The Dynamics of Low Pay Employment in Australia

Cai, Lixin (2015): The Dynamics of Low Pay Employment in Australia. Published in: International Journal of Manpower , Vol. 36, No. 7 (20 September 2015): pp. 1095-1123.

Abstract

Using the Household, Income and Labour Dynamics in Australia (HILDA) survey, this study shows that workers who have entered low pay from higher pay also have a higher hazard rate of transitioning to higher pay; and those who have entered low pay from non-employment are more likely to return to non-employment. Union members, public sector jobs and working in medium to large size firms tend to increase the hazard rate of transitioning to higher pay, while immigrants from non-English speaking countries and workers with health problems have a lower hazard rate of moving into higher pay. There is some evidence that the longer a worker is on low pay, the less likely he or she is to transition to higher pay.

• Item Type: MPRA Paper
• Language: English
• Keywords: Earnings; low pay; data analysis; modelling
• Subjects: J - Labor and Demographic Economics > J0 - General > J01 - Labor Economics: General; J - Labor and Demographic Economics > J0 - General > J08 - Labor Economics Policies; J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J31 - Wage Level and Structure ; Wage Differentials

References

Australian Government (2012) Australian Government Submission to the Fair Work Australia Annual Wage Review 2012, 16 March 2012, Canberra, Australia.

Baker, M. and Melino, A. (2000) ‘Duration Dependence and Nonparametric Heterogeneity: A Monte Carlo Study’, Journal of Econometrics, vol. 96, iss. 2, pp. 357-393.

Blank, R.M. (1989) ‘Analyzing the Length of Welfare Spells’, Journal of Public Economics, vol. no. 3, 39, pp. 245-273.

Buddelmeyer H, Lee W & Wooden M. (2010) ‘Low-Paid Employment and Unemployment Dynamics in Australia’, Economic Record, 86 (272), pp.28-48.

Cai, L. (2010) ‘The Relationship between Health and Labour Force Participation: Evidence from a Panel Data Simultaneous Equation Model’, Labour Economics, 17 (1), pp. 77-90.

---- (2009) ‘Effects of Health on Wages of Australian Men’, Economic Record, 85 (270), pp.290-306.

---- (2006) ‘An Analysis of Duration on the Disability Support Pension Program’, Australian Economic Papers, 45 (2), pp.106-26.

Cai, L. and Kalb, G. (2006) ‘Health Status and Labour Force Participation: Evidence from Australia’, Health Economics, 15(3), p241-61.

Cai,L. and Liu, A. (2011) ‘Public-Private Sector Wage Gap in Australia: Variation along the Distribution’, British Journal of Industrial Relations 49 (Issue Supplement, s2), p362-390.

Cai, L. and Liu, A. (2008) ‘Union Wage Effects in Australia: Are There Variations along the Distribution?’, Economic Record 84 (267), P496-510.

Cai, L. and Waddoups, C.J. (2012) ‘Unobserved Heterogeneity, Job Training, and the Employer Size-Wage Effect in Australia’, Australian Economic Review, 45 (2), p158-75.

Cai, L. and Waddoups, C.J. (2011) ‘Union Wage Effects in Australia: Evidence from Panel Data’, British Journal of Industrial Relations 49(Supp), p s279-s305.

Cappellari, L. (2002) ‘Do the ‘Working Poor’ Stay Poor? An Analysis of Low Pay Transitions in Italy’, Oxford Bulletin of Economics and Statistics, 64 (2), pp. 87-110.

Cappellari, L. and Jenkins, S.P. (2008) ‘Estimating Low Pay Transition Probabilities, Accounting for Endogenous Selection Mechanisms’, Journal of the Royal Statistical Society, Series C 57, pp.65-86.

Dolton, P. and van der Klaauw, W. (1995) ‘Leaving Teaching in the UK: A Duration Analysis’, Economic Journal, vol. 105, no. 429, pp. 223-235.

Dunlop Y. (2001) ‘Low-paid Employment in the Australian Labour Market, 1995-97’, in J. Borland, B. Gregory and P. Sheehan (eds), Work Rich, Work Poor: Inequality and Economic Change in Australia. Centre for Strategic Economic Studies, Victoria University, Melbourne; pp.95-118.

Flinn, C. and Heckman J. (1983) ‘Are Unemployment and Out of the Labor Force Behaviorally Distinct Labour Force States?’, Journal of Labour Economics, vol. 1. No. 1, pp. 28-42.

Florens, J., Fougére D. and Mouchart, M. (1996) ‘Duration models’, in The Econometrics of Panel Data: A Handbook of the Theory with Applications, 2nd edition, eds L. Mátyás and P. Sevestre, Kluwer Academic Publishers.

Fok, Y., Jeon, S. and Wilkins, R. 2009, ‘Does part-time employment help or hinder lone mothers’ movements into full-time employment?’, Melbourne Institute Working Paper Series No 25/09.

