Low-wage Labour, A European Perspective

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Workshop 8 May 2008 London
Working out of Poverty A progressive labour
market
Low-wage Labour, A European Perspective Wiemer
Salverda
AIAS
LoWER Amsterdam Institute for Advanced Labour
Studies European Low-wage Employment Research
network www.uva-aias.net

www.uva-aias.net/lower.asp
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A four-year five-country project- some
aggregate analysis- 200 case studies low-wage
jobs in low- paying industries (Ho, Re,
CC, Hp, Fo) Initiated by Russell Sage
Foundation, New York, with strong stimulus from
Robert Solow (Nobel Laureate Economics
1987)Five books just published presented to
John Martin (director OECD)(comparative volume
including US in preparation)
New Research Results
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Level of low-paid employment in 2005
Main Differences Within EU
Incidence of low pay among employees and all, ,
2005 (national data)
Germany now at par with US DK and FR far lower
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Level evolution of low-paid employment
The Familiar Picturehigh UK, US
Incidence evolution of low pay among employees,
, 1973-2005 (national data)
US around 25 UK up from 12 to 22, steady since
1997
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Level evolution of low-paid employment
Steadily Low LevelsDK, FR
Incidence evolution of low pay among employees,
, 1973-2005 (national data)
DK always around 9 FR slowly down to 11
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Level evolution of low-paid employment
Moving up to High LevelsDE, NL
Incidence evolution of low pay among employees,
, 1973-2005 (national data)
DE up since mid-1990s (full-time!) NL sharply up
from 9 to 17 in mid-1990s
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Low pay and employment rate in 2005
Low Pay and Employment Diverge
Incidence of low pay and employee employment
rate, , 2005 (national data)
DK highest E-rate and lowest LWI Only FR
trade-off, perhaps ...
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Evolution employee employment rate
Contradictory Movements Pay and Jobs
Employees to population (15-64) ratio, ,
1973-2005 (OECD economic outlook)
DK high US up down UK down on balance DE, FR
up NL down up (head count!)
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Earnings mobility
Transitions out of and into Low Pay
of employees remaining/transiting in a year,
pooled over 1995-2001 (ECHP)
DK, FR more mobile upward DK often via no job? UK
lower no-jobs stays NL frequent low-pay access
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• 1. Main differences are now within EU, more than
  between US and EU
• 2. Surprisingly stable levels of incidence, low
  as well as high (throws up very interesting
  questions)
• 3. No prima facie relation of low pay incidence
  to employment success
• 4. More mobility in the two countries with a
  lower incidence

Summary 1Overall
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Characteristics of low pay
Demographics Women
Employees-to-population ratios by age, , 2001
(ECHP, Eurostat and CPS)
Youth makes most of the difference prime age
only DK exceptional UK older women (head count!)
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Characteristics of low pay
Demographics Men
Employees-to-population ratios by age, , 2001
(ECHP, Eurostat and CPS)
Youth most of the difference again prime age DK
less exceptional FR older men lower, but not
because of low pay
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Characteristics of low pay
Usual Suspects and ...
Importance part-time (lt35 hrs) jobs for low-wage
employment, Netherlands, 1979-2005
Youth educational system incl. grants Female 2nd
earners combine with household All seek part-time
jobs
Part-time shares in low-wage employment,
2001 DK FR DE NL UK US 38 21 35 64 49 39
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Characteristics of low pay
Determinants (selected) of probability, pooled
1995-2001 (ECHP, bold significant)
Industries and Low Pay
DK low risk for women, steep for age NL steep
for education UK, NL part-time effects and risk
of continuation
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Characteristics of low pay
Shift-share Comparison of Low Pay
Differences in low-wage incidence compared to US
structure and incidence, 2001 (ECHP)
Sectoral effects are small comparable DE, NL
face higher risk with US structure
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Evolution middle of earnings distribution
Fall of Middle Hinders Pay Careers
Percent of employees paid between 2/3 and 1.5
median hourly wages, 1973-2005 (various data)
DE, NL strong fall, towards low pay US, UK low,
declining FR may be stable (DK no data)
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• 1. Usual suspects suffer more from low pay
  everywhere youth, women, low skilled,
  immigrants etc.
• 2. Growing part-timisation of low-wage jobs poses
  career problems for low-skilled school-leavers
  unemployed, also for improving female hours
  worked (also necessitates FTE analysis)
• 3. Low-wage sectors are universal and main users
  of part-time jobs, but comparative sectoral
  structure has only a small effect
• 4. Declining middle affects career prospects
  after a low-paid start

Summary 2Composition
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Poverty and pay
Working-age Poverty and Work
Low-pay threshold and poverty wages, 2005
(Eurostat)
Difference of principle labour-market pay versus
workers household situation
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Poverty and pay
Working-age Poverty and Work
Population and employed at risk of poverty (),
importance of employed, 2005 (Eurostat)
Modest aggregate differences Larger role of
employed in UK, NL
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Poverty and pay
Households In-work Poverty
Proportion of the population in poor households,
19842001 (OECD)
Larger differences, and US much higher
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Affecting the tail of low pay
Minimum Wage and Low Pay
Minimum wage to median and employment at minimum
wage and low pay, US 1979-2006
No effect on LWI Equal fall of MW MW-employment
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Affecting the tail of low pay
Minimum Wage and Low Pay
Minimum wage to median and employment at minimum
wage and low pay, NL 1979-2006
Strong fall of MW, less of MW jobs and (later)
growth of LWI
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Affecting the tail of low pay
Minimum Wage and Low Pay
Minimum wage to median and employment at minimum
wage and low pay, UK 1999-2007
Increasing MW, stable MW jobs and LWI
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Affecting the tail of low pay
Distribution of Low Pay and MWs
Very different tails and impact of minimum wage
Very long tails for DE without MW, NL with youth
MWs
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• 1. Poverty and low pay are not identical though
  related more research along IPPR lines is needed
• 2. Minimum wage does not necessarily affect LWI
• 3. Tail of low wages very different with
  diverging effects of MW
• LOW PAY MAY BE A COUNTRYS CHOICE BUT IT IS NOT A
  SINGULAR CHOICE DIMINISHING IT MAY BE DESIRABLE
  FOR SEVERAL REASONS (POVERTY, PRODUCTIVITY) ITS
  PART-TIME-ISATION DEMANDS COMPENSATING MEASURES

Summary 3Policies
Overall Conclusion