Economist Kamila Fialová is the author of a new European Commission study on low wages in Central and Eastern European Member States of the European Union. The document Low-wage employment in Central and Eastern European Member States is published within the framework of the long-term project Social Situation Monitor, in which the Institute of Sociology of the CAS cooperates.
This research note offers a comprehensive view of low-wage employment and its determinants, comparing Central and Eastern European (CEE) and Western European (WE) EU Member States. For some workers, low wage (defined as less than two-thirds of the national median wage) is merely a transitional phase towards higher-paying jobs, while others receive low wages for longer periods. Using the EU Statistics on Income and Living Conditions (EU-SILC) data for 2004-2019, this study investigates the incidence and persistence of low-wage employment, including the effects of individual characteristics, and institutional and macroeconomic factors.
What are the key findings of the study?
- Low-wage employment exhibits a significant degree of persistence in the European Union, affecting some specific groups particularly strongly. In Central and Eastern Europe (CEE), the proportion of low-paid workers (18.1%) is higher compared to Western Europe (WE) (13.5%) and, also, working in a low-paying job in CEE increases the probability of staying in a low-paid position in future significantly more than in WE (16.9 percentage points in CEE compared to 5.9 percentage points in WE).
- The key individual characteristics that determine the likelihood of earning low wages and the chances of remaining in low-wage employment are gender, age, and education. Having more education is a stronger driver reducing the incidence and persistence of low-wage employment in CEE, compared to WE.
- While in WE, younger workers face a higher likelihood of being low-paid and remaining in low-paying jobs, in CEE, both younger and older workers are more prone to low-wage employment and prolonged periods of low wages, compared to workers aged 40-44.
- Stronger trade unions, higher minimum wages, larger spending on social policies, and tighter labour markets with more job opportunities tend to be associated with less widespread low wages and/or lower persistence of low-wage employment across EU Member States.
Low-wage persistence is higher in CEE Member States across various groups of workers
Source: EU-SILC pooled longitudinal data 2008–20 (income years 2005-2019, utilising lagged wage variable narrows the examined period by one year), authors’ calculations.
Note: Estimates of the average partial effect based on the results of a dynamic random effects probit model with unobserved heterogeneity. All estimates are statistically significant at 1% level. Low-paid status of an individual defined by the threshold set at two-thirds of the sample’s median wage. Full-time full-year employees only.
The study can be downloaded in PDF formate.
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