Characteristics of Low-Wage Workers and Their Labor Market Experiences: Evidence from the Mid- to Late 1990s. Reentry Into The Low-Wage Labor Market

04/30/2004

What happens to low-wage workers after they leave their low-wage jobs? We have seen that during the mid- to late 1990s, about one-half of low-wage job spells ended in higher-wage employment, and about one-quarter ended in nonemployment. In this section, we examine reentry into the low-wage labor market for these workers.

a. Duration of Nonemployment Spells

During the period under investigation, about 47 percent of male low-wage workers and 57 percent of female low-wage workers exited their low-wage employment spells into nonemployment (including unemployment and leaving the labor force; Table VI.3). How long did they stay nonemployed, and what types of jobs did they find when they became reemployed?

Nonemployment spells for low-wage workers were typically short (Table VI.5). Among males in our sample, about two-thirds returned to the labor market within six months after becoming nonemployed, and 80 percent returned within a year. Reemployment rates were somewhat lower for females (51 percent found jobs within six months, and 67 percent found jobs within a year), in part reflecting the higher percentage of females who became nonemployed because they left the labor force. These relatively high reemployment rates may have been due to the strong economy faced by sample members. Nonetheless, they suggest that low-wage workers do not typically remain unemployed for a long time.

Most nonemployed low-wage workers in our sample who became reemployed returned to the low-wage labor market, and fewer entered higher-paying jobs (Table VI.5). Within 24 months after becoming nonemployed, 64 percent of males returned to low-wage jobs, compared to only 23 percent of males who found higher-paying jobs. Stated differently, more than 7 in 10 males who found jobs returned to the low-wage labor market. Similarly, more than 8 in 10 females who became reemployed returned to low-wage jobs.

Table VI.5.
Cumulative Reemployment Rates For Workers Who Exited Low-Wage Jobs
Into Nonemployment, By Gender
Month Males Workers Females Workers
Total Type of Reemployment Total Type of Reemployment
Low-Wage Job Higher-Wage Job Low-Wage Job Higher-Wage Job
Cumulative Percentage of Spells Ending in Reemployment Within the Specified Number of Months
1 18 14 4 13 11 2
2 32 24 8 22 19 3
3 42 31 10 29 25 4
4 56 41 15 43 35 7
5 61 45 16 47 39 8
6 66 49 17 51 43 9
7 69 51 17 55 46 9
8 73 54 19 59 49 10
9 74 55 19 61 51 10
10 76 57 20 63 52 11
11 78 58 20 65 54 11
12 80 59 21 67 56 12
13 81 60 21 69 57 12
14 82 61 21 71 59 12
15 83 61 21 72 60 12
16 83 62 22 73 61 13
17 84 62 22 74 62 13
18 85 63 22 75 62 13
19 85 63 22 76 63 13
20 86 63 22 76 63 13
21 86 64 22 77 64 13
22 86 64 22 78 64 13
23 86 64 23 78 65 14
24 87 64 23 79 65 14
Source: 1996 SIPP longitudinal files using the sample of 1,277 spells for males and 2,761 spells for females for low-wage workers who exited their low-wage job spells into nonemployment.
Note: All figures are weighted using the longitudinal panel weight.

b. Duration of Higher-Wage Spells

During the mid- to late 1990s, about 49 percent of low-wage employment spells for males and 36 percent of low-wage employment spells for females ended in medium-wage or high-wage employment within a four-year period (see bottom panel for each gender group in Table VI.3). In this section, we examine the rate at which workers who obtained these higher-paying jobs (1) left these jobs, (2) returned to the low-wage labor market, and (3) became nonemployed.

Our results on the duration of higher-wage employment spells show that the majority of those who obtained higher-wage jobs left these jobs within the panel period, but a significant number also remained in them (Table VI.6). Nearly 60 percent of males and females left the higher-wage labor market within one year after job start, and about 70 percent left within two years. Yet, nearly one-third stayed employed in these high-wage jobs for at least two years. Thus, we again find diversity in the labor market success of low-wage workers.

Interestingly, nearly all those who left higher-wage jobs returned to the low-wage labor market, and only a small percentage exited into nonemployment (Table VI.6). For example, more than one-half of all workers reentered the low-wage labor market within two years, whereas only about 16 percent became nonemployed over the same period. Stated another way, nearly 80 percent of those who left higher-paying jobs reentered the low-wage labor market. These results are consistent with previous findings from the overall employment analysis that many low-wage workers experienced multiple low-wage job spells during the panel period. Consequently, both exits out of and reentry into the low-wage market were common for low-wage workers during the mid- to late 1990s.

Table VI.6.
Cumulative Exit Rates From Higher-Wage Jobs For Workers Who Exited Low-Wage Jobs
Into Higher-Wage Jobs, By Gender
Month Males Workers Females Workers
Total Type of Exit Total Type of Exit
Low-Wage Job Unemployment Left the Labor Force Low-Wage Job Unemployment Left the Labor Force
Cumulative Percentage of Higher-Wage Employment Spells Ending Within the Specified Number of Months
1 2 2 0 0 3 2 0 1
2 6 4 1 1 7 4 1 2
3 9 6 1 2 10 6 1 2
4 36 30 3 4 37 31 2 4
5 38 31 3 4 39 32 2 5
6 39 32 3 4 41 33 3 5
7 41 33 3 5 43 34 3 5
8 50 40 4 5 52 43 3 6
9 52 41 4 6 54 44 3 7
10 52 42 5 6 55 44 3 7
11 53 43 5 6 56 45 4 8
12 58 46 5 6 60 48 4 8
13 58 46 5 7 61 48 4 8
14 59 47 6 7 61 48 4 8
15 60 47 6 7 61 49 4 8
16 64 50 7 7 65 51 4 9
17 64 50 7 8 65 51 4 9
18 64 50 7 8 66 52 5 10
19 65 50 7 8 67 52 5 10
20 66 51 7 8 69 54 5 10
21 67 52 7 8 69 54 5 11
22 67 52 7 8 69 54 5 11
23 67 52 7 8 70 54 5 11
24 70 54 8 8 71 55 5 11
Source: 1996 SIPP longitudinal files using the sample of 2,061 spells for males and 2,469 spells for females for low-wage workers who exited their low-wage job spells into medium- or higher-wage jobs.
Note: All figures are weighted using the longitudinal panel weight.

In sum, the labor market dynamics of low-wage workers are complex. Most low-wage workers find higher-paying jobs at some point. Many, however, return to the low-wage labor market. At the same time, however, a nontrivial share of low-wage workers exit into higher-paying employment and keep these jobs for a substantial period of time. Thus, there is considerable diversity in wage progression among the low-wage worker population, although, on average, their earnings prospects improve over time.

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