Webinar: Alexander Plum & Kabir Dasgupta, AUT, Human Capital Formation and State Dependence in Low Pay

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Melbourne Institute Seminar Series

Title: Human Capital Formation and State Dependence in Low Pay

Abstract: This study aims at understanding how persistence in low pay changes over time by age and qualification level. In general, the wage trajectory over a life cycle follows a hump-shaped pattern, with more qualified workers experiencing higher wage growth rates. We use population-wide tax records to track monthly labour market trajectories of workers who initially start off in low paid employment. Performing age- and qualification-specific regressions, our empirical findings indicate that the change in the probability of staying on low pay is highly heterogeneous across the workforce. For a qualified worker in their early 20s, the risk of staying on low-pay declines by, on average, 5 to 10 pp after one year, while a worker in their 50s has a particularly low likelihood of exiting the low pay sector. Our empirical evidence, which reveals that young and highly qualified workers manage to transit into better-paying firms, indicate that the specific group is likely to experience a better employee-employer match than other workers.

Presenter: Alexander Plum & Kabir Dasgupta, Auckland University of Technology

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