What are the overall employment experiences of low-wage workers over a three-and-one-half year follow-up period after job start? How many eventually find a higher-wage job? How many move in and out of the low-wage labor market? What fraction of time are they in low-wage jobs, higher-wage jobs, and no jobs? Do employment rates increase over time? How do the employment patterns of low-wage workers compare to those of higher-wage workers? Which groups of workers have the best outcomes?
This chapter addresses these questions using a nationally representative sample of workers in the SIPP longitudinal panel file who started jobs during the first six months of the panel period (roughly in the first half of 1996). As discussed in Chapter II, to minimize misclassification errors, we defined a worker as a low-, medium-, or high-wage worker on the basis of the worker's average wage during the month of job start and the subsequent six months. We then examined the labor market experiences of these workers over a 42-month (three-and-one-half year) follow-up period from the month of job start. We conducted a descriptive (univariate) analysis by gender, as well as a multivariate analysis to efficiently summarize key labor market outcomes for subgroups of low-wage workers. To place our findings in context, we also present selected descriptive statistics for medium- and high-wage workers (a group whom we often refer to collectively as higher-wage workers).(27) All statistics were calculated using the longitudinal panel weight. Supplemental tables to those presented in the main text are found in Appendix B.
The entry cohort sample used in the overall employment analysis is conceptually different than the March 1996 cross-sectional sample used to describe the characteristics of low-wage workers and their jobs in the last chapter. The entry cohort sample consists of workers who started a job spell during a six-month window, whereas the cross-sectional sample consists of workers in the middle of their job spells, and hence, contains a disproportionate share of workers with longer-than-average spells. The demographic and job characteristics of the two sets of workers reflect these differences (Table C.1). Workers in the entry cohort sample tend to be younger and to live in poorer households than those in the cross-sectional sample. Similarly, workers in the entry cohort sample typically worked fewer hours, had lower weekly earnings, and were much less likely to have employer-based health insurance coverage. There are few differences, however, between the education levels, racial and ethnic composition, hourly wages, and occupations of workers in the two samples.
In the remainder of this chapter, we present descriptive findings by gender for the full set of outcome measures, and then present findings from the subgroup and multivariate analyses for selected outcomes. We caution readers again that the 1996 to 1999 follow-up period covered by our data was a period of strong economic growth with a high demand for labor. These strong economic conditions may have produced more positive labor market outcomes for our sample than would have been the case under a weaker economy.
Descriptive Analysis Findings, By Gender
Our descriptive analysis reveals that there was some movement into and out of the low-wage labor market for low-wage workers. During a three-and-one-half-year period after job start, most workers held medium-wage jobs at some point. However, many also returned to the low-wage labor market. Low-wage workers were employed about 80 percent of the time. Altogether, low-wage workers spent about twice as much time in low-wage than higher-wage (that is, medium- or high-wage) jobs. However, employment rates in higher-wage jobs increased over time, especially for males.
These results indicate that low-wage workers have some upward mobility over the medium-term. At the same time, however, a segment of the low-wage population remains entrenched in low-wage jobs. Next, we discuss the evidence for these findings.
We have found that the average earnings of low-wage workers improve somewhat over time. At the same time, however, many low-wage workers do not experience positive labor market outcomes. This section addresses the important question: Which groups of low-wage workers experience improvements in their labor market outcomes and which groups do not? Examining differences in overall employment outcomes across subgroups of the low-wage population has important policy implications for targeting appropriate services to those who are at most risk of poor outcomes.
We conducted our subgroup analysis in two interrelated ways. First, we examined key labor market outcomes for selected subgroups one at a time. These subgroups were defined by worker, area, and job characteristics at the time the workers started their low-wage jobs. (31) Second, we conducted a multivariate analysis to examine the association between particular explanatory (subgroup) variables and key labor market outcomes, holding constant the effects of other explanatory variables. The multivariate analysis accounts for correlations among the subgroup variables and also allows us to efficiently examine labor market outcomes for a large number of subgroups.
We examined four key labor market outcomes for the subgroup analysis:
- The percentage of months low-wage workers spent in low-wage jobs during the 42-month follow-up period
- The percentage of months workers spent in higher-wage jobs (that is, in medium- and high-wage jobs)
- The percentage of months workers spent in all jobs
- Whether the worker spent less than 25 percent of months in higher-wage jobs
We used the total time employed measure to assess the overall labor force attachment of subgroups of low-wage workers. We examined the average percentage of time that workers held higher-wage jobs to assess the extent to which subgroups of workers were able to escape the low-wage labor market over time. Finally, because focusing on averages can mask important subgroup differences in the distributions of the amount of time workers spent in various labor market activities, we also examined the share of workers who spent little time (less than one-quarter time) in the medium- and high-wage labor market sectors. Together, these summary outcome measures were used to identify subgroups who had the most and least successful labor market experiences.
The subgroup analysis was conducted separately by gender. Furthermore, all figures were calculated using the longitudinal panel weight. We estimated the multivariate models using ordinary least squares methods for the continuous outcome measures (the first three listed above) and logit maximum likelihood methods for the binary outcome measure (the fourth measure listed above). In the multivariate analysis, we conducted statistical tests to gauge the statistical significance of differences in labor market outcomes across subgroups. For some subgroups with small sample sizes (see Table III.1), the standard errors of the estimates are large. Consequently, some relatively large parameter estimates are not statistically significant. (32)
We included the following categories of explanatory variables in the regression models:
- Individual and household characteristics measured at job start (from the longitudinal panel file)
- Prepanel employment information (from the wave 1 topical module)
- Job characteristics measured at the start of the low-wage employment spell (from the longitudinal panel file)
- Area characteristics and state economic indicators measured at the start of the job, as well as changes in unemployment rate indicators between the start and end of the follow-up period (from published data sources; see the Methodological Appendix A)(33)