’ families are more likely to have children receiving free or reduced-price school lunch, to have a higher than recommended rent burden, to have a family member enrolled in Medi-Cal, and to live below the Federal Poverty Line.

Other effects of low wages

Low wages negatively affect the physical and mental health of workers

All else equal, low wages (and in turn poverty) result in increased rates of blood pressure, obesity, and other chronic illnesses, as well as greater likelihood of premature death. Low wages also lead to poor mental health, including heightened stress and anxiety, and reduced cognitive functioning.

Kim D. and Leigh J. 2010. “Estimating the Effects of Wages on Obesity.” Journal of Occupational and Environmental Medicine 52(5):495–500. Leigh J and Du J. 2012. “Are Low Wages Risk Factors for Hypertension?” The European Journal of Public Health 22(6):854–59. Mani A., Mullainathan S., Shafir E., and Zhao J. 2013. “Poverty Impedes Cognitive Function.” Science 341(6149):976–80. Shapiro M., Rylant R., de Lima A., Vidaurri A., and van de Werfhorst H. 2017. “Playing a Rigged Game: Inequality’s Effect on Physiological Stress Responses.” Physiology & Behavior 180:60–69. Waldron H. 2007. “Trends in Mortality Differentials and Life Expectancy for Male Social Security-Covered Workers, by Socioeconomic Status.” Social Security Bulletin 67(3):28.

Parents’ earnings affect the physical and mental health of their children

Several quasi-experimental studies have found that an increase in family income reduces the likelihood of low birth weight and poor mental health among children. Higher wages are also associated with reduced rates of parental neglect and mistreatment.

Akee R., Copeland W., Costello E., and Simeonova E. 2018. “How Does Household Income Affect Child Personality Traits and Behaviors?” American Economic Review 108(3):775–827. Costello J., Compton S., Keeler G., and Angold A. 2003. “Relationships Between Poverty and Psychopathology: A Natural Experiment.” JAMA 290(15): 2023. Hoynes H., Miller D., and Simon D. 2015. “Income, the Earned Income Tax Credit, and Infant Health.” American Economic Journal: Economic Policy 7(1):172–211. Raissian K. and Bullinger L. 2017. “Money Matters: Does the Minimum Wage Affect Child Maltreatment Rates?” Children and Youth Services Review 72:60–70.

Parents’ earnings affect the future earnings and work hours of their children

All else equal, children from low-income families earn less and work fewer hours as adults. These effects are most pronounced when family income is low during the prenatal period and first five years of the child’s life.

Akee R., Copeland W., Keeler G., Angold A., and Costello J. 2010. “Parents’ Incomes and Children’s Outcomes: A Quasi-Experiment Using Transfer Payments from Casino Profits.” American Economic Journal: Applied Economics 2(1):86–115. Duncan G., Ziol-Guest K., and Kalil A. 2010. “Early-Childhood Poverty and Adult Attainment, Behavior, and Health.” Child Development 81(1):306–25.

Parents’ earnings affect the academic outcomes of their children

Multiple randomized studies have shown that an increase in family income results in young children doing better in school and completing more years of school. The reverse is also true, suggesting there are negative effects on the educational attainment of children from low-income families.

Duncan G., Morris P., and Rodrigues C. 2011. “Does Money Really Matter? Estimating Impacts of Family Income on Young Children’s Achievement with Data from Random-Assignment Experiments.” Developmental Psychology 47(5):1263–79. Clark-Kauffman E., Duncan G., and Morris P. 2003. “How Welfare Policies Affect Child and Adolescent Achievement.” American Economic Review 93(2):299–303.

Job Profile

Median hourly wages

The median wage for low-wage workers was $11.05 per hour in 2017, just over half the median hourly wage for all California workers.

Median annual earnings

Median annual earnings for low-wage workers in California were $19,000 in 2017, and only $10,000 for part-time workers.

Even when working full time, median earnings for low-wage workers only reached $21,000.

Full-time/Part-time status

Low-wage workers are twice as likely to work part time (defined as less than 35 hours per week) compared to the overall California workforce.

Full-year/Part-year status

Not only are low-wage workers more likely to work part-time, they’re also more likely to work part-year (less than 50 weeks) compared to the overall workforce.

The result is that only about two-thirds of low-wage workers have full-time, full-year jobs.

Union membership

Low-wage workers are less likely to be members of a union compared to the overall California workforce.

Employee benefits

Low-wage workers are less likely to receive health insurance or retirement benefits from their employer.

