IDEAS home Printed from
   My bibliography  Save this paper

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


  • Yin King Fok

    (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)

  • Rosanna Scutella

    (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)

  • Roger Wilkins

    () (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)


We investigate transitions between unemployment, low-paid employment and higher-paid employment using household panel data for the period 2001 to 2011. Dynamic panel data methods are used to estimate the effects of labour force status on subsequent labour force status. A distinctive feature of our study is the investigation of heterogeneity in the effects of unemployment and low-paid employment on future employment prospects. We find that there is state dependence in both unemployment and low-paid employment and clear evidence of a low-pay no-pay cycle for both men and women. Significant differences in effects across different subgroups of the population are, however, found. Typically, the young and the better educated face less severe penalties from unemployment or low-paid employment, and, for women, the cycle between low pay and no pay varies across subgroups. Moreover, in the case of men who have completed secondary schooling but have no further qualifications, low-paid employment actually decreases the chances of entering higher-paid employment by more than unemployment does. This is not the case for women, however, who clearly have a higher likelihood of entering higher-paid employment from low-paid employment than from unemployment, regardless of their age, education level or other characteristics.

Suggested Citation

  • Yin King Fok & Rosanna Scutella & Roger Wilkins, 2013. "The Low-Pay No-Pay Cycle: Are There Systematic Differences across Demographic Groups?," Melbourne Institute Working Paper Series wp2013n32, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
  • Handle: RePEc:iae:iaewps:wp2013n32

    Download full text from publisher

    File URL:
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    1. Knights, Stephen & Harris, Mark N & Loundes, Joanne, 2002. "Dynamic Relationships in the Australian Labour Market: Heterogeneity and State Dependence," The Economic Record, The Economic Society of Australia, vol. 78(242), pages 284-298, September.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. repec:bla:ecorec:v:92:y:2016:i:299:p:517-547 is not listed on IDEAS
    2. Claus Schnabel, 2016. "Low-wage employment," IZA World of Labor, Institute for the Study of Labor (IZA), pages 276-276, July.
    3. Cai, Lixin & Mavromaras, Kostas G. & Sloane, Peter J., 2016. "Low Paid Employment in Britain: Estimating State-Dependence and Stepping Stone Effects," IZA Discussion Papers 9633, Institute for the Study of Labor (IZA).

    More about this item


    Employment dynamics; state dependence; heterogeneous impacts;

    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

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:iae:iaewps:wp2013n32. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sheri Carnegie). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.