Low-paid jobs: Employment trends and impact of minimum wage policies

This report examines trends in employment in low-paid jobs and whether minimum wage policies influenced the employment structures of the EU Member States between 2001 and 2024. While most existing research focuses on the local effects of minimum wage increases on employment levels, this report adopts a broader perspective, analysing how such policies may influence the distribution of employment across sectors and occupations. The basic unit of observation used in the analysis is the job (defined as a combination of occupation and sector), allowing the whole employment structure to be captured. 

Minimum wage policy has gained prominence across Europe, particularly since the mid-2010s. Following a period of wage moderation after the 2008 global financial crisis, many Member States implemented substantial increases in minimum wages. At EU level, this shift culminated in the adoption of the Minimum Wage Directive in 2022; the directive provides a framework for setting adequate wage floors and wider collective bargaining coverage. 

At the same time, labour markets have undergone significant structural changes driven by a series of factors, including technological progress, globalisation, demographic shifts and institutional reforms. Empirical evidence suggests that the combined effects of these forces have led to a general upgrading of jobs in many Member States, alongside more limited episodes of polarisation in specific periods and Member States. 

Minimum wage policies operate within this broader context and may interact with these structural drivers, potentially influencing not only wage levels but also the composition of employment through several channels, such as encouraging the reallocation of labour towards more productive firms and sectors and strengthening incentives for firms to invest in innovation and skills. 

• Low-paid jobs in Europe are heavily concentrated in a limited number of sectors and occupations. Among sectors, low-paid jobs are most prevalent in services, particularly accommodation and food services, administrative and support services, wholesale and retail trade, and human health and social work. Within these sectors, low-paid jobs are especially common in low-skilled occupations, such as cleaners and helpers, labourers, personal service workers, food preparation assistants and sales workers. 

• Eight of the largest low-paid jobs (in terms of total employment) were selected for this study as representative of the low-paid segment of the labour market: retail sales workers, health and social care workers, hospitality personal service workers, manufacturing labourers, business services cleaners, retail labourers, personal service workers, and hospitality food preparation assistants. On average across Member States, between 2011 and 2024, these eight jobs grew in absolute terms (by 11.6 % in employment and 7.6 % in hours worked), but their shares of total employment and hours worked declined (− 2.5 % and − 5.2 %, respectively), indicating slower growth than better-paid jobs generally. 

• Trends diverge markedly across jobs. The numbers of retail sales workers and manufacturing labourers declined in most Member States and periods, while for other jobs, particularly health and social care workers and hospitality food preparation assistants, numbers expanded. The overall decline in employment shares during 2011–2024 was largely driven by a reduction in the employment of retail sales workers, which was steady and broad-based over time, and in the employment of hospitality personal service workers, which was a more abrupt decline linked to structural changes related to the COVID-19 pandemic. 

• Looking at the whole employment structure, the overall pattern between 2001 and 2024 points to employment upgrading, with strong growth in high-paid jobs. The largest losses were in middle-paid jobs rather than low-paid jobs, indicating a hollowing out of middle-paid jobs (denoting polarisation) alongside upgrading. 

• Changes in the employment structure vary widely among Member States and over time, despite widespread rapid increases in minimum wages, indicating that the latter are only one of several drivers. In particular, employment in low-paid jobs appears to be closely linked to economic cycles, with sharp contractions occurring during the Great Recession (2008–2010) and in the aftermath of the COVID-19 pandemic, while high-paid jobs are generally more resilient. 

• An econometric analysis provides some evidence of an upgrading of the employment structure, associated with increases in national minimum wages. A 1 % yearly increase in the real minimum wage level is associated with a reduction of around 0.1 % in the employment share of the bottom job–wage quintile (the lowest-paid jobs, which account for 20% of employment) and an increase of about 0.06 % in the employment share of the jobs in the top quintile (the highest-paid jobs, which account for 20% of employment). 

• While wage inequality and the incidence of low-paid work declined overall across the EU over the period, the analysis does not identify a systematic link with minimum wage developments. However, minimum wage increases are associated with a reduction in wage inequality at the lower end of the wage distribution. 

• The concentration of low-paid jobs in a limited set of sectors and occupations highlights the potential of targeted policy interventions in these areas, which can reach a large share of the low-paid workforce. 

• Evaluation of minimum wage policies should go beyond aggregate employment effects and consider changes in employment composition, including shifts across wage segments, sectors, occupations and contract types, in addition to impacts on headcount employment and hours worked. 

• Low-paid jobs are particularly vulnerable to economic shocks, and the structural changes triggered by the COVID-19 pandemic contributed to lasting reductions in the employment shares of some low-paid jobs. Minimum wage policies should therefore be complemented by broader countercyclical measures to sustain employment and income during downturns, and by structural policies that support transitions out of declining low-paid jobs during phases of structural change. 

• Minimum wage policy does not operate in a vacuum: its employment effects are mediated by the broader economic and structural context, including the macroeconomic cycle, sociodemographic trends, exposure to trade and technological change, labour market institutions, sectoral composition and the scope for productivity gains. Policy design should therefore calibrate both the level and the pace of increases to the underlying sectoral and labour market conditions, using indicators that capture the exposure to minimum wage changes across occupations, sectors, regions and other relevant dimensions. 

• Minimum wages are an effective instrument for compressing the lower tail of the wage distribution, while their effects on broader inequality measures are weaker and more country-specific. Expectations of what minimum wage policy can deliver should be calibrated accordingly, and complementary instruments – such as taxation, transfers and collective bargaining – remain essential for addressing wider distributional objectives. 

• Complementary policies could help firms and workers adjust to higher wage floors. Productivity-enhancing investments in skills, technology and work organisation can help firms absorb higher wage floors without reducing employment, while active labour market policies can support workers in transitioning out of declining low-paid jobs into higher-paid occupations.