U NIVERSITY OF A MSTERDAM Low-wage Labour, A European Perspective Wiemer Salverda AIAS LoWER...

UNIVERSITY OF AMSTERDAM

Low-wage Labour, A European Perspective

Wiemer Salverda

AIAS LoWERAmsterdam Institute for Advanced Labour Studies European Low-wage Employment

Research networkwww.uva-aias.net www.uva-aias.net/lower.asp

Working out of Poverty:A progressive labour market

Workshop 8 May 2008 London


AIASA four-year five-country project

- some aggregate analysis- 200 case studies: low-wage jobs in low- paying industries (Ho, Re, CC, Hp, Fo)

Initiated by Russell Sage Foundation, New York, with strong stimulus from Robert Solow (Nobel Laureate Economics 1987)

Five books just published & presented to John Martin (director OECD)(comparative volume including US in preparation)

New Research Results


AIAS

8.5

11.1

22.7

17.6

21.7

25

10.4

17.1

22.9

18.820

23.1

0

5

10

15

20

25

30

Denmark France Germany* Netherlands United Kingdom United States**

Employees only All employed***

*) 22.0 if estimated separately for East and West; **) estimated over CPS-ORG 2003-2005; ***) concentration of self-employed from EU-KLEMS

Main Differences Within EU

Incidence of low pay among employees and all, %, 2005 (national data)

Level of low-paid employment in 2005

Germany now at par with US

DK and FR far lower


AIAS Level & evolution of low-paid employment

6

16

26

1973 1977 1981 1985 1989 1993 1997 2001 2005

US

UK

The Familiar Picture:high UK, US

Incidence & evolution of low pay among employees, %, 1973-2005 (national data)

US around 25%

UK up from 12 to 22%, steady since 1997


AIAS

6

16

26

1973 1977 1981 1985 1989 1993 1997 2001 2005

US

UK

FR

FRoecd

DK

Level & evolution of low-paid employment

Steadily Low Levels:DK, FR


DK always around 9%

FR slowly down to 11%


AIAS

6

16

26

1973 1977 1981 1985 1989 1993 1997 2001 2005

US

UK

DE

NL

FR

FRoecd

DK

Moving up to High Levels:DE, NL


Level & evolution of low-paid employment

DE up since mid-1990s (full-time!)

NL sharply up from 9 to 17% in mid-1990s


AIAS

8.5

11.1

22.7

17.6

21.7

25

63

65

72

58

6463

0

5

10

15

20

25

30

Denmark France Germany* Netherlands UnitedKingdom

UnitedStates**

% e

mpl

oyee

s lo

w p

aid

50

55

60

65

70

75

80

empl

oyee

s to

pop

ulat

ion

%

Low-wage incidence Employees/population 15-64

*) 22.0 if estimated separately for East and West; **) estimated over CPS-ORG 2003-2005; ***) concentration self-employed from EU-KLEMS

Low Pay and Employment Diverge

Incidence of low pay and employee employment rate, %, 2005 (national data)

Low pay and employment rate in 2005

DK highest E-rate and lowest LWI

Only FR trade-off, perhaps ...


AIAS

Contradictory Movements Pay and Jobs

Employees to population (15-64) ratio, %, 1973-2005 (OECD economic outlook)

Evolution employee employment rate

45

50

55

60

65

70

75

1973 1977 1981 1985 1989 1993 1997 2001 2005

DK

US

NL

DE

UK

FR

DK high

US up & down

UK down on balance

DE, FR up

NL down & up

(head count!)


AIAS

Transitions out of and into Low Pay

% of employees remaining/transiting in a year, pooled over 1995-2001 (ECHP)

Earnings mobility

DK, FR more mobile upward

DK often via no job?

UK lower no-jobs stays

NL frequent low-pay access

DK FR DE NL UK

Remain low paid 0.487 0.492 0.601 0.618 0.580

High to low pay 0.030 0.048 0.035 0.042 0.061

Low to high pay 0.294 0.344 0.256 0.250 0.276

Into low-pay job 0.080 0.068 0.102 0.137 0.112

Into high-pay job 0.214 0.109 0.122 0.129 0.166

Remain out of job 0.800 0.872 0.842 0.829 0.791

Low pay to out 0.229 0.171 0.145 0.136 0.148

High pay to out 0.083 0.082 0.070 0.055 0.069


AIAS

1. Main differences are now within EU, more than between US and EU

2. Surprisingly stable levels of incidence, low as well as high (throws up very interesting questions)

3. No prima facie relation of low pay incidence to employment success

4. More mobility in the two countries with a lower incidence

Summary 1Overall


AIAS

Demographics Women

Employees-to-population ratios by age, %, 2001 (ECHP, Eurostat and CPS)

Characteristics of low pay

Youth makes most of the difference; prime age only DK exceptional

UK older women

(head count!)

