Low-Wage Jobs – Stepping Stone or Poverty Trap?

Erscheinungsdatum: November 2010

SOEPpapers on Multidisciplinary Panel Data ResearchWe examine whether low-paid jobs have an effect on the occupational advancement probability of unemployed persons to obtain better-paid jobs in the future (stepping-stone effect). We make use of data from the German Socio-Economic Panel (SOEP) and apply a dynamic random-effects probit model. Our results suggest that low-wage jobs can act as stepping stones to better-paid work. The improvement of the chance to obtain a high-wage job by accepting low-paid work is particularly large for less-skilled persons and for individuals with longer unemployment experiences. Low-paid work is less beneficial if the job is also associated with a low social status.

dynamic random effects models, low pay dynamics, state dependence, unemployment dynamics

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