The Career Progression Effects of Labor Market Policies

ABSTRACT: 

This project aims at evaluating the career progression effects of labor market policies targeting individuals at the low end of the wage spectrum and marginally attached to the labor market. Our focus is placed on minimum wages and active labor market policies (ALMPs), tools that have gained prominence in the debate around fair compensation and inclusive growth. By mandating a minimum level of pay, minimum wages promote decent compensation for those in work. ALMPs aim at improving jobseekers’ prospects of gainful employment by offering job search assistance and retraining opportunities, with the goal of promoting an inclusive labor market. Both policies may impact the career progression prospects of individuals – an aspect at the core of our analysis. As minimum wages are seen as effective in boosting wage growth (European Commission, 2020), several countries implemented ambitious minima and others debate their introduction. While we know that minimum wages compress wages at the bottom, evidence on effects up the wage distribution is mixed. On the one hand, minimum wage increases may trigger raises even above the Ministero dell'Università e della Ricerca MUR - BANDO 2022 PNRR minimum, as firms attempt to preserve differentials across jobs. On the other hand, firms struggling with rising wage costs may have to cut back on higher pay scales. These developments can have important implications. For workers, poor career prospects can negatively affect morale, effort, and human capital investment. For firms, wage pressures may induce changes in organizational structure, with further implications for workforce development and productivity.

Other Research Units:

• Vincenzo Scrutinio, Università degli Studi di Bologna