COMBATING PRECARIOUS WORK: MINIMUM WAGES, TRAINING AND ACTIVATION POLICIES

Anke Hassel

WSI

Copyright rests with the author. All rights reserved

Precarious work in the EU

Alternative/ non-standard employment

In-work poverty

Low Pay

Precarious work in the EU

Alternative/ non-standard employment

In-work poverty

Low Pay

Open-ended full-time contracts and

open-ended part-time contracts:

relatively low risk of

precariousness.

Marginal and involuntary part-time

work, fixed-term work and

involuntary fixed-term

work, work and self-employment:

medium risk of precariousness.

Temporary agency work and posted

work: medium/high risk of

precariousness.

Informal/undeclared work and in

some cases zero hours contracts:

high risk of precariousness.

Source: Broughton et al. 2016

In-work poverty in the EU (in%)

0

2

4

6

8

10

12

14

16

18

20

Change of in-work poverty 2005-2015

-40-30-20-10

0102030405060708090

100110

Deuts

chla

nd

Slo

wenie

n

Zypern

Estland

Italie

n

Schw

eden

Spanie

n

Malta

Fra

nkre

ich

Lu

xe

mb

urg

Belg

ien

Öste

rreic

h

Tschechis

che…

Dä

ne

ma

rk

Un

garn

Griechenla

nd

Vere

inig

tes…

Lettla

nd

Litauen

Po

rtugal

Fin

nla

nd

Nie

derlande

Pole

n

Irla

nd

Slo

wakei

Low pay in the European Union, 2014 (by sex, in %)

0

5

10

15

20

25

30

35

Swed

en

Bel

giu

m

Fin

lan

d

Den

mar

k

Fran

ce

Ital

y

Luxe

mb

ou

rg

Po

rtu

gal

Spai

n

Au

stri

a

Mal

ta

EU2

8

Hu

nga

ry

Bu

lgar

ia

Slo

ven

ia

Net

her

lan

ds

Cze

ch R

epu

blic

Slo

vak

Rep

ub

lic

Cyp

rus

Un

ited

Kin

gdo

m

Irel

and

Gre

ece

Ger

man

y

Esto

nia

Cro

atia

Po

lan

d

Lith

uan

ia

Ro

man

ia

Latv

ia

Low Pay Incidence (men)

Low Pay Incidence (women)

Source: Eurostat, Structure of Earnings Survey 2014.

Low pay in the EU 2006, 2010 and 2014

0,00

5,00

10,00

15,00

20,00

25,00

30,00

35,00S

weden

Be

lgiu

mF

inla

nd

De

nm

ark

Fra

nce

Italy

Luxem

bourg

Port

ugal

Spain

Austr

iaM

alta

EU

27

Hungary

Bulg

aria

Slo

venia

Neth

erlands

Czech R

epublic

Slo

vakia

Cypru

sU

nited K

ingdom

Irela

nd

Gre

ece

Ge

rmany

Esto

nia

Cro

atia

Pola

nd

Lithuania

Rom

ania

Latv

ia

2006 2010 2014

Structural changes and challenges

The rise of alternative/non-standard work, in

particular part-time work

The persistence of low pay

The rise of in-work poverty

The heterogeneity of European labour markets

In-work poverty

Individual characteristics of the working poor:

Low skills

More blue than white collar workers

More younger than older workers

More migrants

More women (marginal)

Household characteristics:

More part-time

More unemployed in households

In-work poverty

Policy context

In-work poverty risks rise with

Higher wage inequality

Lack of public child care

Lower replacement rate of unemployment insurance

Stricter activation measures

Risk of in-work poverty and spending on ALMP

0,0

5,0

10,0

15,0

20,0

25,0

30,0

35,0

0 0,3 0,6 0,9 1,2 1,5

Ist-Wert

Red: unskilled and temporary

Blue: skilled and permanent

Risk of in-work poverty and sanctions

0,0

5,0

10,0

15,0

20,0

25,0

30,0

35,0

1,0 1,5 2,0 2,5 3,0 3,5 4,0

Ist-Wert

Red: unskilled and temporary

Blue: skilled and permanent

Low pay

Minimum wages can make a contribution to lowering the

low-pay incidence.

