The Times Australia
The Times World News

.

Are low-paid jobs really a stepping stone to better pay? A new study suggests it’s not that simple

  • Written by Alexander Plum, Senior Research Fellow in Applied Labour Economics, Auckland University of Technology

A job – any job – is generally thought of as better than no job at all. Consequently, low-paid work is often considered a “stepping stone” to a higher-paid job. But how easily do low-paid workers climb up the pay scale, really?

Our new research[1] suggests past studies may have considerably overstated the chances of moving from low to higher pay. This has significant implications for understanding labour market behaviour.

Given the NZ$3.3 billion increase in welfare payments[2] announced in New Zealand’s recent budget – dubbed the “biggest lift in a generation” – and the ongoing focus on inequality and minimum wage rates, how we measure income mobility is increasingly important.

In particular, what are some of the characteristics of the low-paid workforce? How likely or unlikely is it that an individual can transition from low to higher pay?

Past research has described low-paid work as a stepping stone if there is a greater chance of moving to higher pay relative to someone who is unemployed.

Furthermore, the data have suggested relatively high likelihoods of making the transition from low to higher pay — estimates range from 47% to nearly 90%, based on studies from the UK, Australia and Germany.

However, this research has mostly had to rely on survey data based on individual responses to an annual set of questions. This means we can only observe a snapshot of any given labour market once a year.

When determining whether an individual is unemployed, low paid or higher paid, a lot of information between those annual surveys falls into the unknown.

What traditional research misses

Why does this matter? It helps to imagine three different individuals, with different labour market experiences, answering a survey about their employment status in October 2019 and again in October 2020:

  • one was low paid in the first survey and remained in low pay every month until the second survey

  • the second oscillated between low and higher pay between surveys but happened to be in low pay at each survey point

  • the third regularly moves between low pay and unemployment but is also in low pay at the time of each survey.

Because of the lack of information between survey time points, all three individuals will fall into the same category. In turn, this may influence estimates of movement out of low pay.

Read more: NZ Budget 2021: women left behind despite the focus on well-being[3]

What more detail reveals

In New Zealand we have the advantage of the integrated data infrastructure (IDI[4]), a large research database published by Stats NZ[5].

As well as being population-wide, this provides monthly administrative tax records that reveal labour market states at a much higher frequency.

Our research uses these detailed data to look at the male low-paid workforce aged between 21 and 60 in New Zealand. The results are illuminating.

Read more: NZ's second 'Well-being Budget' must deliver for the families that sacrificed most during the pandemic[6]

First, we mimicked conventional earlier research by looking at the labour market from only one month each year. Through this lens, New Zealand looks similar to Australia, with the probability of moving from low pay to higher pay estimated to be 74%.

When we use the detailed monthly income records, however, it is clear the picture is not as rosy. Most importantly, the likelihood of moving from low pay to higher pay is much lower than traditional methods suggest.

In fact, for those who have been in low-paid work for all of the prior 12 months, we found the likelihood of them moving into higher pay in the following month was only 28%. Being continuously in low-paid work, it seems, means it isn’t easy to climb out.

A limited stepping stone

On the other hand, our research confirms the stepping-stone effect does exist in the New Zealand labour market: compared to being unemployed, you’re more likely to move into higher pay from being low paid.

Specifically, someone unemployed for the previous 12 months has only a 1% probability of moving into higher pay in the next month. That compares to 28% for those in low-paid employment for all of the previous 12 months.

Work and Income office sign Moving from low-paid work to better pay may be difficult, but moving from an unemployment benefit to higher pay is even less likely. GettyImages

Overall, our research highlights the value of detailed, high-frequency, integrated data in assessing the nuances in the labour market landscape.

On top of that, it illustrates the real difficulty in climbing the wage ladder for those in long-term low-paid work. This suggests policymakers should focus on pathways to wage growth, as well as on job creation itself.

References

  1. ^ new research (onlinelibrary.wiley.com)
  2. ^ increase in welfare payments (www.workandincome.govt.nz)
  3. ^ NZ Budget 2021: women left behind despite the focus on well-being (theconversation.com)
  4. ^ IDI (www.stats.govt.nz)
  5. ^ Stats NZ (www.stats.govt.nz)
  6. ^ NZ's second 'Well-being Budget' must deliver for the families that sacrificed most during the pandemic (theconversation.com)

Read more https://theconversation.com/are-low-paid-jobs-really-a-stepping-stone-to-better-pay-a-new-study-suggests-its-not-that-simple-162162

Times Magazine

Building an AI-First Culture in Your Company

AI isn't just something to think about anymore - it's becoming part of how we live and work, whether we like it or not. At the office, it definitely helps us move faster. But here's the thing: just using tools like ChatGPT or plugging AI into your wo...

Data Management Isn't Just About Tech—Here’s Why It’s a Human Problem Too

Photo by Kevin Kuby Manuel O. Diaz Jr.We live in a world drowning in data. Every click, swipe, medical scan, and financial transaction generates information, so much that managing it all has become one of the biggest challenges of our digital age. Bu...

Headless CMS in Digital Twins and 3D Product Experiences

Image by freepik As the metaverse becomes more advanced and accessible, it's clear that multiple sectors will use digital twins and 3D product experiences to visualize, connect, and streamline efforts better. A digital twin is a virtual replica of ...

The Decline of Hyper-Casual: How Mid-Core Mobile Games Took Over in 2025

In recent years, the mobile gaming landscape has undergone a significant transformation, with mid-core mobile games emerging as the dominant force in app stores by 2025. This shift is underpinned by changing user habits and evolving monetization tr...

Understanding ITIL 4 and PRINCE2 Project Management Synergy

Key Highlights ITIL 4 focuses on IT service management, emphasising continual improvement and value creation through modern digital transformation approaches. PRINCE2 project management supports systematic planning and execution of projects wit...

What AI Adoption Means for the Future of Workplace Risk Management

Image by freepik As industrial operations become more complex and fast-paced, the risks faced by workers and employers alike continue to grow. Traditional safety models—reliant on manual oversight, reactive investigations, and standardised checklist...

The Times Features

Is our mental health determined by where we live – or is it the other way round? New research sheds more light

Ever felt like where you live is having an impact on your mental health? Turns out, you’re not imagining things. Our new analysis[1] of eight years of data from the New Zeal...

Going Off the Beaten Path? Here's How to Power Up Without the Grid

There’s something incredibly freeing about heading off the beaten path. No traffic, no crowded campsites, no glowing screens in every direction — just you, the landscape, and the...

West HQ is bringing in a season of culinary celebration this July

Western Sydney’s leading entertainment and lifestyle precinct is bringing the fire this July and not just in the kitchen. From $29 lobster feasts and award-winning Asian banque...

What Endo Took and What It Gave Me

From pain to purpose: how one woman turned endometriosis into a movement After years of misdiagnosis, hormone chaos, and major surgery, Jo Barry was done being dismissed. What beg...

Why Parents Must Break the Silence on Money and Start Teaching Financial Skills at Home

Australia’s financial literacy rates are in decline, and our kids are paying the price. Certified Money Coach and Financial Educator Sandra McGuire, who has over 20 years’ exp...

Australia’s Grill’d Transforms Operations with Qlik

Boosting Burgers and Business Clean, connected data powers real-time insights, smarter staffing, and standout customer experiences Sydney, Australia, 14 July 2025 – Qlik®, a g...