It’s often said that the worst thing for any career is to have no work for a prolonged period of time.  The implication is that any job is better than no job, as it’s far easier to find better work when you’re in work than out of work.

New research from Auckland University of Technology explores if that is really the case.  It explores how easily low-paid workers find it to climb up the career ladder.  The study suggests that we may previously have significantly overestimated the ease with which we can move on to better things.

Income mobility

The researchers set out to understand some of the characteristics of the low-paid workforce to understand how likely it is that they’re able to transition to higher pay.

They cite previous research suggesting that the chances of someone transitioning to higher pay can be as high as 90%.  These figures tended to rely on survey data that was based on an annual set of questions.  In other words, it only gave the researchers a snapshot of the labor market at a given point in the year.

The researchers attempt to overcome this information gap by utilizing the integrated data infrastructure (IDI), which is a large research database published and maintained by Stats NZ.  The database provides monthly administrative tax records for the entire population that help the researchers understand labor market states at a high frequency.

When they replicated past studies by looking at just one month in the year, they too found the chances of moving onto higher paid work was around 74%.  When they looked at more detailed monthly records, however, this was far from the case.

Difficult mobility

Indeed, this approach found that the chances of moving on to higher-paid work were much lower than previously thought.  When looking across an entire year, the researchers found that the chances of this progression slumped to around 28%.

So, the more detailed analysis reveals that the stepping-stone effect does exist and it is easier to move on to better pay from within a low-paid job than from being unemployed, but the size of this boost is not as big as previously thought.

The researchers suggest that the chance of someone unemployed for the last year moving on to higher-paid work in the next month is just 1%, so even though 28% is lower than we thought, it is nonetheless a significant gain on trying to climb up after a period of unemployment.

The authors hope that their findings not only highlight the importance of using robust data in assessing these kinds of questions, but also will inform policymakers to focus on pathways to wage growth as much as they do on job creation itself.