A route out of poverty?
Mothers’ employment and wages
in the UK Families and Children Study
Francesca Bastagli and Kitty Stewart
Centre for Analysis of Social Exclusion
London School of Economics
Funded by the Nuffield Foundation
Work in progress
SPA Conference
July 2010
Outline
Motivation and questions
 The data
 Employment trajectories
 Wages
 Findings and discussion

Motivation and questions

UK government policy emphasises employment as a route out
of poverty.


“Getting a job, keeping a job and having the chance to progress up the
earnings distribution out of low-paid work are the key to improving life
chances” (HM Treasury, 1999).
Mothers of young children encouraged to enter or return to
work and to remain in paid work – through the tax credit
system, childcare and labour market policies - to raise family
income.

For example: “In addition to assisting with employment retention,
childcare can also promote career advancement. ...This will help to
increase lone parent employment rates, decrease child poverty, reduce the
gender pay gap and boost productivity”
(Inter-departmental Childcare Review, 2002).
Motivation and questions

Do mothers:
 Enter and keep paid employment?
 Progress up the earnings distribution?

Special attention paid to:
 Mothers of young children
 Low-skilled mothers
The data
UK Families and Children Study (FACS)
 Annual panel study of families with
dependent children
 Sampled from Child Benefit records
 1999-2005

-
Wave 1-2: lone parents and low-income couples
Wave 3 (2001) onwards: higher-income couples
included to yield representative sample of British
families with dependent children.
Employment trajectories

Employment trajectory sample sizes 2001-2005
Trajectory
Frequency
Percent
Working FT stable
653
15.6
Working PT stable
664
15.8
Working stable PT-FT
555
13.2
No work stable
937
22.4
Exiters
212
5.1
Entrants
449
10.7
At home with one
work episode
304
7.3
In and out
418
9.9
4192
100
Total
Employment trajectories

Examples of individual employment trajectories
Yellow: not working; Pink: working full time; Blue: working part time
Wages

Hourly wage
weekly wage/n. hours worked weekly

Wage growth
wgr= [wl – wf / wf]
wgrw= wgr / y
wl: last observed wage
wf: first observed wage
y: number of years between first and last observed wage
Wages

Median hourly wages: by trajectory and skill level
Trajectory
Median
hourly wage
Median
hourly wage
Low skilled
Median
hourly wage
Skilled
Working FT
stable
6.9
5.9
8.4
Working PT
stable
5.8
5.5
7.8
In and Out
5.7
5.2
8.0
Total
6.1
5.5
8.0
Source: FACS 2001-2005
Wages

How does the final wage of mothers employed throughout the
period compare with the final wages of mothers who moved in
and out of work, controlling for starting conditions/initial wages?
(Regressors in Model 2 include: age, own health, n of children, lone parent,
tenure, new birth)

OLS regression on final hourly wage (log).
Model 1
Initial wage and
work trajectories
Model 2
+ Personal
and HH characteristics
0.45***
0.43***
Working PT stable
-0.09***
-0.11***
In and Out
-0.11***
-0.14***
N
R-squared
2122
0.27
2122
0.31
Initial wage (log)
Trajectory – FT stable omitted
Source: FACS 2001-2005
Wages

Employment trajectory and final wage by skill level.

OLS regression on final wage (log), includes personal
and HH characteristics regressors (i.e. Model 2).
Low skilled
Skilled
0.33***
0.44***
Working PT stable
-0.05***
-0.15***
In and Out
-0.11***
-0.14***
N
R-squared
1462
0.18
656
0.31
Initial wage (log)
Trajectory – FT stable omitted
Source: FACS 2001-2005
Wage growth

Hourly wage growth: by trajectory and skill level
(weighted by N of years between first and last observed wage)
Trajectory
Wage growth Wage growth
Sample
Low skilled
median
Wage growth
Skilled
Working FT
stable
4.7
4.3
5.3
Working PT
stable
4.1
4.0
4.4
In and Out
3.4
3.3
4.1
Total
4.1
3.9
4.5
Source: FACS 2001-2005
Note: Percentage change in hourly earnings weighted by years (2001-2005) from Annual
Survey of Hourly Earning (ASHE) for all employees: WOMEN: 4.8.
Wage growth
Probability for a working mother to experience:
a) Wage growth above the sample median (4%)
b) Negative wage growth.


Dprobit on wage growth>=4%. Regressors: work
trajectories, personal and HH characteristics.
Full sample
Low skilled
Skilled
Working PT stable
-0.06**
-0.03
-0.12***
In and Out
-0.11***
-0.09**
-0.13***
2118
0.01
1462
0.01
656
0.03
Trajectory – FT stable omitted
N
Pseudo R-squared
Source: FACS 2001-2005. Note: Table reports marginal effects.
Wage growth

Probability for a working mother to experience
negative wage growth.

Dprobit on wage growth<0. Regressors: work
trajectories, personal and HH characteristics.
Full sample
Low skilled
Skilled
Working PT stable
0.11***
0.07**
0.16***
In and Out
0.15***
0.09**
0.24***
2118
0.04
1462
0.03
656
0.06
Trajectory-FT stable omitted
N
Pseudo R-squared
Source: FACS 2001-2005. Note: Table reports marginal effects.
Findings
1.
UK mothers follow a multitude of employment
trajectories. Over the 1999-2005 period: 17% In and
Out, 33% Mixed Enter/Exit/PT, vs 7% in FT stable
employment.
2.
Compared with working mothers in FT stable
employment, mothers following interrupted pathways
have lower final wages (controlling for initial
conditions and changes in circumstances over time).
3.
This difference is significantly higher among skilled
women than for low skilled women; the “wage
penalty” is higher among skilled mothers.
Findings
4.
Working mothers following interrupted work
pathways are less likely (-11%) to experience a wage
growth rate equal to or above the sample median. For
skilled women the probability is -13%, while for low
skilled women it is -9%.
5.
Mothers on In and Out trajectories are more likely to
record negative wage growth (15%) compared with
those in FT stable employment. For skilled women,
this probability reaches 24%, while for the low skilled
it is 9%.
Thank you.
Francesca Bastagli: f.a.bastagli@lse.ac.uk
Kitty Stewart: k.j.stewart@lse.ac.uk