Do low-paid workers benefit from the urban escalator? Evidence from British cities

Abstract

Cities are characterised as places of increased human capital accumulation, dynamic labour markets and faster wage growth: in short, places where workers can get ahead. Studies suggest that urban workers can benefit from faster learning and from better job matching. This article assesses the extent to which cities act as escalators for workers in low-wage jobs using panel data from Great Britain covering the period 2009–2014. When defining low pay using a standard national wage threshold, workers in London, the largest city, are significantly more likely to make a transition from low- to higher-paid employment than workers in non-urban areas. However, the use of a national wage threshold to measure progression from low pay is sensitive to geographic variations in wage levels. When using an alternative, occupation-based definition of low pay there is little to no evidence of faster wage growth in London or other large British cities, suggesting that low-paid workers do not benefit significantly from faster learning or more efficient job matching in cities. The findings, once adjusted for differences in the wage distribution, fail to identify an urban escalator effect for those in low-paid employment, suggesting that there is a fairly consistent set of underlying factors shaping progression from low pay across geographies.