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Low-Wage Jobs - Stepping Stone or Poverty Trap?


  • Andreas Knabe
  • Alexander Plum


We examine whether low-paid jobs have an effect on the occupational advancement probability of unemployed persons to obtain better-paid jobs in the future (stepping-stone effect). We make use of data from the German Socio-Economic Panel (SOEP) and apply a dynamic random-effects probit model. Our results suggest that low-wage jobs can act as stepping stones to better-paid work. The improvement of the chance to obtain a high-wage job by accepting low-paid work is particularly large for less-skilled persons and for individuals with longer unemployment experiences. Low-paid work is less beneficial if the job is also associated with a low social status.

Suggested Citation

  • Andreas Knabe & Alexander Plum, 2010. "Low-Wage Jobs - Stepping Stone or Poverty Trap?," SOEPpapers on Multidisciplinary Panel Data Research 337, DIW Berlin, The German Socio-Economic Panel (SOEP).
  • Handle: RePEc:diw:diwsop:diw_sp337

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    Cited by:

    1. Lixin Cai, 2014. "State-Dependence and Stepping-Stone Effects of Low-Pay Employment in Australia," The Economic Record, The Economic Society of Australia, vol. 90(291), pages 486-506, December.
    2. Dutz, Mark A. & Kessides, Ioannis & O'Connell, Stephen & Willig, Robert D., 2011. "Competition and innovation-driven inclusive growth," Policy Research Working Paper Series 5852, The World Bank.
    3. Luiz de Mello & Mark A. Dutz, 2012. "Promoting Inclusive Growth : Challenges and Policies," World Bank Publications, The World Bank, number 16948, March.

    More about this item


    low pay dynamics; unemployment dynamics; dynamic random effects models; state dependence;

    JEL classification:

    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • 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

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