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The Low-Pay No-Pay Cycle: Are There Systematic Differences across Demographic Groups?

Author

Listed:
  • Yin King Fok
  • Rosanna Scutella
  • Roger Wilkins

Abstract

type="main" xml:id="obes12084-abs-0001"> We investigate transitions between unemployment, low-paid employment and higher-paid employment using dynamic panel data methods applied to household panel data. We find state dependence in both unemployment and low-paid employment and evidence of a low-pay no-pay cycle. However, we also find significant differences in effects across population subgroups. Typically, the young and better-educated face lower penalties from unemployment and low-paid employment. Further, low-paid employment is preferable to unemployment for women regardless of their demographic characteristics, but for men who have only completed secondary schooling, low-paid employment actually decreases the chances of entering higher-paid employment by more than does unemployment.

Suggested Citation

  • Yin King Fok & Rosanna Scutella & Roger Wilkins, 2015. "The Low-Pay No-Pay Cycle: Are There Systematic Differences across Demographic Groups?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 77(6), pages 872-896, December.
    • Handle: RePEc:bla:obuest:v:77:y:2015:i:6:p:872-896
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    File URL: http://hdl.handle.net/10.1111/obes.2015.77.issue-6
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    Cited by:

    1. Claus Schnabel, 2021. "Low-wage employment," IZA World of Labor, Institute of Labor Economics (IZA), pages 276-276, March.
    2. Adrian Chadi & Clemens Hetschko, 2021. "How Job Changes Affect People's Lives — Evidence from Subjective Well‐Being Data," British Journal of Industrial Relations, London School of Economics, vol. 59(2), pages 279-306, June.
    3. Jeff Borland & Michael Coelli, 2016. "Labour Market Inequality in Australia," The Economic Record, The Economic Society of Australia, vol. 92(299), pages 517-547, December.
    4. Pacheco, Gail & Plum, Alexander T. & Sloane, Peter J., 2020. "Not Much Bounce in the Springboard: On the Mobility of Low Pay Workers," IZA Discussion Papers 12896, Institute of Labor Economics (IZA).
    5. Plum Alexander, 2016. "Can Low-Wage Employment Help People Escape from the No-Pay – Low-Income Trap?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 16(4), pages 1-28, October.
    6. Alexander Plum & Gail Pacheco & Kabir Dasgupta, 2021. "When There is No Way Up: Reconsidering Low‐paid Jobs as Stepping‐stones," The Economic Record, The Economic Society of Australia, vol. 97(318), pages 387-409, September.
    7. Cai, Lixin & Mavromaras, Kostas & Sloane, Peter J., 2016. "Low Paid Employment in Britain: Estimating State-Dependence and Stepping Stone Effects," IZA Discussion Papers 9633, Institute of Labor Economics (IZA).
    8. Bryn Lampe & Catherine de Fontenay & Jessica Nugent & Patrick Jomini, 2022. "Climbing the Jobs Ladder Slower: Young People in a Weak Labour Market," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 55(1), pages 40-70, March.
    9. Lixin Cai, 2020. "Is there a low-pay no-pay cycle in Australia? A note on Fok, Scutella and Wilkins (2015)," Empirical Economics, Springer, vol. 59(3), pages 1493-1511, September.
    10. Dütsch Matthias & Himmelreicher Ralf, 2020. "Characteristics Contributing to Low- and Minimum-Wage Labour in Germany," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 240(2-3), pages 161-200, April.
    11. Chiara Mussida & Dario Sciulli, 2023. "Low pay and household poverty in Italy," Working Papers 635, ECINEQ, Society for the Study of Economic Inequality.
    12. Selcuk GEMICIOGLU & Hasan SAHIN, 2023. "Unemployment Persistence in The Turkish Labor Market," Journal of Economic Policy Researches, Istanbul University, Faculty of Economics, vol. 10(1), pages 181-211, January.
    13. Redmond, Paul & McGuinness, Seamus & Kelly, Elish, 2025. "Labour Market Dynamics of Minimum Wage Workers," IZA Discussion Papers 17598, Institute of Labor Economics (IZA).
    14. Anna Baranowska-Rataj & Zoltán Elekes & Rikard Eriksson, 2021. "Escaping from Low-Wage Employment: The Role of Co-worker Networks," CERS-IE WORKING PAPERS 2123, Institute of Economics, Centre for Economic and Regional Studies.
    15. Dütsch Matthias & Himmelreicher Ralf, 2020. "Characteristics Contributing to Low- and Minimum-Wage Labour in Germany," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 240(2-3), pages 161-200, April.
    16. Kabir Dasgupta & Alexander Plum, 2023. "Human capital formation and changes in low pay persistence," Applied Economics, Taylor & Francis Journals, vol. 55(56), pages 6583-6604, December.

    More about this item

    JEL classification:

    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General

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    1. The Low‐Pay No‐Pay Cycle: Are There Systematic Differences across Demographic Groups? (Oxford Bulletin of Economics & Statistics 2015) in ReplicationWiki

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