Pay mobility is high among lowest-paid workers

In April 1999, the Danish Employers' Confederation (DA) published an analysis of pay mobility among the employees of its member companies. The research found that 83% of employees who were in the lowest-paid 10% of the workforce in 1994 had moved into a higher-paid group by 1997. For DA, this shows that stable attachment to the labour market results in faster pay increases for the lowest paid. It is claimed that these results also demonstrate that there is no need to fear relaxation of minimum pay rates for groups such as young employees: as long as they learn something in their work and obtain job experience they will soon receive more pay.

The Danish Employers' Confederation (Dansk Arbejdsgiverforening, DA) has performed an analysis of the pay mobility of employees in part of the private labour market which it organises (published in April 1999 in ArbejdsMarkedsPolitisk Agenda 6/99). The analysis shows that 83% of those employees who in 1994 were in the lowest-paid 10% of the workforce in the DA area, within three years experienced a pay increase which allowed them to leave the lowest pay group. Indeed, within one year, more than half of the lowest-paid group had moved up to a higher pay group. DA states that this demonstrates that a stable attachment to the labour market means faster pay increases for the lowest-paid. Other findings of the research included the following:

• pay mobility was greatest among the 25-34 age group, of whom 92% moved out of the lowest pay group over the three-year period, compared with 85% of the 35-49 age group. Employees aged 60 or older in 1994 experienced lower pay mobility than any other age group.;

• for a small proportion of employees, pay mobility is only temporary. Of those in the lowest pay group in 1994, 24% were still there in 1997, of whom 17% had remained in the group throughout the entire period. Thus 7% had achieved a temporary pay increase during the three years;

• taking into account the number of employees who experienced pay decline during the same three-year period, pay mobility was still higher upwards than downwards. More than 65% of the employees in the second-lowest pay group had moved up, 28% were in the same group and only 7% had moved down; and

• over 1994-7, it was the lowest-paid who experienced the lowest pay increase of any group of employees. For the lowest pay group, the average, annual net pay increase for the stood at 1%, compared with 2.4% for the remainder. As a result, the gap between the highest and lowest pay levels increased to some extent, though DA calculates that the pay range in 1997 was the same as in 1990. Denmark is still one of the countries with the lowest pay ranges.

Professor Niels Westergaard Nielsen from the Centre for Labour Market and Social Research (Center for Arbejdsmarkeds- og Sociale Analyser) stated that the results of the DA research corresponded with other analyses. Given the very high pay mobility, even among the lowest-paid workers, he believed that the most important conclusion was that there is no need to fear a relaxation of minimum pay rates for groups such as young employees. As long as young workers learn something in their work and obtain job experience they will soon receive more pay, he claimed.