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Labour market dynamics of minimum wage workers

Author

Listed:
  • Paul Redmond
  • Seamus McGuinness
  • Elish Kelly

Abstract

Ireland is the only country in Europe with a direct question in its Labour Force Survey to identify minimum wage employees. By combining this with the longitudinal component of the Labour Force Survey, we examine the labour market transitions of minimum wage employees over a period of up to five quarters. After one quarter, just over half of minimum wage employees are still on minimum wage while 28% have moved to higher pay. After one year, almost half have moved to higher pay, with just one-third remaining on minimum wage. Employees that move to higher pay are more likely to change jobs compared to those that stay on minimum wage. Despite this, the majority (almost 90%) of minimum wage employees that transition to higher pay do so with the same employer. We employ a dynamic random effects probit model to estimate the degree of genuine state dependence of minimum wage employment. While there is some degree of true state dependence, much of the persistence in minimum wage employment is due to observed and unobserved heterogeneity, whereby minimum wage employees possess characteristics that result in them entering, and staying on, minimum wage.

Suggested Citation

  • Paul Redmond & Seamus McGuinness & Elish Kelly, 2026. "Labour market dynamics of minimum wage workers," Applied Economics, Taylor & Francis Journals, vol. 58(10), pages 1985-1997, February.
    • Handle: RePEc:taf:applec:v:58:y:2026:i:10:p:1985-1997
    DOI: 10.1080/00036846.2025.2472047
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    Cited by:

    1. Redmond, Paul & Kelly, Lorcan & Creaton, Hugh, 2026. "The impact of a minimum wage increase on employment: Evidence from Ireland," Research Series, Economic and Social Research Institute (ESRI), number RS228.

    More about this item

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General

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