Low-wage employment

Schnabel C (2016)

Publication Language: English

Publication Type: Journal article

Publication year: 2016


Publisher: Forschungsinstitut zur Zukunft der Arbeit GmbH

Journal Issue: 276

DOI: 10.15185/izawol.276


Low-wage employment has become an important feature of the labor market and a controversial topic for debate in many countries. How to interpret the prominence of low-paid jobs and whether they are beneficial to workers or society is currently an open question. The answer depends on whether low-paid jobs are largely transitory and serve as stepping stones to higher-paid employment, whether they become persistent, or whether they result in repeated unemployment. The empirical evidence is mixed, pointing to both stepping-stone effects and “scarring” effects (i.e. long-lasting detrimental effects) of low-paid work. Although upward mobility is limited, low-wage jobs can act as stepping stones to better-paid jobs for certain groups of workers. This provides some support for the “work-first” strategy that forms the basis for welfare reforms in many countries. However, as low-wage employment is not a self-correcting problem and can induce scarring effects, a comprehensive policy approach is needed. This should include active labor market policies and a philosophy of lifelong learning that increase workers’ chances to move up to better jobs, as well as a strategy of promoting “good firms” that invest more in training and provide better opportunities for workers to acquire high-paid jobs.

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Schnabel, C. (2016). Low-wage employment. IZA World of Labor, 276. https://doi.org/10.15185/izawol.276


Schnabel, Claus. "Low-wage employment." IZA World of Labor 276 (2016).

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