How Employer Wage-Setting Shapes Working Poverty

Even hiring for the same occupation, some employers post the lowest wage possible, while others follow a high-road strategy. How does employer power over wage-setting shape working poverty? High-premium employers may lift workers out of poverty, but they may also exclude low-income applicants. We link household panel income data to employer wage records and find working poverty rates four times higher at low-premium employers, compared to high-premium employers, and poor hires twice as likely to stay in poverty. However, high-premium employers hire poor workers so rarely that they lift workers out of poverty less often than low-premium employers do. Employer pay-setting is a key determinant of working poverty overall: if all employers became high-premium, without changing employment composition, the working poverty rate would decrease by two-fifths. But reshuffling workers across employers would have little impact, as low-premium employers continue to pull workers into poverty. While low-paying employers harbor and produce the working poor, high-paying employers exclude them altogether.