Individual Wage Mobility Individual Wage Mobility

This paper identifies some of the determinants of individual mobility in the wage distribution over time. The proposed model takes attrition as well as the decile of origin into account unlike all other used models to describe the wage mobility. A simpel probit analysis is compared with the more sofisticated method used in this paper. Even though the wage distribution in Denmark has been nearly constant in the latest decade, this masks a very high individual wage mobility where less than 20% remain in the lowest deciles for more than 4 years. Human capital variables such as education and experience are important determinants of the position in the wage distribution, and upward wage mobility is found to be associated with less unemployment, less experience and the absense of changes in occupation and industry. On the other hand, unemployment is the single most important obstacle to upward mobility. These findings have a clear consequence for policies concerning minimum wage setting and job creation. The conclusion is that it is important to be employed even at a low wage in order to get better employment possibilities later, and that the risk of remaining in low wage jobs is small.