4  Who are the low wage workers?

Most research in this area concentrates on new entrants who are young. Youth comprise only a portion of low skill workers. In brief, people move into low wage jobs from the education system, from being outside the labour force for other reasons, from unemployment and from higher wage jobs. People move out of low wage jobs into unemployment, out of the labour force, and into higher wage jobs. We define upward mobility only as movement into a higher wage job. “Stability” obviously includes staying in a low wage job. But it also will be defined to include moving to unemployment or out of the labour force.

The OECD (1997:7) observes that “While the overall incidence of low pay varies substantially across OECD countries, it tends to be concentrated among the same workers and in the same jobs.” Low wage jobs are disproportionately found among those with relatively little education, among women and among youth and older workers. The types of people who do low wage work comprise four main groups. These are:

• school leavers (or current students) with no prior work experience
• sole mothers
• people previously unemployed or out of the labour force, such as mothers returning to the workforce
• displaced workers made redundant by business closures or restructuring who cannot find employment in their field of specialisation (such as men who lose jobs in manufacturing).

In countries with a sizeable migrant population, recent migrants and migrants who are not fluent in the language of their new country are frequently found among the low wage workers, even if they have quite high levels of formal education.

In the UK, the wages of people who are in entry jobs (ie, in the previous period were not employed, for whatever reason) are typically in the 20^th percentile of the overall wage distribution: people in entry jobs get paid significantly less, given their observable and unobserved characteristics, than do other employed people (Gregg and Wadsworth, 2000).

In the US, there is also a strong race dimension to the low wage group, with blacks and Hispanics over-represented. France and Japan have a relatively high proportion of women in their low wage population.

Most research on low wage employment focuses on the first group because of the availability of longitudinal data on the employment dynamics of youth, which are rarely available for the other three groups.

Tables 2 and 3 give an excellent overview of who are the low wage workers. Table 2 shows what the typical low paid worker looks like in terms of age, sex and education. The comparisons focus on the main English-speaking countries, with Germany included to give the different European picture. Low wage workers are more likely to be women than men, except in Australia and New Zealand. Note that women make up fewer than half of the full-time workforce in all these countries, so that they are disproportionately likely to be low paid.

Note: The data refer only to full-time workers. Low wage is defined as less than two thirds of the median earnings of full-time workers.

Source: Keese, Puymoyen and Swaim, 1998:230

Note: *The data refer only to full-time workers. Low wage is defined as less than two-thirds of the median earnings for full-time workers.

Source: Keese, Puymoyen and Swaim, 1998:230

With the exception of Australia and Germany, a clear majority of low wage workers are prime age (25-54). This is a very important statistic, because it makes it clear that low wages are not just a temporary event that young people experience in their transition from school to adult employment. It is also important because adults have adult responsibilities, including for the support and care of their children. Other evidence shows that many low wage adults live in families with an employed partner, which means that the family income is not necessarily low. But many others do not, in particular the women in mother-headed households.

It is surprising that, with the exception of Germany, many of the low wage earners have quite high levels of education, between a fifth and a third having post-school education. De Grip and Nekkers (2001) report that in 1998, about 15% of high education workers in the Netherlands, Germany, France and the UK had low wages.[2] This compares with between 40% (UK) and 55% (Netherlands and Germany) of the lowest education group.

Table 3 shows the same information as Table 2, but presented in a different way. Rather than identify the low wage workers, Table 3 shows which groups have the highest likelihood of being in low wage work. As with Table 2, the data are confined to people who work full-time. While in most of the countries considered there are more men than women receiving low wages, in all the countries the chances of being in a low wage job are higher for women than for men. This is most strongly the case in Germany and the UK and least apparent for Australia and New Zealand. In Germany, women working full-time are 3.3 times more likely to be in a low wage job than are men. In New Zealand, they are 1.4 times more likely. In Canada, the UK and the US, over one fifth of full-time workers aged over 54 receive low wages. In New Zealand the figure is 16%. Germany, with only 5% of older workers and 7% of prime age workers working in low wage jobs, presents the strongest case for the view that low wage jobs are a temporary stepping stone for youth as they move into higher paid jobs. This characterisation is more true for Australia than it is for New Zealand, and is least true for the UK, Canada and the US. In the US and Canada, over 20% of full-time workers in the prime ages of 26-54 receive low wages.

Those with more education clearly face lower risks of low wage employment in each of the countries for which there are data. In the US and Germany, it is higher education that makes the difference: in New Zealand it is upper secondary education. But more education is not fully protective. In Canada, New Zealand and the US, around 15% of full-time workers with higher education worked in low wage jobs.

The information presented in Tables 2 and 3 makes it plain that low wage workers are not homogeneous. While the risk of being low paid is everywhere higher for people under age 25, in most of the OECD countries the majority of low wage workers are older than 25. In New Zealand, over half of the low paid are in the prime age group of 25-54. Similarly, while everywhere the risk of having a low wage is higher for women than for men, in Australia, New Zealand and the Netherlands the majority of (full-time) low wage earners are men. If we ask what the typical low wage earner looks like, the answer will vary across the OECD. For the main English-speaking countries, the answer is that they are fairly evenly divided between the sexes, of prime age and have a basic or (in the case of Canada and the US), upper secondary education. Clearly, low wage employment is not confined to young people who have little formal education and who are using low paid jobs as a means to acquiring the skills to move on to better paid jobs.