Kurzbeschreibung

A substantial body of literature on the determinants of transitions out of low-paid work provides evidence on the inuence of personal characteristics, previous low-pay experience and job characteristics. However, the receipt of social assistance has previously not been considered, although it may positively inuence the probability of moving up in the earnings distribution
through the job search assistance o ered by the job agency but it may also function in a negative way, e. g. by scaring or through locked-in effects. This paper uses a large representative panel data set for the years 2007-2012 to investigate the dynamics of low-pay in Germany. We find that based on the raw aggregated transition rates, welfare recipients are more likely to stay in low-
paid jobs or to become unemployed than low-paid workers without welfare. Welfare receipt is highly correlated with personal and other characteristics that unfavorably affect the labor market success of low-paid workers. We estimate a dynamic random e ects probit model of the low-pay incidence to further analyze these welfare/non-welfare differences. The results reveal that
welfare/non-welfare differences observed in the raw transition rates disappear when individual observed and unobserved characteristics are controlled for.