10 Sources of upward wage mobility
The studies of wage mobility reported above include some evidence on the attributes of workers that contribute to an increased likelihood of upward mobility.
The evidence cited so far gives a reasonable idea about the extent of upward wage mobility among low wage workers. While there clearly is mobility, especially for younger workers, there is also a deal of stability. Older, less educated, female, rural and displaced workers have the lowest prospects of upward mobility. Mobility to a higher paying job is much less if movement out of a job (or a full-time job) is included. It is interesting, then, to ask what is known about the conditions that increase upward mobility.
Dunlop (2000) examines the rates of transition from a low wage job to a higher paying job across a range of personal and work attributes. She reports (for Australia) that those with the lowest prospects of upward mobility are women with dependent children, older workers, rural workers, part-time and casual workers and non-union members who work in a small private sector firm. A logit estimate of the determinants of moving above the low wage threshold for Australian workers concluded that young male urban low wage workers were the most likely to be upwardly mobile. However, workers employed by small firms were significantly less likely to move to a higher wage in the next period. This is most sensibly interpreted to mean that such firms do not provide systematic on-the-job training or do not have promotion ladders that provide wage growth within the firm. This finding is consistent with that for the UK (Stewart and Swaffield, 1997; Sloane and Theodossious, 1994). It should also be noted that having undertaken training in the previous year was not significantly associated with the probability of moving to a higher wage (Dunlop,2000: 38).
10.1 The economic environment
There is tentative evidence that the state of the macro-economy has some impact on wage mobility. The form this takes is not so much immediate wage changes (at least in the US, over recent decades wages have not moved much in response to macro-economic conditions). Rather, the evidence suggests that to a modest extent a strong labour market encourages the growth of jobs in industries and occupations that have promotion possibilities. The existence of promotion ladders is indicated by the evidence that people with longer tenure in the occupation or industry have higher wages, other things equal. The return to tenure varies considerably across industries. For example, Hines, Hoynes and Krueger et al (2001) calculate a return to tenure in the US of virtually zero for Entertainment, Recreation, Mining and Personal Services industries, while the return was as high as 2.8% per year for Finance, Insurance and Real Estate. Similarly, the returns to tenure varied from zero for farmers to 2.2% per year for professional and technical workers. The question is, do people shift into occupations or industries with higher returns to tenure as the labour market moves in favour of workers? Hines et al conclude that as the macro-economy tightens, there is some evidence that workers, especially the lower paid, do shift into industries with career paths. A tight labour market is beneficial for low skilled workers primarily because it increases the probability of them getting a job, and of being able to work longer hours. But it seems that it is also of some benefit in increasing the chances of low skilled workers finding jobs that offer opportunities for advancement.
We note, however, that a strong macro-economy may not by itself be able to overcome serious labour market disadvantage. The 1990s boom in the US has indeed resulted in a fall in the level of unemployment among young black men (from 43 to 30% during 1985-98). However, their level of employment actually fell from 34 to 30% during the same period. (Ryan 2001:41). Indeed, by 2000, more young black men were in gaol than in full-time work.
The value of a tight labour market is also supported by the evidence (eg, De Grip and Nekkers, 2001; Gottschalk, 2001) that voluntary job changes on average result in a gain in wages whereas involuntary ones typically cause a loss in wages. Since it is low wage workers who are most at risk of losing their jobs in a recession, they face a double jeopardy: of both job loss and of wage loss if they are able to find another job.
