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When there is no way up: Reconsidering low-paid jobs as stepping stones

Author

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  • Gail Pacheco

    (NZ Work Research Institute, Faculty of Business, Economics and Law at AUT University)

  • Alexander Plum

    (NZ Work Research Institute, Faculty of Business, Economics and Law at AUT University)

Abstract

Several studies have shown significant persistence in low pay, along with a greater probability of moving out of low pay and into higher pay in the future. Low-paid jobs are therefore often deemed stepping stones, rather than dead-ends. However, using point-in-time information past literature has usually only considered changes in labour market status at the annual level and not accounted for within-year changes of an individual’s low pay position. Using population-wide administrative data with monthly earnings information, this study accounts for changes in an individual’s low pay position and shows that attachment to the low pay sector is highly heterogeneous. The empirical evidence points to workers that have a strong attachment to the low pay sector facing a very high probability of staying low-paid employed; and the likelihood of their low pay jobs being stepping stones towards higher pay are found to be negligible.

Suggested Citation

  • Gail Pacheco & Alexander Plum, 2020. "When there is no way up: Reconsidering low-paid jobs as stepping stones," Working Papers 2020-08, Auckland University of Technology, Department of Economics.
    • Handle: RePEc:aut:wpaper:202008
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    References listed on IDEAS

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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Are low-paid jobs really a stepping stone to better pay? A new study suggests it’s not that simple
      by ? in Forum:Blog on 2021-06-24 10:52:27

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    Cited by:

    1. Lixin Cai, 2023. "The Steppingstone Effect of Casual Employment in Australia: A Re‐Examination," The Economic Record, The Economic Society of Australia, vol. 99(326), pages 385-409, September.

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    More about this item

    Keywords

    low pay; pay persistence; dynamic random effects models; administrative data;
    All these keywords.

    JEL classification:

    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis

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