The Times Australia
Google AI
The Times World News

.

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[1] 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[2] 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[3]

What more detail reveals

In New Zealand we have the advantage of the integrated data infrastructure (IDI[4]), a large research database published by Stats NZ[5].

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[6]

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.

References

  1. ^ new research (onlinelibrary.wiley.com)
  2. ^ increase in welfare payments (www.workandincome.govt.nz)
  3. ^ NZ Budget 2021: women left behind despite the focus on well-being (theconversation.com)
  4. ^ IDI (www.stats.govt.nz)
  5. ^ Stats NZ (www.stats.govt.nz)
  6. ^ NZ's second 'Well-being Budget' must deliver for the families that sacrificed most during the pandemic (theconversation.com)

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

Times Magazine

Epson launches ELPCS01 mobile projector cart

Designed for the EB-810E[1] projector and provides easy setup for portable displays in flexible ...

Governance Models for Headless CMS in Large Organizations

Where headless CMS is adopted by large enterprises, governance is the single most crucial factor d...

Narwal Freo Z Ultra Robotic Vacuum and Mop Cleaner

Rating: ★★★★☆ (4.4/5)Category: Premium Robot Vacuum & Mop ComboBest for: Busy households, ha...

Shark launches SteamSpot - the shortcut for everyday floor mess

Shark introduces the Shark SteamSpot Steam Mop, a lightweight steam mop designed to make everyda...

Game Together, Stay Together: Logitech G Reveals Gaming Couples Enjoy Higher Relationship Satisfaction

With Valentine’s Day right around the corner, many lovebirds across Australia are planning for the m...

AI threatens to eat business software – and it could change the way we work

In recent weeks, a range of large “software-as-a-service” companies, including Salesforce[1], Se...

The Times Features

Shark SteamSpot S2001 Review: A Chemical-Free Way to Tackle Messes and Stubborn Stains

If you're looking for a reliable steam mop that can handle both everyday spills and stubborn stains ...

How Businesses Are Generating Profits in a High-Inflation Economic Environment

Inflation in Australia and globally has surged to multi-decade highs since 2021, driven by pande...

The Effects of the War in the Middle East on Australian Small Businesses

The war in the Middle East is not a distant geopolitical event for Australia. In an interconnect...

Back at uni? How to help your wellbeing while you study

University can be a time of great opportunities, but it can also be very stressful[1]. Many stud...

Taste Port Douglas celebrates 10 years of world-class flavour in the tropics

30+ events, new sunrise and wellness experiences, 20+ chefs and a headline Michelin-star line-up...

Oztent RV tent range. Buy with caution

A review of the Oztent RV "30 second tent" range. Three years ago we bought an RV-4 from BCF Mack...

Essential Upgrades for a Smarter, Safer Australian Home

As we settle into 2026, the concept of the "dream home" has fundamentally shifted. The focus has m...

How To Modernise Your Home Without Overcapitalising

For many Australian homeowners, the dream of a "Grand Designs" transformation is often checked by ...

The Art of the Big Trip: Planning a Seamless Multi-Generational Getaway in Tropical North Queensland

There is a unique magic to the multi-generational holiday. It is a rare opportunity where gr...