UNIVERSITY OF AMSTERDAM Low-wage Labour, A European Perspective Wiemer Salverda AIAS LoWER Amsterdam Institute for Advanced Labour Studies European Low-wage Employment Research network www.uva-aias.net www.uva-aias.net/lower.asp Working out of Poverty: A progressive labour market Workshop 8 May 2008 London
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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
UNIVERSITY OF AMSTERDAM
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
UNIVERSITY OF AMSTERDAM
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
UNIVERSITY OF AMSTERDAM
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
UNIVERSITY OF AMSTERDAM
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
Incidence & evolution of low pay among employees, %, 1973-2005 (national data)
DK always around 9%
FR slowly down to 11%
UNIVERSITY OF AMSTERDAM
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
Incidence & evolution of low pay among employees, %, 1973-2005 (national data)
Level & evolution of low-paid employment
DE up since mid-1990s (full-time!)
NL sharply up from 9 to 17% in mid-1990s
UNIVERSITY OF AMSTERDAM
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 ...
UNIVERSITY OF AMSTERDAM
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!)
UNIVERSITY OF AMSTERDAM
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
UNIVERSITY OF AMSTERDAM
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
UNIVERSITY OF AMSTERDAM
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
UNIVERSITY OF AMSTERDAM
AIAS
Demographics Men
Employees-to-population ratios by age, %, 2001 (ECHP, Eurostat and CPS)
Characteristics of low pay
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
UNIVERSITY OF AMSTERDAM
AIAS
Usual Suspects and ...
Importance part-time (<35 hrs) jobs for low-wage employment, Netherlands, 1979-2005
Characteristics of low pay
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%
UNIVERSITY OF AMSTERDAM
AIAS
Industries and Low Pay
Determinants (selected) of probability, pooled 1995-2001 (ECHP, bold significant)
Low pay at previous year 1.326 1.303 1.367 1.706 1.617
UNIVERSITY OF AMSTERDAM
AIAS
Shift-share Comparison of Low Pay
Differences in low-wage incidence compared to US structure and incidence, 2001 (ECHP)
Characteristics of low pay
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
UNIVERSITY OF AMSTERDAM
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)
UNIVERSITY OF AMSTERDAM
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
UNIVERSITY OF AMSTERDAM
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
UNIVERSITY OF AMSTERDAM
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 %
UNIVERSITY OF AMSTERDAM
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
UNIVERSITY OF AMSTERDAM
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
UNIVERSITY OF AMSTERDAM
AIAS
Minimum Wage and Low Pay
Minimum wage to median and employment at minimum wage and low pay, NL 1979-2006
Affecting the tail of low pay
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
UNIVERSITY OF AMSTERDAM
AIAS
Minimum Wage and Low Pay
Minimum wage to median and employment at minimum wage and low pay, UK 1999-2007
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%
UNIVERSITY OF AMSTERDAM
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