Minimum wages are most effective when combined with

strong collective bargaining institutions. Best results are

obtained in countries that combine high minimum wages

with high collective coverage.

The causal effect runs through wage compression, not

through the displacement of workers (as is often claimed).

Women workers are the main beneficiaries of minimum

wages.

Minimum Wages in % of full-time median wage, 2015

15

Source: OECD

Minimum wages and low pay

AUT DEU

DNK FIN

ITA

GBR

CZE

ESP

EST

LVA

SVK

POL

HUN

IRL

GRC

NLD

BEL

PRT

LUX

SVN

FRA

0

5

10

15

20

25

30

35

0 0,1 0,2 0,3 0,4 0,5 0,6 0,7

Low

Pay

Inci

de

nce

(to

tal,

in %

)

Kaitz Index (minimum wage / median wage) Note: Refers to long-run country averages. Only observations with valid observations for all relevant variables are included. Where no comprehensive minimum wage exists, the Kaitz Index is coded 0. For countries that introduced a minimum wage, observations prior to the introduction are excluded. Source: OECD Earnings Database.

R² = 0.261 (for countries with Kaitz ≠ 0)

Interaction between minimum wages and collective bargaining and low pay

AUT DEU

DNK FIN

ITA

GBR

CZE

ESP

EST

LVA

SVK

POL

HUN

IRL

GRC

NLD

BEL

PRT

LUX

SVN

FRA

0

5

10

15

20

25

30

35

0 0,1 0,2 0,3 0,4 0,5 0,6 0,7

Lo

w P

ay I

ncid

en

ce (

tota

l, in

%)

Interaction term (Kaitz Index × collective coverage)

Note: Refers to long-run country averages. Only observations with valid observations for all

relevant variables are included. Where no comprehensive minimum wage exists, the Kaitz Index is

coded 0.

R² = 0.736 (for countries with Kaitz ≠ 0)

Summary

Precarious work is a key challenge for European

labour markets

Precarious work is closely be related to in-work

poverty and/or the working poor.

Working-poor is influened by activation, childcare

and low pay.

Low pay is affected by minimum wage and

collective bargaining.

Redesign activation, invest in childcare and

address low pay.

Policies

Strengthen minimum wage floor and combat low

pay

Rethink activation: from work placements to

individual support and training

Improve vocational and further training

Enable and support female labour market

participation through child-care

Define minimum standards for non-standard work

(zero hour contracts, minimum hours, return to full-

time).

ANNEX

Risk of in-work poverty and activation measures

Red: unskilled and temporary

Blue: skilled and permanent

0,0

5,0

10,0

15,0

20,0

25,0

30,0

35,0

40,0

60 65 70 75 80 85 90

Ist-Wert

Interaction between minimum wages and collective bargaining and wage compression

AUT

DEU

DNK FIN ITA

GBR CZE

ESP

EST

LVA

SVK

POL HUN

IRL GRC

NLD

BEL

PRT

LUX

SVN

FRA

1

1,2

1,4

1,6

1,8

2

2,2

0 0,1 0,2 0,3 0,4 0,5 0,6 0,7

Low

er

De

cile

Rat

io (

D5

/D1

)

Interaction term (Kaitz Index × collective coverage)

Note: Refers to long-run country averages. Only observations with valid observations for all relevant variables are included. Where no comprehensive minimum wage exists, the Kaitz Index is coded 0. For countries that introduced a minimum wage, observations prior to the introduction are excluded. Source: OECD Earnings Database and ICTWSS Database Version 5.1.

R² = 0.779 (for countries with Kaitz ≠ 0)

References

Daniel Seikel and Dorothee Spannagel 2017: Activation and In-Work Poverty, in:

Henning Lohmann and Ive Marx (eds.): Handbook of Research on In-Work

Poverty. Edward Elgar.

Malte Lübker 2017: manuscript

Thorsten Schulten, Torsten Müller and Line 2015: Eldring Prospects and

obstacles of a European minimum wage policy, in: G. Van Guys and Thorsten

Schulten (eds.): Wage bargaining under the new European Economic

Governance - Alternative strategies for inclusive growth, ETUI, pp.327-359.

Andrea Broughton et al. 2016 Precarious Employment in Europe: Patterns,

Trends and Policy Strategies. Study for the European Parliament's Committee

on Employment and Social Affairs.