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Human capital formation and changes in low pay persistence

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  • Kabir Dasgupta
  • Alexander Plum

Abstract

This study presents new empirical evidence on the role of time trends in low pay persistence. We utilize population-wide tax records to track monthly labour market trajectories of initially low-paid workers. By performing age- and qualification-specific regressions, we find that low pay persistence reduces with time. However, the magnitude is highly heterogeneous across workforce characteristics. For a qualified worker in their early 20s, the risk of staying on low-pay declines by, on average, 5–10% points after one year. For a worker in their 50s, persistence remains almost unchanged regardless of their qualification level. We conclude that policy initiatives need to be more nuanced than a simple one-size-fits-all approach by accounting for time trends in low-pay persistence.

Suggested Citation

  • 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.
    • Handle: RePEc:taf:applec:v:55:y:2023:i:56:p:6583-6604
    DOI: 10.1080/00036846.2022.2161989
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    More about this item

    JEL classification:

    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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