Human capital formation and changes in low pay persistence

Kabir Dasgupta and Alexander Plum

Applied Economics, 2023, vol. 55, issue 56, 6583-6604

Abstract: This study presents new empirical evidence on the role of time trends in low pay persistence. We utilize population-wide tax records to track monthly labour market trajectories of initially low-paid workers. By performing age- and qualification-specific regressions, we find that low pay persistence reduces with time. However, the magnitude is highly heterogeneous across workforce characteristics. For a qualified worker in their early 20s, the risk of staying on low-pay declines by, on average, 5–10% points after one year. For a worker in their 50s, persistence remains almost unchanged regardless of their qualification level. We conclude that policy initiatives need to be more nuanced than a simple one-size-fits-all approach by accounting for time trends in low-pay persistence.

Date: 2023
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Working Paper: Human Capital Formation and Changes in Low Pay Persistence (2020)
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DOI: 10.1080/00036846.2022.2161989

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