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

29 Pages Posted: 11 Oct 2013

See all articles by Yin King Fok

Yin King Fok

University of Melbourne; University of Melbourne - Melbourne Institute of Applied Economic and Social Research

Rosanna Scutella

University of Melbourne - Melbourne Institute of Applied Economic and Social Research

R Wilkins

affiliation not provided to SSRN

Date Written: October 1, 2013

Abstract

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.

Keywords: Employment dynamics, state dependence, heterogeneous impacts

JEL Classification: J01, J31, J60

Suggested Citation

Fok, Yin King and Scutella, Rosanna and Wilkins, Roger, The Low-Pay No-Pay Cycle: Are There Systematic Differences Across Demographic Groups? (October 1, 2013). Melbourne Institute Working Paper No. 32/13. Available at SSRN: https://ssrn.com/abstract=2338263 or http://dx.doi.org/10.2139/ssrn.2338263

Yin King Fok

University of Melbourne ( email )

185 Pelham Street
Carlton, Victoria 3053
Australia

University of Melbourne - Melbourne Institute of Applied Economic and Social Research ( email )

Level 5, FBE Building, 111 Barry Street
Parkville, Victoria 3010
Australia

Rosanna Scutella (Contact Author)

University of Melbourne - Melbourne Institute of Applied Economic and Social Research ( email )

Level 5, FBE Building, 111 Barry Street
Parkville, Victoria 3010
Australia
+61 3 8344 8175 (Phone)
+61 3 8344 5630 (Fax)

HOME PAGE: http://wff1.ecom.unimelb.edu.au/iaesrwww/people/rscutella/

Roger Wilkins

affiliation not provided to SSRN

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