The classic argument for this status downgrade is one of cost-reduction. In the private sector, low-skilled labor has long become the work of the poor. Union manufacturing labor was outsourced all together, and the service industry was, well, "in-sourced": low-skilled jobs are largely done by immigrants or disenfranchised domestic populations. Market pressures have simply beat out any countervailing social pressures, whether organized labor or simple decency, to pay higher wages.
So, let's imagine a situation in which low-skilled labor is payed a middle-class wage. Janitors, cashiers, clerks, dishwashers, landscapers, garbage collectors, etc. would all be paid, say, $20 an hour. This of course would increase the price of goods in relevant industries. Restaurants, consumer goods, civil services and the like would become more expensive. It may be the case that growth would slow, and overall wages would stagnate. (I'm getting in over my head here, as the economics becomes complex). Yet would the economy somehow fall apart, so that the effective result would be more poor people - people who could not find employment at all? Or would the result be a diminished standard of living for the middle and upper classes, whose incomes might drop slightly?
Regardless, the argument for maintaining the current system, is that we allow the market to make a determination that low-skilled laborers must live in poverty. And so they do. Countless families live paycheck to paycheck, often without health insurance or any sense of job security. This is the bargain that we have apparently made for a "pro-growth", market-based model.
One of the arguments for allowing this structure to exist is that poverty wages provide an incentive structure that drives people to work harder, and to invest more in themselves, furthering their human capital and capacity for social mobility. This is at least partially true. But at the same time it relies on a model of meritocratic social Darwinism in which the "fittest" escape poverty and the rest stay poor. The problem with this is that being "fit" or unfit is at least largely socially or genetically determined. One's life experiences greatly affect one's ability to take advantage of opportunities that may exist. By equating one's "fitness" with just deserts, we are condemning great numbers of people to poverty when they had no real option to do otherwise. (Likewise, we are congratulating for their the success untold numbers of people who did have the option to succeed).
A corollary argument to that of incentivization, is that many low-skill jobs should not be thought of as careers. This is the "paper route" model of labor: these positions should be temporary, and that workers should think of them as stepping stones to more skilled careers. The problem with this model is that there are many reasons why workers might get stuck in low-skill jobs. For instance, even if there are opportunities for advancement at a particular organization, the limitations of organizational hierarchy demand that the majority of workers do not move up. The definition of a pyramid is that upward mobility necessarily narrows. And aside from the endless possibilities for the process of advancement to be corrupted by favoritism, nepotism, etc., there are countless external and internal pressures on workers that control for their ability to select from opportunities to get ahead. Things such as families, access to education, financial resources, all can limit self-efficacy. But internal pressures exist as well, as personal skill sets such as ability to communicate effectively, cognitive processing, attention, emotional regulation, knowledge of cultural and operational systems all determine one's ability to leverage oneself within an organization.
Another argument for allowing this structure to exist is that society has no real choice. Capitalism might sometimes be ugly, but it is better than the alternatives. Furthermore, there may be unintended consequences of trying to manipulate such a complex economic system. This may in many ways be true. But it seems there are many things we can do, if we accept the premise that no one who works should really be paid a poverty wage, to at least ameliorate some of the hardships of poverty, as well as facilitate access to social capital that can be used by the working poor to transcend their position.
Because of the realities of the property market, the poor tend to be shunted into ghettos. This can exponentially pressurize options for mobility in a negative way. No where is this more true than in access to quality education. Not only are the working poor almost by definition lacking in human capital, making the raising of highly intelligent and prepared children less-likely, their children are placed in schools filled with similarly disadvantaged children. One thing society can do to address this problem is to invest in an interventionist model of education in poor neighborhood schools, in which a variety of targeted measures are taken that facilitate greater access to resources that will promote adequate academic and social development. This ought to include, but not be limited to: smaller class sizes, greater access to technology, extra classroom aides, after-school programs, extended hours, on-site social workers, and community-services integration.
Furthermore, on a general level, the existence of a working poor means that there should be a consistent effort to maintain proper safety nets, such as universal access to health care and child services. Job training and community colleges should be well-funded and outreach an integral aspect of service provision. Homeless shelters should be properly equipped to guarantee families a safe and comfortable place to "land". Short-term lending services with low-interest rates ought to be provided by non-profits trained explicitly in working with disadvantaged, at-risk populations.
As to the question of reducing the number of working poor by driving up wages, I'm uncomfortable taking any real positions on policy. Although I think there ought to be some real, effective policies that we can use. And in the end, unions have provided leverage against wage depression that may have been unmatched, at least in terms of policy options that have been attempted.
In the end, this is a moral question. No one should have to live in poverty if one does not wish to. And given that many market forces conspire to keep a consistent percentage of the population in working poverty, we ought to do something about it. If we can't find a way to raise their wages, we can at least provide services that keep their poverty from causing even more harm.
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