Low-Wage Work and Labour Market Policies: A European Cross-Country Study

Trine Schack (), Jordy Meekes (), Barreto, César, Carcillo, Stéphane (), Jonas Fluchtmann (), Alexander Hijzen (), Benjamin Lochner (), Matthew Nibloe () and Rune Vejlin ()
Additional contact information
Trine Schack: Department of Economics and Business Economics, Aarhus University
Jordy Meekes: Leiden University
Barreto, César: OECD, Paris
Carcillo, Stéphane: Sciences Po, Paris
Jonas Fluchtmann: OECD
Alexander Hijzen: OECD
Benjamin Lochner: FAU Erlangen-Nuremberg
Matthew Nibloe: UCL
Rune Vejlin: Aarhus University

No 18891, IZA Discussion Papers from IZA Network @ LISER

Abstract: We study the incidence, sources, and dynamics of low-wage employment using harmonised linked employer-employee administrative data from Denmark, France, Germany, the Netherlands, Portugal, and the United Kingdom. We examine how worker characteristics, firm-specific wage premia, wage progression, and labour market institutions shape outcomes at different parts of the lower wage distribution. Three main findings emerge. First, worker characteristics account for most of the wage gap facing low-wage workers, though firm-specific wage premia matter too, especially at the very bottom. Firm premia reflect both sorting across industries and pay differences across firms within industries. Second, low-wage employment is at least partly transitory, as workers at the bottom see faster subsequent wage growth and change firms more often. Third, minimum wages and marginal effective tax rates show limited systematic association with wage growth or job-to-job mobility, though higher minimum wages are linked to a smaller share of workers below 70 % of the median. These patterns are broadly similar across countries and point to the joint importance of worker skills and access to higher-paying firms for improving low-wage workers' prospects.

Keywords: low-wage employment; cross-country; matched employer-employee data; wage premia; taxes (search for similar items in EconPapers)
JEL-codes: J24 J31 J38 J62 (search for similar items in EconPapers)
Date: 2026-08
New Economics Papers: this item is included in nep-eec, nep-inv and nep-ltv
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