Characteristics of Low-Wage Workers and Their Labor Market Experiences: Evidence from the Mid- to Late 1990s. Comparing The Duration of Low-, Medium-, and High-Wage Spells

04/30/2004

How long are the spells of workers who start low-wage jobs compared to those of workers who start medium- and high-wage jobs? The answer to this question can help place in perspective the life table findings for low-wage workers presented above.

To address this question, we compared two types of employment spells for those starting low-, medium-, and high-wage jobs. First, we examined the length of time workers were employed in jobs of the same wage type as their initial job. For example, we examined how long medium-wage workers remained in medium-wage jobs (either with the same employer or with a different one). Second, we examined how long workers were employed at all. For example, we examined how long those starting high-wage jobs were continuously employed in any job and at any wage level.

Table V.4.
Characterisitics Of Initial Low-Wage Job And The Job Held Three Years Later
Month Males Females
Without Left-
Censored Spells
With Left-
Censored Spells
Without Left-
Censored Spells
With Left-
Censored Spells
Number of Months After Start of Low-Wage Job
   4 26 24 28 25
   8 42 39 42 39
 12 51 46 52 48
 16 57 52 58 54
 20 61 56 62 58
 24 64 59 66 62
 28 66 61 68 65
 32 69 63 71 67
 36 71 65 72 69
 40 72 67 75 72
 44 74 68 78 73
 48   70   74
 52 to 104 (1 to 2 Years)   81   85
105 to 156 (2 to 3 Years)   85   91
157 to 208 (3 to 4 Years)   89   94
208 to 260 (4 to 5 Years)   94   97
Source: 1996 SIPP longitudinal files using the sample of 3,943 spells for males and 6,832 spells for females.
Note: All figures are weighted using the longitudinal panel weight.

We find that, during the mid- to late 1990s, low-wage employment spells were typically shorter than medium- and high-wage employment spells, especially for males (Figure VI.2, and Tables E.3 and E.4). Furthermore, the differences increased somewhat over time. For example, among male workers, about 74 percent of low-wage employment spells ended within one year after job start, compared to 60 percent of high-wage spells. By 24 months, differences in the cumulative exit rates were larger (88 percent for low-wage employment spells, compared to 70 percent for high-wage employment spells). This suggests that, after an initial adjustment period, higher-wage workers became more and more likely than low-wage workers to remain on their jobs. Differences in spell lengths by wage type, however, are smaller for women. The 24-month cumulative exit rate was 84 percent for females with low-wage employment spells and 76 percent for females with high-wage employment spells.

Although medium- and high-wage employment spells were somewhat longer than low-wage employment spells, they were shorter than expected. The reason is that a nontrivial percentage of medium-wage workers exited into low-wage or high-wage jobs, and a nontrivial percentage of high-wage workers exited into medium-wage jobs. Among medium-wage workers, about 30 percent of males and females ultimately exited into higher-wage jobs, and 28 percent of males and 19 percent of females ultimately exited into low-wage jobs (not shown). Among those starting high-wage job spells, about 37 percent of males and females exited into medium-wage jobs within 44 months.

Figure VI.2.
Cumulative Exit Rates from Low-, Medium- and High-Wage Employment Spells of the Same Wage Type, By Gender
 
Figure Vi.2a. tive Exit Rates From Low-, Medium- and High-Wage Employment Spells Of The Same

Figure Vi.2b. Cumulative Exit Rates From Low-, Medium- And High-Wage Employment Spells Of The Same

Source: 1996 SIPP longitudinal files using the entry cohort sample.

Thus, there is considerable wage movement over time for those starting medium- and high-wage spells, as well as for those starting low-wage spells. These wage fluctuations could be due partly to reporting errors in hourly wages or in monthly earnings and hours worked per week (for those who could not directly report hourly wages) or to temporary changes in labor supply effort or earnings levels (although we "smoothed" the constructed wage measures within waves to help alleviate this problem). We believe, however, that our findings reflect real movements of medium- and high-wage workers across wage categories. This interpretation is supported by findings from the overall employment analysis that many workers in our sample who started higher-wage jobs at the start of the panel period experienced multiple job and employment spells over the three-and-one-half-year follow-up period. Thus, wage and job mobility is common both for higher earners and for low earners.

During the mid- to late 1990s, overall employment spells lasted substantially longer for those starting higher-wage than lower-wage jobs (Figure VI.3, and Tables E.3 and E.4). About 65 percent of low-wage male and female workers became nonemployed within two years after starting their jobs. In contrast, only about 45 percent of medium-wage and 39 percent of high-wage workers became nonemployed over the same period. Thus, although wage fluctuations were common for all groups of workers, unemployment was less of a problem for higher-wage workers than for low-wage ones. Again, our overall employment analysis supports these findings, because over a fixed three-and-one-half-year follow-up period, low-wage workers spent, on average, more than twice as many weeks unemployed than higher-wage workers.

Figure VI.3.
Cumulative Exit Rates from Low-, Medium-, and High-Wage Employment Spells of Any Wage Type, By Gender
 
Figure Vi.3a. Cumulative Exit Rates From Low-, Medium-, And , and High-Wage Employment Spells Of Any Wage Type, By Gender

Figure Vi.3b. Cumulative Exit Rates From Low-, Medium-, And High-Wage Employment Spells Of Any Wage Type, By Gender

Source: 1996 SIPP longitudinal files using the entry cohort sample of spells.

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