Low-Wage Careers: Are There Dead-End Firms and Dead-End Jobs?

27 Pages Posted: 1 Feb 2010

See all articles by Alexander Mosthaf

Alexander Mosthaf

Johannes Gutenberg University Mainz

Claus Schnabel

University of Erlangen-Nuremberg; IZA Institute of Labor Economics

Jens Stephani

Government of the Federal Republic of Germany - Institute for Employment Research (IAB)

Abstract

Using representative linked employer-employee data of the German Federal Employment Agency, this paper shows that just one out of seven full-time employees who earned low wages (i.e. less than two-thirds of the median wage) in 1998/99 was able to earn wages above the low-wage threshold in 2003. Bivariate probit estimations with endogenous selection indicate that upward wage mobility is higher for younger and better qualified low-wage earners, whereas women are substantially less successful. We show that the characteristics of the employing firm also matter for low-wage earners' probability of escaping low-paid work. In particular small plants and plants with a high share of low-wage earners often seem to be dead ends for low-wage earners. The likelihood of leaving the low-wage sector is also low when staying in unskilled and skilled service occupations and in unskilled commercial and administrational occupations. Consequently, leaving these dead-end plants and occupations appears to be an important instrument for achieving wages above the low-wage threshold.

Keywords: low-wage employment, wage mobility, Germany

JEL Classification: J30, J60

Suggested Citation

Mosthaf, Alexander and Schnabel, Claus and Stephani, Jens, Low-Wage Careers: Are There Dead-End Firms and Dead-End Jobs?. IZA Discussion Paper No. 4696, Available at SSRN: https://ssrn.com/abstract=1545123

Alexander Mosthaf (Contact Author)

Johannes Gutenberg University Mainz

Claus Schnabel

University of Erlangen-Nuremberg ( email )

Institut für Wirtschaftsforschung
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IZA Institute of Labor Economics

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Jens Stephani

Government of the Federal Republic of Germany - Institute for Employment Research (IAB) ( email )

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Nuremberg, 90478
Germany

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