Jobs against poverty: a fixed-effects analysis on the link between gaining employment and exiting poverty in Europe

Abstract

This article analyses the role of gaining employment in escaping poverty at the individual level by using EU-SILC pooled panel data for 2010-2017 for 30 European countries. We assess this in a dynamic research setting using individual fixed effects that take into account unobserved time-invariant heterogeneity between individuals. We focus on the type and intensity of employment and the role of gender, education, and age. Overall, gaining employment increased the chances of exiting poverty by 33 percentage points among men and 30 percentage points among women. Shorter employment spells and part-time employment were less effective routes out of poverty. The results also suggest that poor individuals with higher education were more likely to benefit from employment to exit poverty. We found substantial cross-country variation. However, the unemployment rate, prevalence of precarious employment or spending on active labour market policies did not moderate the association between gaining employment and exiting poverty. Further analysis is needed on the institutional factors supporting poor people’s employment and its effectiveness in significantly improving income level.