Basic Needs and the American Paycheck: New Indicators of Pay Quality and Group Disparities, 1979-2019

Abstract

A defining feature of the post-1979 American economy has been increasing pay inequality, but for many working families, far worse than falling further behind those at the top has been the growing threat to living standards made possible by a full-time job: falling pay quality. There are many good inequality metrics but no intuitively transparent indicators of the pay quality distribution. This paper constructs these by anchoring different points in the wage distribution to the living standards each wage makes possible with a single regular full-time job using evidence from basic-needs family budget calculators. This approach is illustrated with three anchored thresholds for the lowest-cost household type—a single-adult household without dependents: a decent-pay (living-wage) threshold that distinguishes low-pay from decent-pay jobs supplemented by poverty-pay and good-pay thresholds that define the bottom tier of low-pay jobs and the upper tier of decent-pay jobs. Pay quality (PQ) indicators measure the distribution of employment across these tiers of the PQ hierarchy for workers stratified by age, education, gender, race, and nativity between 1979 and 2019 using CPS-ORG data. Main findings include 1) substantial decoupling of decent-pay jobs (number and incidence) and GDP growth; 2) a striking narrowing of gender PQ gaps—whether measured by decent-, poverty-, or good-pay incidence—that reflect large absolute declines in PQ for men, particularly young (18-34) men without a college degree; 3) a modest rise in the overall racial poverty-pay gap between 1979 and 2019, driven by an increasing gap between white and nonwhite women that has dominated a declining gap between white and nonwhite men; and 4) the disappearance by 2019 of the large poverty-pay gap favoring native- over foreign-born young less-educated workers, both men and women. These findings document profound long-term shifts in paycheck-based living standards across American demographic groups with important political and social implications.