Low earnings and their drivers in relation to in-work poverty

This chapter provides the context of the low-paid labour market to the analysis of in-work poverty. It discusses data and stylized facts of international comparison and evolution of low-wage employment. It points out that low pay is not at all identical with in-work poverty. The chapter singles out relevant strands of low-wage analysis: the ‘low-pay-no-pay’ cycle and state dependency of being low paid, and summarizes relevant elements grouped into the role of individual and job characteristics and individual transitions into and out of low pay, and broader theoretical explanations which distinguish between supply and demand without restraints on the one hand, and embedded in institutions on the other hand. It elaborates on the role of households in relation to the earnings distribution and advises broadening the scope of in-work poverty analysis to households which are not poor. Individual wage inequality provides only half the story of income inequality, as after the demise of the single-earner world a large majority of employees are now members of households with two or more earners. This affects the nature of the competition for jobs, including particularly for jobs at the lower end of the labour market. The thrust of the argument is that low-wage employment is not a matter of a stand-alone distribution of earnings in the labour market, but that it is rooted deeply in rapidly changing household labour supply behaviour.