Moving Up Or Moving On:Moving Up Or Moving On:Workers, Firms and Workers, Firms and

Advancement in the Low-Advancement in the Low-Wage Labor MarketWage Labor Market

Fredrik AnderssonFredrik AnderssonHarry HolzerHarry Holzer

Julia LaneJulia Lane

OverviewOverview

Research QuestionResearch Question Data, Definitions and MeasurementData, Definitions and Measurement ApproachApproach ResultsResults SummarySummary

Research QuestionsResearch Questions1. How frequently do low earners transition into higher 1. How frequently do low earners transition into higher

earnings categories over time?earnings categories over time?2. How important are the characteristics of firms – 2. How important are the characteristics of firms –

especially the especially the wage premiawage premia they pay - in accounting for they pay - in accounting for these transitions?these transitions?

3. Do low-earners make more progress through job 3. Do low-earners make more progress through job retentionretention (i.e., staying with the same firm and (i.e., staying with the same firm and accumulating seniority and training there) or job accumulating seniority and training there) or job mobilitymobility (i.e., moving to firms with higher wages and better (i.e., moving to firms with higher wages and better advancement opportunities)?advancement opportunities)?

4. Does earlier work experience matter for the progress 4. Does earlier work experience matter for the progress made in later jobs by these workers? If so, which made in later jobs by these workers? If so, which characteristics of earlier work matter? Does early work characteristics of earlier work matter? Does early work for a temp agency generate more advancement later on?for a temp agency generate more advancement later on?

Research DesignResearch Design1.1. Define low-earners: Prime-age workers who work at Define low-earners: Prime-age workers who work at

least one quarter a year but who consistently earn less least one quarter a year but who consistently earn less than $12,000 annually over a 3-year base period than $12,000 annually over a 3-year base period (1993-95)(1993-95)

2.2. Measure transitions out of low earnings (partial v. Measure transitions out of low earnings (partial v. complete) over subsequent 3-year periods (1996-98, complete) over subsequent 3-year periods (1996-98, 1999-2001)1999-2001)

3.3. Analyze relationship between earnings transitions and Analyze relationship between earnings transitions and primary firm characteristics in the subsequent periodsprimary firm characteristics in the subsequent periods

4.4. Analyze relationship between job mobility/retention Analyze relationship between job mobility/retention and transitions – comparing move/movers, and transitions – comparing move/movers, move/stayers, stay/movers and stay/stayersmove/stayers, stay/movers and stay/stayers

5.5. Analyze characteristics of earlier jobs that contribute Analyze characteristics of earlier jobs that contribute to later transitions for those who change jobsto later transitions for those who change jobs

The Longitudinal Employer - The Longitudinal Employer - Household Dynamics Household Dynamics

ProgramProgramLink RecordPerson-ID Employer-IDData

Business Register Employer-IDCensus Entity-IDData

Economic Censuses and SurveysCensus Entity-ID Data

Demographic Surveys

Household RecordHousehold-IDData

Person Record Household-IDPerson-IDData

DataData- UI and Es202 data from 5 states (CA, FL, IL, MD and - UI and Es202 data from 5 states (CA, FL, IL, MD and

NC): almost 1 billion quarterly observations, on NC): almost 1 billion quarterly observations, on some 58 million employers 1992-99some 58 million employers 1992-99

- We use a subset of workers aged 25-54 and with We use a subset of workers aged 25-54 and with some labor force attachment in the 1993-95 period some labor force attachment in the 1993-95 period resulting in 500 million observations on 19 million resulting in 500 million observations on 19 million individuals and 1.2 million employers (5% sample)individuals and 1.2 million employers (5% sample)

- Demographics added from Census NumidentDemographics added from Census Numident- Longitudinal in firms and workersLongitudinal in firms and workers- Individual and firm fixed effectsIndividual and firm fixed effects

The Big WinnersThe Big Winners

SIC Sector

Different From

AverageWho You

Are Who You Work For

62 Security, commodity, brokers and services 79% 32% 37%67 Holding and other investments 61% 29% 26%46 Pipelines, except natural gas 57% 4% 54%48 Communication 55% 3% 50%49 Electric, gas and sanitary services 50% 2% 48%28 Chemicals and allied products 47% 11% 34%81 Legal services 43% 14% 26%12 Bituminous coal mining 40% -26% 93%61 Credit agencies other than banks 36% 14% 20%63 Insurance carriers 35% 10% 24%37 Transportation equipment 30% -1% 32%

The Big LosersThe Big Losers

SIC Sector

Different From

AverageWho You

Are Who You Work For

58 Eating and drinking places -43% -10% -37%88 Private households -36% -25% -16%1 Agriculture-crops -34% -12% -26%

79 Amusement and recreation services -32% -7% -28%72 Personal services -32% -11% -24%70 Hotel and lodging services -30% -14% -20%78 Motion pictures -29% -7% -25%53 General merchandise stores -26% -3% -24%2 Agriculture-livestock -25% -13% -14%

56 Apparel and accessory stores -25% 1% -26%83 Social services -24% -14% -12%59 Miscellaneous retail -24% -1% -24%54 Food stores -24% 1% -25%

FindingsFindings1.1. Most low-earners eventually transition out of this Most low-earners eventually transition out of this

status; but few make complete transitions.status; but few make complete transitions.2.2. The characteristics of The characteristics of firmsfirms – and especially their – and especially their

earnings premia earnings premia – are major determinants of – are major determinants of advancement in the low-wage labor market. advancement in the low-wage labor market.

3.3. Job changersJob changers generally make greater progress generally make greater progress than job stayers, primarily because they move to than job stayers, primarily because they move to better firms and jobs; but it is best to move early better firms and jobs; but it is best to move early and then accumulate some seniority and skills.and then accumulate some seniority and skills.

4.4. Accumulating seniority in a low-wage job can help Accumulating seniority in a low-wage job can help in subsequent jobs, but working for a higher-in subsequent jobs, but working for a higher-wage firm earlier helps even more. Working for a wage firm earlier helps even more. Working for a temp agency can help as well.temp agency can help as well.

Policy ImplicationsPolicy ImplicationsTwo Broad Implications:Two Broad Implications:

Improve job placements of low earnersImprove job placements of low earners Create more higher-wage firms and jobsCreate more higher-wage firms and jobs

How to Do So:How to Do So: Use labor market intermediariesUse labor market intermediaries Integrate training and job placements (e.g., Integrate training and job placements (e.g.,

sectoral strategies)sectoral strategies) Sequence of appropriate job Sequence of appropriate job

placements/training over time placements/training over time Provide relevant data and technical Provide relevant data and technical

assistance to WIB’sassistance to WIB’s