Other dimensions of job quality

Unpredictable and “on call” schedules

In a national sample of early career workers in 2011, the large majority of low-wage workers had fluctuations in their work hours (70 percent for full-time workers and 85 percent of part-time workers), and close to half received one week or less advanced notice of scheduling changes.
In a 2013 survey of California grocery store workers, 47 percent reported that their schedule varied from week to week at least some of the time, and 25 percent reported that they had to be available for “on call” shifts at least some of the time.
A recent survey of retail workers found that unstable scheduling led to higher rates of household financial insecurity, decreased measures of health and well being, increased parental stress, and decreased the amount of time parents spent with their children.

Lambert S., Fugiel P., and Henly J. 2014. “Precarious Work Schedules among Early-Career Employees in the US: A National Snapshot.” EINet. Jayaraman S. 2014 “Shelved: How Wages and Working Conditions for California’s Food Retail Workers Have Declined as the Industry Has Thrived.” Food Labor Research Center, University of California, Berkeley. Carrillo D., Harknett K., Logan A., Luhr S., Schneider D. 2017. “Instability of Work and Care: How Work Schedules Shape Child-Care Arrangements for Parents Working in the Service Sector.” Social Service Review 91(3):422-455.

Wage theft

A 2008 survey of very low-wage workers in Los Angeles (median wage of $8.06 in 2008 dollars) found rampant wage theft: 30 percent were paid less than the minimum wage in the previous work week; 79 percent of those who worked overtime were not paid the legally required overtime rate; and 71 percent did not receive any pay when they worked before or after their regular shift. Workers with violations lost an average of $2,070 to wage theft, out of total annual earnings of $16,536.

Milkman R., Gonzalez A., and Narro V. 2010. “Wage Theft and Workplace Violations in Los Angeles.” Institute for Research on Labor and Employment, University of California, Los Angeles.

Industries and Occupations

Industries

Low-wage workers are employed throughout California’s economy, but retailers and restaurants alone account for 27 percent of the state’s low-wage workers. (Industry is a category that describes what the business does.)

Rates of low-wage work by industry

California industries that have high rates of low-wage work include key parts of the service sector (such as restaurants, retail, hotels, and home care and child services), as well as key parts of the goods-producing sector (such as agriculture and non-durable manufacturing).

Occupation groups

Low-wage workers are employed in all major occupations, but three groups – office and administrative support, sales, and food preparation and serving occupations account for 40 percent of California’s low-wage workers. (Occupation is a category that describes what the worker does.)

Rates of low-wage work by occupation group

California occupations that have high rates of low-wage work include service jobs (such as food preparation workers, home care workers, and janitors), as well as jobs in the goods-producing sector (such as farm workers and warehouse workers).

Common low-wage detailed occupations

Retail sales workers, personal care aides, childcare workers, and cooks and food preparation workers are the most common low-wage occupations.

More than half of low-wage workers work in these ten occupations.

Independent contracting and gig work

Independent contractors work throughout California’s economy

Independent contractors can be found in occupations and industries across California’s economy. Workers who use on-demand labor platforms such as Uber and TaskRabbit are a subset of independent contractors.

Data on gig work is limited

We do know that 8.5 percent of workers in California are independent contractors at their main job. The proportion of the workforce actively using on-demand labor platforms to earn money is very small - 0.5 percent in the US and between 0.7 and 1.2 percent in California cities.

Bernhardt A. and Thomason S. 2017. “What Do We Know About Gig Work in California? An Analysis of Independent Contracting.” Center for Labor Research and Education, University of California, Berkeley. Farrell D. and Greig F. 2016. Center for Labor Research and Education, University of California, Berkeley. “The Online Platform Economy. Has Growth Peaked?” JPMorgan Chase & Co. Institute.

Independent contracting as a second job may be increasing

Recent research has shown that since the early 2000s, the proportion of the US workforce that is an independent contractor at their main job hasn’t increased. However, there is evidence suggesting an increase in the number of people who are doing independent contracting for supplemental income, in addition to their regular job. (For example, sole proprietor tax filings have increased in California since the early 2000s.)

Common independent contractor occupations in California

We do not have good data on the wages of independent contractors. However, here is a look at common independent contractor occupations in California that are typically paid low wages.

Typically low-wage occupations

Janitors, maids, and housekeepers
Personal care aides, home health aides, childcare workers
Grounds maintenance workers
Retail sales workers
Material moving workers (for example, in car washes and waste management services)
Cooks
Dry cleaning and laundry workers, tailors, sewing machine operators
Animal care workers

Typically low- to mid-wage occupations

Construction trades workers
Beauty salon, barber shop and nail salon workers
Truck and taxi drivers
Car repair mechanics
Customer service representatives
Couriers and messengers, stock clerks, and dispatchers

Employment projections by industry

Official employment projections to 2024 do not show a substantial change in California’s industry mix, meaning that our state’s low-wage jobs problem will continue into the foreseeable future.

