Minimum wage employment often acts as a stepping stone to higher pay

A new ESRI study, funded by the Low Pay Commission, finds that minimum wage workers are more likely to transition to higher pay than remain on the minimum wage.

Over a nine month period, approximately 30 percent of minimum wage employees transitioned to higher pay, with 18 percent staying on the minimum wage. The vast majority of transitions to higher paid employment are achieved through wage progression within the employee’s current job, as opposed to a job change. However, certain groups within the population, such as non-Irish nationals, those with low levels of education, part-time employees and those on temporary contracts were found to have a higher likelihood of remaining on the minimum wage.

The remaining 52 percent experienced some other type of labour market transition either from or to higher pay, unemployment or inactivity.

Minimum wage employees were found to be more likely to transition to unemployment or inactivity compared to high paid workers. After controlling for a range of personal, education and work related characteristics, minimum wage employees are found to be up to four percentage points more likely to transition to unemployment or inactivity compared to high paid workers.

“While minimum wage employment acts as a stepping stone to higher pay for many employees, it is important to note that it can also represent a low wage trap for certain types of workers and is also associated with a greater likelihood of becoming unemployed”, said Dr Redmond, an author of the report.

Dr Donal De Buitléir, Chairman of the Low Pay Commission welcomed the publication of the research paper, which was produced under a research partnership agreement between the Low Pay Commission and the ESRI. He commented, “The Low Pay Commission has a responsibility in legislation to ensure that any recommendations it makes do not have a significant adverse impact on employment and the low paid. This report provides much needed data regarding the factors which influence the ability of minimum wage workers to transition to higher paid employment and is a valuable source of information for the Commission to consider when making future recommendations.”