Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/242587 
Year of Publication: 
2020
Series/Report no.: 
Economics Working Paper Series No. 2020/15
Publisher: 
Auckland University of Technology (AUT), Faculty of Business, Economics and Law, Auckland
Abstract: 
This study aims at understanding how persistence in low pay changes over time. In particular, we extend the existing literature on human capital formation by documenting heterogeneity in low pay persistence by age and human capital level. We utilise population-wide tax ecords to track monthly labour market trajectories of workers who are observed in low paid employment during the initial period of analysis. Performing age- and qualification-specific regressions, our empirical findings indicate that low pay persistence reduces with time. However, the magnitude is highly heterogeneous acorss the workforce. For a qualified worker in their early 20s, the risl of staying on low-pay declines by, on average, 5 to 10% points after one year - while for a worker in their 50s, independent of their qualification level, persistence remains almost unchanged. We find a strong association between decline in low-pay persistence and the firm's average wage level.
Subjects: 
low pay
human capital formation
state dependence
random-effects probit
intital condition
unobserved heterogeneity
JEL: 
J63
J61
J24
Document Type: 
Working Paper

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