Low‐wage Employment in Europe

Citation

Ackah, C. (2000), "Low‐wage Employment in Europe", International Journal of Manpower, Vol. 21 No. 2, pp. 141-147. https://doi.org/10.1108/ijm.2000.21.2.141.1

The context for this book is the on‐going debate about the potential social costs and benefits of an expansion of low‐wage employment in Europe. It is a debate which stems from concerns that competition from low‐cost producers producing low‐skill intensive goods is creating unemployment in Europe. Those who see the prospect of reducing unemployment through the creation of low‐wage employment claim that access to a job, even if low‐paid, provides those with few skills and little experience with a stepping stone into work and hence onto the ladder of economic mobility. Minimum wage rates and wage regulation mechanisms are seen as obstacles to employment. On the other side in the debate are those who see low wages as instrumental in creating poverty and increasing earnings inequality. Those on this side of the debate also raise concerns regarding social exclusion among the have‐nots in society.

Despite this debate, there has been little research until relatively recently into the nature and consequences of low‐wage employment on a European basis and little by way of international comparisons. This book seeks to address such issues.

Low‐wage Employment in Europe is an edited volume of 16 contributions presented originally to a Conference of the Low‐Wage Employment Research (LoWER) network. It is structured in three parts which looks at: International comparisons; Individual Country Experiences; and Low Pay among School Leavers. The contributions focus on the period from the mid‐1970s to early 1990s.

The three papers which seek to make international comparisons examine differences in the evolution of low‐wage employment in a number of countries, the forms which low‐wage employment may take and the role and impact of mechanisms designed to regulate low wages. The broad conclusions of this section of the book are that the experience of low‐wage employment has varied across Europe, with some countries such as the UK more akin in this respect to the USA than their European counterparts. The extent of earnings inequality has been similarly varied, although not always solely attributable to an increase in low wage employment. Poverty at working age has been more widespread in countries such as the UK, USA and Canada, despite their higher employment levels, than in Continental European countries such as France and The Netherlands.

A general concern must be expressed, however, about the validity of the international comparisons, and it is a concern acknowledged by the authors. It relates to the fact that there was little harmonisation of earnings data among the countries being compared during the period under consideration. Earnings definitions vary considerably even between European countries, as does the coverage of earnings surveys. All these issues serve to raise questions about the effectiveness of the comparisons being made. Comparison proved difficult also in the examination of the role played by mechanisms to regulate low wages. A country such as Germany clearly has a highly regulated labour market; France had a national minimum wage throughout the period under consideration, as did Spain; The Netherlands had a national minimum wage but modified its regulatory mechanisms in the mid‐1980s, in an attempt to combat unemployment. The UK, meanwhile, had only very piecemeal provision for wage regulation through the wages councils, and even that only until 1993. Ireland was in a similar position.

Difficulties of comparison notwithstanding, the conclusions drawn from this section are convincing. In general, minimum wage regulation did seem to provide some protection for the lowest paid workers but could only have a significant impact where it was part of a more general system of wage regulation through collective bargaining, as in France, for example. The effects of wage regulation on unemployment are not really addressed in terms of international comparisons. That is a deficiency made good, however, in the second part of the book when in an examination of individual country experiences, the contribution on the Spanish experience concludes that the effects of the national minimum wage were insignificant in terms of adult employment.

Other contributions to the section on individual country experiences, which looked at Ireland, Germany and Spain, were also of interest by way of international comparison in terms of what had gone before. Comparisons had indicated, for example, that there is a fairly strong, positive, cross‐country correlation between the incidence of low‐wage employment among full‐time workers and the incidence of poverty among the working age population. The individual country experiences of Ireland and Germany, however, provide a more in‐depth exploration of how the “identity” of the low‐wage worker and his personal circumstances mediate the relationship between low‐wages and poverty. It is of some significance whether the low‐wage worker is the main household breadwinner with dependant children as in the Irish study, or the student or early retired person is engaged in atypical employment as in the German case. As Nolan sagely observes: “The dynamics of low pay and poverty need to be understood before one can draw firm conclusions about the relationship between low pay and household poverty and its implications” (p. 106).

The final part of the book sees a shift from a detailed study of low‐wage employment in specific European countries, to a study of the impact on a specific group of workers, i.e. on young people, and on school‐leavers. In making such a shift, the book remedies one of the deficiencies of the earlier sections which concentrate on full‐time adult employees and largely neglect the position of young workers, who are a group of some significance in the low‐paid population as a whole.

This final section is based on empirical work which looks at the cases of school leavers in France and in The Netherlands. Neither study seeks to provide a single factor explanation for the earning position of young workers, but each looks at the relationship between education and training levels and youth wages. Of particular interest here is an examination of the usefulness of various theories such as human capital theory, the labour queue theory and “job matching” in this context.

Low‐wage Employment in Europe makes a welcome contribution to the debate on the incidence, implications costs and benefits of low‐wage employment in Europe. In particular, it provides useful accounts of the experiences of different countries in relation to the impact of low wages on poverty rates, and the role which wage regulation has to play in mediating the development and implications of low‐wage employment. Both issues are at the centre of a much wider debate.

A somewhat surprising omission was the absence of any contribution relating to the position of low‐wage women, in particular since low‐paid, female partners in two adult households are generally accepted to make up 40‐50 per cent of the low‐wage workforce in most European countries (with the notable exceptions of Sweden and Finland). Such an omission was even more striking in a publication which examines the relationship between low wages and poverty in a number of countries. It is now widely acknowledged that the living standard of a typical household at working age depends increasingly on the combined labour market positions of household members, rather than, as was typically the case two or three decades ago, on the labour market position of the male breadwinner.

Such comments aside, this is a book which will be of interest to a wide audience of students and scholars in the areas of labour economics, European studies and social policy, and one which sets the scene for much further research.