The ‘great recession’ and low pay in Europe

Abstract:

This article contributes to the literature on low-paid work by analysing the shares of low-paid employment in the period 2006–2014 and the underlying causes. I use an inflation-adjusted low-pay threshold anchored at 60 percent of median wages to assess the impact of the Great Recession, which increased the share of low-paid employees in two-thirds of European countries and in the EU as a whole.

This was driven by a general decline in real wages, which was particularly intense in European periphery countries and at the bottom of the wage distribution as well as among employees with shorter tenure. However, compositional effects either prevented a larger expansion of low-pay shares by masking the real extent of the wage correction or were generally negligible in driving low-pay shares. Moreover, growing part-time employment emerges as a significant source of low-paid work from the onset of the crisis.