Low-Wage Employment in Europe: A Review of the Evidence

Posted: 29 Feb 2008

See all articles by Claudio Lucifora

Claudio Lucifora

Università Cattolica del Sacro Cuore di Milano ; IZA Institute of Labor Economics

Abigail McKnight

CASE, London School of Economics

Date Written: May 2005

Abstract

In this study, we review the patterns of low pay in Europe. We first describe the evolution of aggregate low-wage employment and the incidence of low pay among several groups of workers, then we look at the compositional changes that occurred in recent decades. Given the prevalence of wage regulation and collective bargaining in most European countries, we also analyse the role of labour market institutions on low pay. We show that minimum wages and union presence do play a relevant role in reducing wage inequalities. Finally, we investigate low pay in the long run and the evolution of earnings over the life-cycle. We show that earnings mobility has an equalizing effect over the long-run but its impact is small over 6/7 years. Empirical evidence from a number of OECD countries confirms that earnings inequality between individuals is lower when earnings are pooled over a number of years but, for Britain at least, the extent to which mobility reduces inequality has fallen over time suggesting a fall in mobility and an increase in long run inequality.

JEL Classification: J31; J51; P51

Suggested Citation

Lucifora, Claudio and McKnight, Abigail, Low-Wage Employment in Europe: A Review of the Evidence (May 2005). Socio-Economic Review, Vol. 3, Issue 2, pp. 259-292, 2005. Available at SSRN: https://ssrn.com/abstract=811464

Claudio Lucifora (Contact Author)

Università Cattolica del Sacro Cuore di Milano ( email )

Department of Economics and Finance
Largo Gemelli, 1
20123 Milano
Italy
+39 027 234 2525 (Phone)
+39 027 234 2781 (Fax)

IZA Institute of Labor Economics

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

Abigail McKnight

CASE, London School of Economics ( email )

Houghton Street
London WC2A 2AE
United Kingdom
020 7955 6673 (Phone)

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