Escaping Low Pay: Do Male Labour Market Entrants Stand a Chance?

International Journal of Manpower, Vol. 31, No. 8, pp. 908-927, 2010

46 Pages Posted: 31 Dec 2010 Last revised: 2 Jan 2011

See all articles by Dimitris Pavlopoulos

Dimitris Pavlopoulos

VU University Amsterdam - Faculty of Social Sciences

Didier Fouarge

Maastricht University

Date Written: November 19, 2010

Abstract

Purpose – The purpose of this paper is to investigate the extent and the human-capital determinants 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), a competing-risks duration model is applied that allows the study of transitions from low pay to competing destination states: higher pay, self-employment, unemployment and inactivity. Unobserved heterogeneity is tackled by a non-parametric mass-point approach.

Findings – It is found 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 firm-specific skills. In Germany, involvement in formal vocational training and the attainment of apprenticeship qualifications 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, the paper shows that a significant percentage of young entrants are caught in a low-pay-non-employment trap. Moreover, it is shown that, depending on the institutional context, different types of human capital investments can account for a successful low-pay exit.

Keywords: Low Pay, Labour Market Entry, Duration Model, Human Capital

JEL Classification: J31, C33, C41

Suggested Citation

Pavlopoulos, Dimitris and Fouarge, Didier, Escaping Low Pay: Do Male Labour Market Entrants Stand a Chance? (November 19, 2010). International Journal of Manpower, Vol. 31, No. 8, pp. 908-927, 2010. Available at SSRN: https://ssrn.com/abstract=1732630

Dimitris Pavlopoulos (Contact Author)

VU University Amsterdam - Faculty of Social Sciences ( email )

De Boelelaan 1081
Amsterdam, 1081 HV
Netherlands

Didier Fouarge

Maastricht University ( email )

P.O. Box 616
Maastricht, 6200MD
Netherlands

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