Low-pay work in Europe: dynamics, evolution and the role of institutional factors

Purpose This paper investigates the temporary or persistent nature of low-pay work in Europe. The evolution over time of low-pay state dependence is explored by considering relevant subperiods. The role of institutional factors is also examined. Design/methodology/approach The analysis is based on longitudinal sections of the European Union Statistics on Income and Living Conditions survey covering the 2003–2020 period. The authors adopt a dynamic framework to characterize the possible transitory or permanent nature of low-paying jobs. To better identify mobility and persistence, they consider the entire spectrum of labor market outcomes (non-employment, low-pay work and high-pay work), thus adopting a multinomial logit specification. The issue of initial conditions is addressed and correlated random effects are assumed. Findings The authors find that being employed, either in low-paying or standard/high-paying job, might be considered a protective factor against the risk of nonemployment. They find evidence of genuine state dependence in the majority of countries explored, with important changes in magnitude. Several countries experienced a strengthening of persistence overtime in low-pay work. Some institutional factors, such as higher minimum wage and expenditure on labor market policies, might play a role in the reduction of the persistence in low-pay conditions. Originality/value The paper stresses the relevance of exploring the entire spectrum of labor market outcomes when analyzing the transitory/permanent nature of low-pay work. It provides novel evidence on the evolution of persistence in low-pay jobs and the role of institutions in Europe.