26

11 14 1724 22

72

5551 53 53 52 52

3225 27

3241

13

12

22 13

1513

4

88 4 6 11

3

3

4

820

7

3813 20

4 9 11 10 5

38 6

12

4

0

10

20

30

40

50

60

70

80

90

DK FR DE NL UK US DK FR DE NL UK US DK FR DE NL UK US

15-24 25-49 50-64

Em

ploy

men

t rat

e (%

)Low paid Part-time

Low paid Full-time

Better paid


AIAS

Demographics Men

Employees-to-population ratios by age, %, 2001 (ECHP, Eurostat and CPS)


Youth most of the difference again; prime age DK less exceptional

FR older men lower, but not because of low pay

2014 14 17

31 28

7772 69

7469 68

57

42 4352 48 52

29

1728 19

1714

68

65 8

3

5613

5

33 7 15

0

10

20

30

40

50

60

70

80

90

DK FR DE NL UK US DK FR DE NL UK US DK FR DE NL UK US

15-24 25-49 50-64

Em

ploy

men

t rat

e (%

)Low paid Part-time

Low paid Full-time

Better paid


AIAS

Usual Suspects and ...

Importance part-time (<35 hrs) jobs for low-wage employment, Netherlands, 1979-2005


Youth: educational system incl. grants

Female 2nd earners combine with household

All seek part-time jobs

5

10

15

20

25

30

1979 1984 1989 1994 1999 2004

ALL

FULL-TIME

PART-TIME

24%

70%

Part-time shares in low-wage employment, 2001DK FR DE NL UK US

38% 21% 35% 64% 49% 39%


AIAS

Industries and Low Pay

Determinants (selected) of probability, pooled 1995-2001 (ECHP, bold significant)


DK low risk for women, steep for age

NL steep for education

UK, NL part-time effects and risk of continuation

DK FR DE NL UK

Female 0.195 0.458 0.475 0.430 0.412>=30 & <45 years -0.619 -0.552 -0.308 -0.584 -0.313>=45 & <65 years -0.731 -0.422 0.005 -0.345 -0.186

Secondary education -0.421 -0.090 -0.364 -0.402 -0.244

Tertiary education -0.699 -0.389 -0.665 -0.835 -0.320

Part-time -0.030 -0.017 0.077 0.220 0.170Temporary contract 0.015 0.348 0.008 0.318 0.169>= 5 years -0.045 -0.223 -0.135 -0.035 0.002Sales occupations 0.450 0.455 0.307 0.283 0.529

Craft 0.219 0.246 0.239 0.130 0.211

Operators 0.236 0.342 0.162 0.246 0.494

Elementary 0.360 0.527 0.310 0.334 0.620Trade, hotels, restaurants 0.150 0.147 0.214 0.125 0.453

Low pay at previous year 1.326 1.303 1.367 1.706 1.617


AIAS

Shift-share Comparison of Low Pay

Differences in low-wage incidence compared to US structure and incidence, 2001 (ECHP)


Total difference

due to different incidence

due to other sectoral

structure

interaction

DK -11.7 -10.4 -2.4 +1.1

FR -8.1 -6.4 -3.2 +1.5

DE -0.3 +3.3 -3.6 -0.1

NL -1.0 +1.4 -2.5 +0.1

UK -1.5 +0.3 -2.1 +0.3

Sectoral effects are small & comparable

DE, NL face higher risk with US structure


AIAS

Fall of Middle Hinders Pay Careers

Percent of employees paid between 2/3 and 1.5 median hourly wages, 1973-2005 (various data)

Evolution middle of earnings distribution

45

56

67

78

1973 1977 1981 1985 1989 1993 1997 2001 2005

FR

NL

DE

UK

US

DE, NL strong fall, towards low pay

US, UK low, declining

FR may be stable

(DK no data)