Employment projections by occupation

Low-wage occupations top the list of projected job growth in California between 2014 and 2024.

Employment projections by educational requirement

Official projections also show no meaningful change by 2024 in the distribution of employment by occupations’ required education for an entry-level job.

Geography

Rates of low-wage work by workplace county

Jobs in the Central Valley and far Northern California are more likely to pay low wages.

On the other hand, jobs in the Bay Area are less likely to pay low wages, but the low-wage measure is not adjusted for regional differences in the cost of living.

Where low-wage workers work

California’s low-wage jobs are concentrated in Los Angeles county, with 29 percent of low-wage jobs located in that county.

Rates of low-wage work by residence county

Workers who live in Northern California and the Central Valley are more likely to earn low wages.

Workers living in the Bay Area are less likely to earn low wages, but the low-wage measure is not adjusted for regional differences in the cost of living.

Where low-wage workers live

California’s low-wage workers also live most frequently in Los Angeles county, with 30 percent of low-wage workers residing in that county.

Geography of low-wage work data table

Data and Methods

Data sources

The data explorer uses three data sources:

Economic Policy Institute (EPI) Uniform Extracts of the Current Population Survey, Outgoing Rotation Groups (CPS ORG), 1979-2017
IPUMS-CPS extract of the Annual Social and Economic Supplement of the Current Population Survey (March CPS), 2017
IPUMS-USA extract of the American Community Survey (ACS) 1-year sample, 2017

Sample definition

Due to differences in data availability in the three sources, each dataset has a slightly different sample definition.

The ACS sample comprises 18-64 year-olds, with non-zero earnings in the past year, who were not self-employed or unpaid family workers, and who were at work last week or had a job but were not at work last week. The ACS sample only includes individuals who live and work in the state of California.

Neither CPS dataset identifies the respondent’s place of work, so for each CPS dataset our sample is defined as California residents 18-64 years old, with non-zero earnings either last week (CPS ORG) or last year (March CPS), who were employed last week, but not self-employed.

Defining low wage

Differences in data availability also affect the construction of the hourly wage variable in our three datasets. In the CPS ORG, we use an hourly wage variable constructed by EPI. Specifically, for workers paid on an hourly basis, the variable is equal to their actual reported hourly wage. For workers paid on a weekly basis the variable is constructed by dividing their earnings last week by the numbers of hours worked last week. For both hourly and weekly workers, the wage measure used to determine low wages includes pay from tips, overtime, and commissions, before tax deductions.

The March CPS does not include an hourly or weekly earnings measure, so we constructed the hourly wage measure by dividing the worker’s annual earnings by the product of usual hours worked per week and weeks worked last year. The March CPS earnings variable includes all income from the worker’s job, including pay from tips, overtime, and commissions, before tax deductions.

The ACS hourly wage variable was also calculated as annual earnings divided by the product of usual hours worked per week and weeks worked last year.¹ In the ACS, the “weeks worked last year” variable is a categorical variable of intervals of weeks worked (such as 14- 26 weeks or 50-52 weeks). We converted this variable to a continuous variable by setting the number of weeks worked to the midpoint of each interval.² The ACS annual earnings variable includes wages, salary, commissions, cash bonuses or tips from all jobs, before tax deductions. For each dataset, we trimmed hourly wage outliers by dropping wages less than $0.50 or greater than $100 in 1989 dollars.³ We then smoothed the hourly wages with a function that randomly adds or subtracts between $0 and $0.25 to each hourly wage. Finally, we adjusted wages from previous years to 2017 dollars using the CPI-U for California.

We used the CPS ORG dataset to identify low-wage workers. We set the hourly wage threshold at two-thirds of the median full-time wage, a widely used metric.⁴ In 2017, the value of the threshold was $14.35, and this value was inflation-adjusted for data from previous years.

1 Since the ACS surveys respondents over the course of the year and asks about earnings in the previous 12 months, we apply the ACS-provided adjust variable to convert the reported earnings to real dollars.

2 We tested the validity of the interval mid-point using the continuous version of weeks worked last year in the Current Population Survey (March supplement). For low-income workers in California, average weeks worked in each of the intervals was not substantially different from the interval midpoint (except for the first interval, which is dropped in our sample).

3 This step follows the methodology of The State of Working America, Economic Policy Institute.

4 Boushey H., Fremstad S., Gragg R., and Waller M. 2007. “Understanding Low-Wage Work in the United States.” The Mobility Agenda and Center for Economic and Policy Research.

Low-Wage Work in California