Gielen, A. C. (2013) ‘Repeated Job Quits: Stepping Stones or Learning about Quality?’, IZA Journal of European Labor Studies, 2 (7), pp.1-22.

Gosling, A., Johnson, P., McCrae, J. and Paul, G. (1997) ‘The Dynamics of Low Pay and Unemployment in Early 1990s Britain’. Institute of Fiscal Studies, London.

Greene, W.H. 2000, Econometric Analysis, 4th edition. Upper Saddle River, N. J.: Prentice Hall.

Gregory, M. and Elias, P. (1994) ‘Earnings Transitions of the Low Paid in Britain, 1976-91: A Longitudinal Analysis’, International Journal of Manpower, 15, issue 2/3, pp.170-88.

Healy, J. And Richardson, S. (2006) ‘An Updated Profile of the Minimum Wage Workforce in Australia’ Australian Fair Pay Commission Research Report No. 4/06.

Heckman, J. and Singer, B. (1985) Social Science Duration Analysis, Cambridge, Cambridge University.

---- (1984) ‘A Method for Minimizing the Impact of Distributional Assumptions in Econometric Models for Duration Data’, Econometrica, vol. 52, no. 2, pp. 271-320.

Knabe, A. and Plum, A. (2013) ‘Low Wage Jobs – Springboard to High-Paid Ones’, Labour, vol. 27, issue 3, pp. 310-330.

Kroft, K., Lang, F., and Notowidigdo, M.J. (2013) ‘Duration Dependence and Labor Market Conditions: Evidence from A Field Experiment’, Quarterly Journal of Economics, vol. 128, issue 3, pp. 1123-1167.

Lancaster, T. (1990) The Econometric Analysis of Transition Data, Cambridge, Cambridge University Press.

Manton, K.G., Stallard, E. and Vaupel, J.W. (1986) ‘Alternative Models for Heterogeneity of Mortality Risks among the Aged’, Journal of the American Statistical Association, vol. 81, issue 395, pp. 635-644.

McGuinness, S., Freebairn, J. And Mavromaras, K. (2007) ‘Characteristics of Minimum Wage employees – Revised May 2007’, Report Commissioned by the Australian Fair Pay Commission.

Meyer, B.D. (1990) ‘Unemployment Insurance and Unemployment Spells’, Econometrica, vol. 58, no. 4, pp. 757-782.

Mosthaf, A., Thorsten, S. and Claus, S. (2009) ‘Low-Wage Employment Versus Unemployment: Which One Provides Better Prospects for Women?’ IZA Discussion Paper No. 4611.

Perkins, D. and Scutella, R. (2008) ‘Improving Employment Retention and Advancement of Low-Paid Workers’, Australian Journal of Labour Economics, 11, pp.97-114.

Phimister, E. and Theodossiou, I. (2009) ‘Gender Differences in Low Pay Labour Mobility and the National Minimum Wage’, Oxford Economic Paper, 61; i122-i146; doi:10.1093/oep\gpn045.

Prentice, R. and Gloeckler, L. (1978) ‘Regression Analysis of Grouped Survival Data with an Application to Breast Cancer Data’, Biometric, vol. 34, no. 1, pp. 57-67.

Prowse, V. (2012) ‘Modeling Employment Dynamics with State Dependence and Unobserved Heterogeneity’, Journal of Business and Economic Statistics, vol. 30, issue 3, pp. 411-431.

Sloane, P.J. and Theodossiou, I. (1998) ‘An Econometric Analysis of Low Pay and Earnings Mobility in Britain’, in R. Asplund, P.J. Sloane and I. Theodossiou (eds), Low Pay and Earnings Mobility in Europe. Edward Elgar, Cheltenham; pp.103-15.

Stewart, M.B. (2007) ‘The Inter-related Dynamics of Unemployment and Low Pay’, Journal of Applied Econometrics, vol. 22, issue 3, pp.511-31.

Stewart, M.B. and Swaffield, J.K. (1997) ‘The Dynamics of Low Pay in Britain’, in P. Gregg (ed.), Jobs, Wages and Poverty: Patterns of Persistence and Mobility in the Flexible Labour Market. Centre for Economic Performance, London; pp.36-51.

Stewart, M.B. and Swaffield, J.K. (1999) ‘Low Pay Dynamics and Transition Probabilities’, Economica, vol. 66, issue 261, pp.23-42.

Uhlendorff, A. (2006) ‘From No Pay to Low Pay and Back Again? A Multi-State Model of Low Pay Dynamics’, IZA Discussion Paper No. 2482.

Watson, I. (2008) ‘Low Paid Jobs and Unemployment: Churning in the Australian Labour Market, 2001 to 2006’, Australian Journal of Labour Economics, vol, 11, no. 1, pp.71-96.

Watson, N. and Wooden, M. (2012) 'The HILDA Survey: A Case Study in the Design and Development of a Successful Household Panel Study', Longitudinal and Life Course Studies, 3(3), pp.369–381.