Employment Dynamics in the Low-wage Sector

The fact that these workers had often been employed in low-wage jobs earlier in their working lives could indicate insufficient opportunities to improve their earning power. Nevertheless, the low-wage sector is an important step for those entering the labour market and for social advancement: workers taking up a low-wage job for the first time reduced their long-term risk of poverty by around 6 percentage points. Policy measures aimed at containing the low-wage sector therefore run the risk of reducing such upward mobility. Rather, conditions should be created that facilitate progress to higher wage segments, such as training opportunities and incentives to expand individual working hours beyond a marginal employment level. However, the probability of advancement from low-wage employment to higher pay segments can be seen to be path-dependent. In the present study, a three-year period consisting of the current, the previous, and the following year is considered, and the probability of progressing from the low-wage sector in the current year to higher wage segments in the following year is calculated. The results show that the chance of such an advance is 14 percentage points lower if the person was already in low-wage employment in the preceding year. Further research is needed to find ways of reducing these path dependencies