Academic journal article Australian Journal of Labour Economics

Who Are the Low Paid?

Academic journal article Australian Journal of Labour Economics

Who Are the Low Paid?

Article excerpt

Abstract

This paper provides pictures of low pay adult employees in Australia in 2004 drawing on data from the HILDA survey. The low paid are disaggregated into full-time and part-time employees. Estimates from multivariate probit models reveal that low wage employees are more likely to have casual status, single marital status, a low educational attainment, aged 21 to 30 or 60 plus, be employed in small firms, non-unionised, and have a lower occupational tenure. The magnitude of effect of these distinguishing characteristics is much larger for part-time versus full-time employees. Low paid employees, and more so in the case of full-time employees, are spread fairly evenly across households with different incomes. For about a half of low paid employees, a low paid job, especially if it is full-time, is a stepping stone to a higher paying job in the future.

1. Background and Introduction

The numbers of and characteristics of low paid employees provide important and necessary background information for assessing the distributional and equity effects of policy options affecting the labour market, including minimum wages, education and training, and policy reforms to the taxation and social security systems. This paper reports estimates of the number of full-time (FT) and part-time (PT) adult employees likely to be effected by the federal minimum wage (FMW). In the paper, low paid employees are defined as those workers earning below $500 per week or $13.15 per hour, or about 10 per cent above the FMW. In the initial description of the low paid, we provide a snapshot profile for 2004 of these individuals in terms of their individual, industry and household level characteristics relative to employees earning well above the minimum wage and relative to the unemployed. To gain a perspective on the experiences over time of the low paid, the labour market histories of low paid employees over the four years 2001 to 2004 are examined to assess the probabilities of movements in and out of low paid employment.

To date, a substantial amount of descriptive evidence exists on the characteristics of low paid employees in Australia (Healy and Richardson, 2006; Richardson and Harding, 2006; and, Richardson, 1998) based on tables showing bivariate data comparisons of the low paid and various characteristics. However, little is known of the independent statistical importance of individual characteristics among low paid employees when a multivariate regression analysis is undertaken. One exception is the now dated study by Flatau, Petridis and Wood (1995) who, in addition to descriptive tables of bivariate comparisons, used a multivariate probit model as used in this paper. In this paper we pay particular attention to differences between FT and PT employees. UK research also established that, in relation to individuals characteristics, minimum wage workers tend to be disproportionately female, parttime, young and located in industries such as Hotels and Catering (Low Pay Commission, 2003). The extent to which these and other individual characteristics are also important within the Australian context, and their magnitude of effect, is explored in this paper.

The fact that low wage earners are not over-represented in the most socially disadvantaged households has been relatively well established for Australia (Harding and Richardson, 1999; and, Tsumori, 2004), and a similar pattern is observed in the UK (NIEC, 1998; and, Bryan and Taylor, 2004). In this paper, we find that the household distribution pattern is slightly different when one distinguishes between the FT and PT low paid.

For our study a low waged worker is defined as anyone earning less than $500 per week or $13.15 per hour. These wage rates are approximately 10 per cent above the FMW which stood at $448 per week or $11.70 per hour in 2004. Anyone earning above these wage levels will be defined as non low waged. It would be preferable to investigate the characteristics of low waged workers in a more disaggregated fashion, for example using categorisations such as below FMW, around minimum wage and well above minimum wage. …

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