Low pay and household poverty in Italy

Working Paper 2023-635

Abstract

This paper explores how low-pay conditions of household heads and partners affect the risk of poverty in Italy. We assume low-pay work is possibly pre-determined by past poverty status, thus allowing for feedback effects from poverty to future labour market outcomes. Our analysis, based on the 2016-2019 EU-SILC panel data, reveals that low-pay work increases the risk of poverty with respect to high-pay conditions. Notably, the effect of low-pay work on poverty with respect to non-employment (both unemployment and inactivity) differs between household heads and partners. It is greater for the former and smaller for the latter. This stresses the leading role of household heads for income formation in Italy and suggests that their earnings are scarcely competitive with non-labor income, and highlights the added-worker role of partners in the Italian households.We find evidence of feedback effects from poverty to future labor market outcomes, thus indicating the existence of a vicious circle between poverty and poor labor conditions.

Authors: Chiara Mussida, Dario Sciulli.