Different Steps on the Ladder: A Multilevel Analysis of Transitions Across Three Wage Thresholds.

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Weickert, Philip
- Affiliation: College of Arts and Sciences, Department of Sociology

Abstract

This paper uses multilevel logistic models incorporating individual random intercepts and state and panel fixed effects, and data from the 1990 through 2004 panels of the Survey of Income and Program Participation, to achieve three goals: more reliable and valid estimates than other studies have provided of the effects of individual characteristics on likelihood of transition out of low wages; estimates of direct and interactive effects of the state-level unemployment rate on that likelihood; and rough estimates of how these effects vary at two higher wage transition points. The study's major finding is that a one-point increase in unemployment is associated with a 7% decrease in likelihood of transition, and the negative effect of higher unemployment is significantly greater for males than females and for high-school dropouts than college graduates. In addition, with caveats due to unobserved heterogeneity, the study indicates that at higher wage transition thresholds, state-level variables generally matter less and individual-level variables matter more. And although higher unemployment has the same negative effect on likelihood of high school dropouts' transition across all wage thresholds, its effect on highly-educated workers' likelihood of transition is significantly smaller or disappears altogether at higher thresholds.

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