Low pay incidence and mobility in the Netherlands - exploring the role of personal, job and employer characteristics

The rise of earnings inequality in many industrialized countries in recent years has increased
concerns about the pay conditions of those individuals located at the bottom of the wage
distribution. In this paper we first analyze which groups in the Dutch labor market are more likely
on average to fall in low-wage segments, and which are the characteristics of workers and firms that
are more closely related to low wage rates. We also explore how the pattern of low-wage
employment has evolved over time. Second, we examine the determinants of being in low-wage
employment for the individual worker, and we analyze whether there exists a type of "poverty trap"
as a result of which earnings mobility is lacking and some workers persist in low-paid jobs for a long
period of time. To achieve this we use two datasets: the European Community Household Panel
(ECHP) for the period 1995-2001, and the Arbeidsvoorwaarden Onderzoek (Labor Conditions Survey,
AVO) of the Dutch Labor Inspectorate for 2002. We utilize the longitudinal aspect of the ECHP to
analyze the evolution of low-wage employment over time, by looking at different individual and job
characteristics. Finally, we complete the analysis on low-wage employment with an examination of
the role of the firm using the detailed information provided by the AVO.