Escaping Low-Wage Jobs: Wealth, Low Wages, and the Black-White Entrapment Gap

Abstract

The aim of this paper is to analyze individuals’ opportunities to escape low-wage jobs. More specifically, relying on an assets or wealth (as a distinct variable from income) theoretical framework, I provide an explanation of such a phenomenon. A good deal of evidence in support for the argument is provided. Assets are indeed shown to be associated with individuals’ opportunities to escape low-wage jobs. In the context of the extended hazard rate framework estimated in the paper, evidence is provided which shows that starting a low-wage job spell with some accumulated wealth increases the likelihood of ending such a spell by making a transition to a high-wage job. In addition, an investigation of the unequal opportunities of blacks and whites for escaping low-wage jobs is carried out. Such an investigation, it is argued, constitutes an experimentum crucis for the argument. On the basis of the analyses in the paper, it can be concluded that such an inequality arises partly from the unequal pattern of wealth ownership of blacks and whites.