Is it Easier to Escape from Low Pay in Urban Areas? Evidence from the UK

Abstract

In this paper we compare periods of low pay employment between urban and rural areas in the UK. Using the British Household Panel Survey, we estimate the probability that a period of low pay employment will end allowing for a number of possible outcomes, namely to a ‘high pay’ job, self-employment, unemployment and out of the labour force. The results show that there are statistically significant differences in the dynamics of low pay across urban and rural labour markets, particularly in terms of exits to high pay and out of the labour force. After controlling for different personal and job characteristics across markets, urban low pay durations are somewhat shorter on average, with a higher probability that urban workers will move to high pay. However, the results suggest that any urban-rural differences in the typical low pay experience are particularly concentrated among certain types of individuals, e.g. young workers, women without qualifications.