Low Paid Employment in Britain: Estimating State-Dependence and Stepping Stone Effects

38 Pages Posted: 18 Jan 2016

See all articles by Lixin Cai

Lixin Cai

University of Melbourne - Melbourne Institute: Applied Economic & Social Research

Kostas G. Mavromaras

University of Melbourne - Melbourne Institute: Applied Economic & Social Research; IZA Institute of Labor Economics

Peter J. Sloane

University of Wales, Swansea; IZA Institute of Labor Economics

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Abstract

Using 18 waves of the British Household Panel Study, this paper examines state dependence and stepping stone effects of low pay. A distinguishing feature is that five types of transition- not in the labour force (NILF), unemployment, self-employment, low pay and higher pay are modelled separately. The results show that both state dependence and stepping stone effects of low pay are present. However, there is no evidence to support a low-pay no-pay cycle. The introduction of the national minimum wage does not appear to have affected state-dependence and stepping stone effects of low pay.

Keywords: low pay, unemployment, state dependence, dynamic models

JEL Classification: J24, J31, I21

Suggested Citation

Cai, Lixin and Mavromaras, Kostas G. and Sloane, Peter J., Low Paid Employment in Britain: Estimating State-Dependence and Stepping Stone Effects. IZA Discussion Paper No. 9633, Available at SSRN: https://ssrn.com/abstract=2716574 or http://dx.doi.org/10.2139/ssrn.2716574

Lixin Cai (Contact Author)

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

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

Kostas G. Mavromaras

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

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

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Peter J. Sloane

University of Wales, Swansea ( email )

Singleton Park
Swansea, Wales SA2 8PP
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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