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Working poor trajectories

Working Paper 2012-280

Abstract

To analyse in-work poverty, we build a model in which human capital and productivity varies over time with experience, time-related obsolescence and poverty. The model reveals four possible trajectories: poverty to exclusion; permanent poverty; the emergence from poverty; poverty to non-poor worker and back to poverty. It also generates the main traits of in-work poverty in terms of skill, age, duration, and family characteristics. Both skill-biased technical change and globalisation boost in-work poverty and exclusion. When unemployment compensation is introduced, being a poor worker can be a rational choice for individuals who accept lower pay today to earn more tomorrow.

Authors: Joël Hellier.

Keywords: Exclusion, poverty, working poor.
JEL: I32, J24.