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The British Low-Wage Sector and the Employment Prospects of the Unemployed

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  • Alexander Plum

    () (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)

Abstract

Are low wages an instrument for the unemployed to switch to high-paying jobs within a medium-term period? Using data from the British Household Panel Survey (BHPS), the labor market dynamics of men are analyzed up to six years after entering unemployment. An alternative econometric approach is presented that allows for correlated random effects between the three labor market states (high-paid employed, low-paid employed and unemployed). The results show that low wages help to significantly reduce the risk of future unemployment. Indications of a “springboard effect” of low wages are found, especially for men without post-secondary education. However, the calculated probability of obtaining a high-paying job is noticeably influenced by the monetary level of the low-wage threshold.

Suggested Citation

  • Alexander Plum, 2014. "The British Low-Wage Sector and the Employment Prospects of the Unemployed," FEMM Working Papers 140004, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
  • Handle: RePEc:mag:wpaper:140004
    as

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    File URL: http://www.fww.ovgu.de/fww_media/femm/femm_2014/2014_04.pdf
    File Function: First version, 2011
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Plum, Alexander & Knies, Gundi, 2015. "Earnings prospects for low-paid workers higher than for the unemployed but only in high-pay areas with high unemployment," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112845, Verein für Socialpolitik / German Economic Association.
    2. Plum, Alexander & Knies, Gundi, 2015. "Does neighbourhood unemployment affect the springboard effect of low pay?," ISER Working Paper Series 2015-20, Institute for Social and Economic Research.
    3. Alexander Plum, 2016. "Reconsidering the interrelated dynamics of unemployment and low-wage employment in Great Britain," Economics Bulletin, AccessEcon, vol. 36(2), pages 1230-1241.
    4. Manuela Rozalia Gabor & Petruța Blaga & Cosmin Matis, 2019. "Supporting Employability by a Skills Assessment Innovative Tool—Sustainable Transnational Insights from Employers," Sustainability, MDPI, Open Access Journal, vol. 11(12), pages 1-18, June.

    More about this item

    Keywords

    low-pay dynamics; simulated correlated multivariate random effects probit model; state dependence; unobserved heterogeneity;

    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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