Is Low-wage Employment a Way to Make Permanent Employment Possible or a Low-wage Trap?

The study examines low-wage employment in full-time jobs offered by sectors of the private economy. The analysis draws on anonymised individual administrative data collected by the Austrian social insurance bodies. In addition to descriptive analyses, the study uses spell models that analyse the probability of transfer from low-wage to better paid employment and to unemployment. Considering that about one in three female full-time workers is in a low-wage job, low-wage employment is a typical feature of women's job careers. Among men, the share of low-wage jobs has been increasing marginally in the past years but is still below the 10 percent threshold. Against this background, it is noticeable that low-wage employment is so much more persistent among women than among men. For men, a low-wage job more frequently acts as a stepping stone for a better paying job or, alternatively, is an episode in a no-pay low-pay cycle, as is indicated by the higher risk of unemployment among low-paid men as well as their considerably more frequent transfer to positions outside the labour pool. Altogether, accepting a low-paid job means incurring a much higher risk of unemployment than is the case for a better paying job. The risk even increases in the course of a low-paid spell because the risk of renewed unemployment over time declines much more strongly for better paid workers than for low-wage workers. As a stepping stone to permanent employment with better payment, low-paid jobs are best suited for younger and more highly skilled workers, especially when they find a job in a major company where payment tends to be high and fluctuation low. For women (who are anyway subject to a greater persistency of low-wage employment) child care obligations further cut into their opportunities to make use of the stepping-stone option.