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Escaping low pay: do male labour market entrants stand a chance?

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  • Pavlopoulos, Dimitris

    (CEPS/INSTEAD and K.U. Leuven)

  • Fouarge, Didier

    (ROA, Maastricht University)

Abstract

Purpose { This paper investigates the extent and the human-capital de- terminants of low-wage mobility for labour market entrants, in the UK and Germany. Design/methodology/approach { Using panel data for the UK (BHPS) and Germany (GSOEP), we apply a competing-risks duration model that al- lows us to study transitions from low pay to competing destination states: higher pay, self-employment, unemployment and inactivity. Unobserved het- erogeneity is tackled by a non-parametric mass-point approach. Findings { We ¯nd that low pay is only a temporary state for most young job starters. However, there is a small group of job starters that is caught in a trap of low pay, unemployment or inactivity. In the UK, job starters escape from low pay mainly by developing ¯rm-speci¯c skills. In Germany, involvement in formal vocational training and the attainment of apprenticeship quali¯cations account for low pay exits. Originality/value { Over the past decades, unemployment and low-wage employment have emerged as major challenges facing young labour market entrants. While most empirical studies focus exclusively on the transition from low pay to high pay, we show that a signi¯cant percentage of young entrants are caught in a low-pay - non-employment trap. Moreover, we show that, depending on the institutional context, di®erent types of human capital investments can account for a successful low-pay exit.

Suggested Citation

  • Pavlopoulos, Dimitris & Fouarge, Didier, 2008. "Escaping low pay: do male labour market entrants stand a chance?," IRISS Working Paper Series 2008-12, IRISS at CEPS/INSTEAD.
  • Handle: RePEc:irs:iriswp:2008-12
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    Cited by:

    1. Sohn, Christophe & Reitel, Bernard & Walther, Olivier, 2009. "Cross-border metropolitan integration in Europe (Luxembourg, Basel and Geneva)," IRISS Working Paper Series 2009-02, IRISS at CEPS/INSTEAD.
    2. Philippe Van Kerm, 2013. "Generalized measures of wage differentials," Empirical Economics, Springer, vol. 45(1), pages 465-482, August.

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    Keywords

    Low pay ; labour market entry ; duration model ; human capital;

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