Modern Australian
Men's Weekly

.

Are low-paid jobs really a stepping stone to better pay? A new study suggests it’s not that simple

  • Written by Alexander Plum, Senior Research Fellow in Applied Labour Economics, Auckland University of Technology

A job – any job – is generally thought of as better than no job at all. Consequently, low-paid work is often considered a “stepping stone” to a higher-paid job. But how easily do low-paid workers climb up the pay scale, really?

Our new research suggests past studies may have considerably overstated the chances of moving from low to higher pay. This has significant implications for understanding labour market behaviour.

Given the NZ$3.3 billion increase in welfare payments announced in New Zealand’s recent budget – dubbed the “biggest lift in a generation” – and the ongoing focus on inequality and minimum wage rates, how we measure income mobility is increasingly important.

In particular, what are some of the characteristics of the low-paid workforce? How likely or unlikely is it that an individual can transition from low to higher pay?

Past research has described low-paid work as a stepping stone if there is a greater chance of moving to higher pay relative to someone who is unemployed.

Furthermore, the data have suggested relatively high likelihoods of making the transition from low to higher pay — estimates range from 47% to nearly 90%, based on studies from the UK, Australia and Germany.

However, this research has mostly had to rely on survey data based on individual responses to an annual set of questions. This means we can only observe a snapshot of any given labour market once a year.

When determining whether an individual is unemployed, low paid or higher paid, a lot of information between those annual surveys falls into the unknown.

What traditional research misses

Why does this matter? It helps to imagine three different individuals, with different labour market experiences, answering a survey about their employment status in October 2019 and again in October 2020:

  • one was low paid in the first survey and remained in low pay every month until the second survey

  • the second oscillated between low and higher pay between surveys but happened to be in low pay at each survey point

  • the third regularly moves between low pay and unemployment but is also in low pay at the time of each survey.

Because of the lack of information between survey time points, all three individuals will fall into the same category. In turn, this may influence estimates of movement out of low pay.

Read more: NZ Budget 2021: women left behind despite the focus on well-being

What more detail reveals

In New Zealand we have the advantage of the integrated data infrastructure (IDI), a large research database published by Stats NZ.

As well as being population-wide, this provides monthly administrative tax records that reveal labour market states at a much higher frequency.

Our research uses these detailed data to look at the male low-paid workforce aged between 21 and 60 in New Zealand. The results are illuminating.

Read more: NZ's second 'Well-being Budget' must deliver for the families that sacrificed most during the pandemic

First, we mimicked conventional earlier research by looking at the labour market from only one month each year. Through this lens, New Zealand looks similar to Australia, with the probability of moving from low pay to higher pay estimated to be 74%.

When we use the detailed monthly income records, however, it is clear the picture is not as rosy. Most importantly, the likelihood of moving from low pay to higher pay is much lower than traditional methods suggest.

In fact, for those who have been in low-paid work for all of the prior 12 months, we found the likelihood of them moving into higher pay in the following month was only 28%. Being continuously in low-paid work, it seems, means it isn’t easy to climb out.

A limited stepping stone

On the other hand, our research confirms the stepping-stone effect does exist in the New Zealand labour market: compared to being unemployed, you’re more likely to move into higher pay from being low paid.

Specifically, someone unemployed for the previous 12 months has only a 1% probability of moving into higher pay in the next month. That compares to 28% for those in low-paid employment for all of the previous 12 months.

Work and Income office sign Moving from low-paid work to better pay may be difficult, but moving from an unemployment benefit to higher pay is even less likely. GettyImages

Overall, our research highlights the value of detailed, high-frequency, integrated data in assessing the nuances in the labour market landscape.

On top of that, it illustrates the real difficulty in climbing the wage ladder for those in long-term low-paid work. This suggests policymakers should focus on pathways to wage growth, as well as on job creation itself.

Authors: Alexander Plum, Senior Research Fellow in Applied Labour Economics, Auckland University of Technology

Read more https://theconversation.com/are-low-paid-jobs-really-a-stepping-stone-to-better-pay-a-new-study-suggests-its-not-that-simple-162162

Someone Trips at Your Fundraiser. Now What? Understanding Public Liability for NFPs

Three months of planning. Volunteers giving up their weekends. Sponsorships chased, catering sorted, tables decorated. And then, about an hour into ...

Stainless Steel Tube: A Complete Specification Guide for Engineers, Project Managers, and Industrial Buyers

Few materials in the industrial and manufacturing world are as universally relied upon — or as frequently misspecified — as stainless steel tube...

How to Choose the Right Barber Shears Scissors for Professional Results

Since a barber is only as good as their tool, choosing the right barber shear scissor must not be taken lightly. Most barbers end up buying the first ...

Why Commercial Construction Companies Play A Critical Role In Modern Urban Development

Urban development requires highly organised planning, engineering expertise, and professional construction teams capable of delivering complex build...

Essential Features for Comfortable Family Caravan Trips

Choosing the right van for family travel requires careful consideration of how the space will be used on a daily basis. Families have specific needs...

Chatswood Tutor: Helping Students Achieve Academic Success With Personalised Learning

Education plays a crucial role in shaping a student’s future, and many students benefit from additional academic support outside the classroom. A pr...

How External Consulting Can Guide Enterprise IT Strategy and Procurement

Internal IT teams carry deep operational knowledge, but that familiarity can create blind spots in strategic decisions. An external IT consultant br...

Why Sports Nutrition Australia Is Important for Performance and Recovery

Athletes and fitness enthusiasts place significant demands on their bodies during training and competition. Maintaining energy levels, supporting mu...

How Body Contouring Bundoora Helps Improve Shape And Confidence

Modern aesthetic treatments have made it possible to refine body shape without the need for invasive surgery. One of the most popular non-surgical o...

Why Plantation Shutters Are a Stylish and Practical Choice for Modern Homes

Window coverings play a major role in the comfort, privacy, and overall design of a home. Homeowners often look for solutions that provide both visu...

Why a Retractable Hose Reel Is Essential for Efficient Water Management

Managing hoses efficiently is important for both residential and commercial environments. Whether watering gardens, cleaning outdoor areas, or maint...

Best Ways to Trade In Your Old Tech for Cash in Australia

Upgrading your mobile is exciting, but many Australians are left wondering what to do with the device they no longer use. Instead of leaving it in a...

Why Doctors in Bundoora Play an Important Role in Community Health

Access to quality healthcare is essential for maintaining a healthy lifestyle and managing medical conditions effectively. Visiting experienced doctor...

Backyard Aesthetics Decoded: Mediterranean, Coastal, Retro, Rustic, and Beyond

Backyard design has come a long way from a patch of lawn, a barbecue in the corner, and a few chairs chosen purely for practicality. Today, outdoor ...

What Stops a Home From Feeling Flat-Pack Generic

There is nothing wrong with convenience. Flat-pack furniture, fast styling decisions, and online checkouts have made it easier than ever to furnish ...

5 Best Dental Clinics in Beecroft, NSW

The best dental clinics in Beecroft, NSW are Beecroft Smiles Dental Surgery, Beecroft Elegant Dental Clinic, McConnell Dental, Dentistry for Life, a...

Executive Recruitment: Finding Leadership Talent That Drives Organisational Success

Hiring the right leadership team can significantly influence the direction and performance of any organisation. Strong executives bring strategic thin...

Understanding the Importance of Abrasive Blasting in Industrial Surface Preparation

Surface preparation is an essential step in many industrial processes. Whether preparing metal structures, removing old coatings, or cleaning equipmen...