13.3 Is a low paid, insecure job better than no job?
This interesting and policy-relevant question has several answers, which depend on the meaning given to “better”.
If “better” means that a person has a higher chance of being employed in the next period, then the answer is that a bad job is probably better than no job, but only modestly so. A number of studies show that movement from unemployment into a job is difficult, the more so the longer the duration of the unemployment. Indeed, theory, with some empirical support, concludes that the chances of a low skilled person moving straight from non-employment into a reasonably good job (especially one with prospects for wage growth) are small. The best prospects for a low skilled person to find a reasonable job come from securing a good match – that is, a job that makes the most of their abilities. It often takes a willingness to move from job to job before a good match is found.
The direct evidence that a bad job is better than no job in terms of securing higher pay is weak. A complete investigation of this question would require careful specification of the alternative to employment. For relatively low skill youth, evidence was cited that job programs do increase the chances of getting a regular job, but do little for wages. The most sophisticated examination of this question concluded that employment in a low wage job provides no statistically significant advantage over an episode of unemployment in the search for a higher paying job.
If “better” means better for mental well-being, then the evidence does not support the view that any job is better than no job. The low income associated with being unemployed is a major source of the distress caused by unemployment. But the overwhelming evidence from a number of longitudinal studies by psychologists is that being employed in a poor job does not lead to better mental well-being than being unemployed, once the effects of any income difference are accounted for.
13.4 Do the costs of geographical mobility and broken employment histories inhibit wage mobility and why?
We do not report any direct evidence on the impact of the costs of within country geographical mobility on wage profiles. There is a considerable literature on both international and internal migration. This literature makes the obvious point that people who migrate for economic reasons must believe that the expected earnings in the new destination will exceed the expected earnings in the current location by an amount sufficient to cover the costs of migrating (including the psychological costs). The expected earnings in each case will be a product of the probability of finding a job and the expected wage in that job (plus any welfare available to cover periods of non-employment). An increase in the costs of moving will increase the degree of self-selection among potential migrants, in favour of those with larger expected gains. The costs of moving will be higher for risk averse people if there is uncertainty about potential wage offers in the labour market to which the migrant might move. One policy response that encourages migration among people who should benefit, is to provide high quality information about the destination labour market. Good job-matching services would play a similar role. Home ownership in declining regions has a well-documented negative effect on the propensity to shift to find a better, or any, job. The obvious reason is the capital loss involved in selling the home into a depressed housing market.
13.5 Does the supply of low skilled/high skilled workers affect the demand for low skilled/high skilled workers?
The link between the supply of and demand for different types of skills and skill structure is complex, two-way and likely to differ over the long-term as compared with the short term. There is a clear interaction between the supply of and demand for skills via the price mechanism. The wages for specific types of skills (geologists, IT specialists, accountants, bricklayers, for example) clearly are responsive to shifts in the state of excess demand or supply for those skills. Changes in relative wages in turn induce a response in the supply and/or demand. But this is not the issue that underlies the bigger question. Rather, the issue is, if low skilled people generally were given more education or other forms of skill development, would this call forth a greater demand for their new skills? Or would it merely mean that they would be over qualified for whatever jobs they were able to get? And would it mean that those who did not get the extra skills would have virtually no chance of employment, being displaced by those higher up the education ladder than themselves?
The reality is likely to be somewhere between these extremes of full response of demand and no response. But on the US evidence, the balance appears closer to no response. The very high levels of average education, and the large proportion of the US workforce that has completed secondary school and that has tertiary qualifications has not prevented the large scale growth of low wage, low skill jobs. It has had two rather disturbing outcomes. One is that people who do not have substantial levels of formal education have little hope of finding satisfactory employment. The absence of completed secondary school education is taken as a strong signal of poor employability. The other is that many people are over qualified for the work that they do. That this over qualification does not translate into greater prospects for upward wage mobility, is suggested by the relatively low levels of mobility in the US compared with a number of European countries.
13.6 Do different causes of low skill (low education, poor schooling or parenting, history on welfare, crime, drug dependence etc) affect future labour market outcomes?
Psychologists have the best evidence on this question. Numerous studies have identified the personal and background characteristics of people who have poor labour market outcomes (mostly in the form of unemployment, rather than low wage jobs).
Economists have observed that the rising inequality of wages in the English-speaking world has occurred within demographic and education groups. That is, people with the same sex, experience, education, race and even occupation are increasingly being paid different levels of wages. This has been interpreted to mean that non-observable personal characteristics, such as motivation and general ability, are being increasingly rewarded in the market place. It must be admitted that the direct evidence for this proposition is modest: it is more an inference than an observation.
The psychological literature is able to identify a range of personal and environmental factors that are detrimental to good employment outcomes. While there is no direct link between these factors and wage mobility, it is a reasonable supposition that the factors that are associated with unemployment, intermittent employment and low wages also contribute to low prospects of obtaining good wages in the future. These factors have direct effects and also effects through their impact on levels of education attained.
Minority ethnicity youth from lower socio-economic status backgrounds who attended public schools are at higher risk for subsequent unemployment. So too are those growing up in a single parent family; with parents who have lower status occupation and qualifications; and with unemployment in the family. Peer relationship problems stemming back into childhood are also predictors of youth unemployment. Young people with the worst labour market prospects not only have family problems and a lack of resources, they are likely also to have mental health problems, a low opinion of themselves, and poor intellectual ability.
Among adults, sole mothers have particular difficulty in moving upward into satisfactory jobs. While for some a low education may be part of the dynamic, no doubt also the need to find time and energy to care for their young children, and an alternative of even modest welfare support, also contribute. There is strong evidence from the US, and some from other English-speaking countries, including Australia, that sole mothers cycle between low paid insecure jobs, having a partner who will support them, and reliance on welfare payments.