AIAS

1. Usual suspects suffer more from low pay everywhere: youth, women, low skilled, immigrants etc.

2. Growing part-timisation of low-wage jobs poses career problems for low-skilled school-leavers & unemployed, also for improving female hours worked (also necessitates FTE analysis)

3. Low-wage sectors are universal and main users of part-time jobs, but comparative sectoral structure has only a small effect

4. Declining middle affects career prospects after a low-paid start

Summary 2Composition


AIAS

Working-age Poverty and Work

Low-pay threshold and poverty wages, 2005 (Eurostat)

Poverty and pay

Difference of principle:

labour-market pay versus worker’s household situation

0

50

100

150

200

Household types (8 UK, 48 US) >>

% o

f lo

w-p

ay th

resh

old

US UK

low-pay threshold = 100


AIAS

Working-age Poverty and Work

Population and employed at risk of poverty (%), importance of employed, 2005 (Eurostat)

Poverty and pay

Modest aggregate differences

Larger role of employed in UK, NL

1112 12

10

12

56

56

8

3532

44 48

28

0

5

10

15

20

25

DK FR DE NL UK

% a

t ris

k am

ong

popu

latio

n, e

mpl

oyed

0

10

20

30

40

50

% e

mpl

oyed

am

ong

at ri

sk p

opul

atio

n

% of population % of employed

employed %


AIAS

Households’ In-work Poverty

Proportion of the population in poor* households, 1984–2001 (OECD)

Poverty and pay

Larger differences, and US much higher

With at least one worker All households

1987 1994 2001 1994 2001

DK .. 1.9 2.6 3.8 5.3

FR 1.1 3.4 2.8 7.5 7.0

DE 4.0 3.3 4.3 9.4 9.8

NL 2.8 4.1 8.5 6.4 7.9

UK 6.9 3.5 4.7 10.5 10.7

US 10.0 9.7 13.2 18.4 16.9


AIAS

Minimum Wage and Low Pay

Minimum wage to median and employment at minimum wage and low pay, US 1979-2006

Affecting the tail of low pay

No effect on LWI

Equal fall of MW & MW-employment

0

5

10

15

20

25

1979 1982 1985 1988 1991 1994 1997 2000 2003 2006

Em

plo

yee

% o

n lo

w p

ay a

nd

on

MW

35

40

45

50

55

60

MW

% o

f M

edia

n

Employees % <=LPT

Employee % <= MW

MW % of Median


AIAS


Minimum wage to median and employment at minimum wage and low pay, NL 1979-2006


Strong fall of MW, less of MW jobs and (later) growth of LWI

0

5

10

15

20

25

1979 1982 1985 1988 1991 1994 1997 2000 2003 2006

Em

ploy

ee h

ours

% <

= M

W

50

55

60

65

70

75

MW

% o

f Med

ian

Employee-hours % <= MWEmployee-hours % <= LPTMW % of Median


AIAS


Minimum wage to median and employment at minimum wage and low pay, UK 1999-2007


Increasing MW, stable MW jobs and LWI

0

5

10

15

20

25

1999 2000 2001 2002 2003 2004 2005 2006 2007

35

40

45

50

55

60

% all employees <LPT % adult employees <LPT % 18+ employees <=MW

% adult employees <=MW adult MW % median


AIAS

Distribution of Low Pay and MWs

Very different tails and impact of minimum wage


Very long tails for DE without MW, NL with youth MWs

0

2

4

6

8

10

12

14

16

18

20

22

0 10 20 30 40 50 60 70 80 90 100

% of low-pay threshold

% o

f all

empl

oyee

s

DE (19.9%)

NL (17.0%)

UK (19.5%)

FR (14.8%)

DK (8.8%)

UK 79%NL 84%DK 88%FR 95%


AIAS

1. Poverty and low pay are not identical though related; more research along IPPR lines is needed

2. Minimum wage does not necessarily affect LWI

3. Tail of low wages very different with diverging effects of MW

LOW PAY MAY BE A COUNTRY’S CHOICE BUT IT IS NOT A SINGULAR CHOICE; DIMINISHING IT MAY BE DESIRABLE FOR SEVERAL REASONS (POVERTY, PRODUCTIVITY); ITS PART-TIME-ISATION DEMANDS COMPENSATING MEASURES

Summary 3Policies

Overall Conclusion

U NIVERSITY OF A MSTERDAM Low-wage Labour, A European Perspective Wiemer Salverda AIAS LoWER...

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