Search results

Labour markets across the globe have recently been characterized by rising wage inequality, real wage stagnation or both. Most academic work to date considers each in isolation, but the research in this paper attempts to pull them together, arguing that higher wage inequality takes on an added significance if real wages of the typical worker are not growing, and showing that inequality rises and real wage slowdowns have gone hand-in-hand with one another due to wages decoupling from productivity in the United States and United Kingdom. The lack of growth of real wages at the median in the United States is also shown to be linked to the declining influence of trade unions.

The purpose of this paper is to examine the role wage dispersion across establishments has played in recent increases in total wage inequality in Germany and compares it to inequality changes at the individual level. It is queried whether the contribution of establishment heterogeneity to the rise of wage inequality stems from changes of institutional settings or from structures such as establishment size and the composition of the workforce.

Applying regression-based decompositions of variance to German linked employer-employee panel data for the years 2000-2010 it is analysed to what extent changes associated to firm structures contribute to the rise of total wage inequality.

Results show that the rise in wage inequality in Germany to a great extent is associated to rising wage variance across establishments, implying that establishment specific wage premiums have grown. By further decomposing across firm components of wage inequality, it is found that changes in across establishment wage inequality related to collective bargaining, worker co-determination and internal labour markets together account for about 3 per cent of the rise in total inequality. Inequality changes related to establishments’ skill and occupational composition account for about 11 per cent and establishment size alone accounts for about 18 per cent of the rise in total inequality.

The main contribution is to quantify the relation of specific establishment characteristics to the rise in total wage inequality over time. Conclusions are drawn about the importance of mechanisms of rent sharing at the firm level in comparison to the determination of wages by individual qualification.

Inequality in the distribution of family income in the U.S., which had remained virtually unchanged since the end of World War II until 1968, has increased sharply since then. In contrast, schooling and skill inequality has declined rather steadily over the postwar period. Another notable change over the past 30 years or so has been the widespread diffusion of computers. Using aggregate time-series data for the 1947–2000 period, I find that the largest effects on inequality come from office, computing and accounting equipment (OCA) investment, which accounted for about half of the rise in inequality between 1968 and 2000. The unionization rate is second in importance, and its decline over this period explains about 40 percent of the increase in inequality. The decline in the dispersion of schooling, on the other hand, plays almost no role in explaining the rise in inequality. On the basis of pooled time series, industry regressions for the 1970–2000 period, I also find that investment in OCA is positively related to changes in skill inequality, while changes in the unionization rate are negatively related.

Purpose – We study the determinants of growing wage inequality in 16 OECD countries in the past two decades of the twentieth century. The main independent variables that we consider are those pertaining to labor market institutions, to international trade with less developed nations, and to deindustrialization.

Methodology – We specify a statistical model of pay differentials using first differences over five-year periods. The main estimation method used is weighted ordinary least squares. Where necessary, we use instrumental variables and two-stage least squares. We also undertake extensive robustness exercises, including a version of extreme bounds analysis and deleting each individual country from the analysis.

Findings – The determinants of wage inequality are different in the 1980s and in the 1990s. In the 1980s, growing wage dispersion is due to changes in the institutions of the labor market, including declining unionization and declines in the level at which wages are bargained collectively. In the 1990s, increases in pay inequality are due to increasing trade with less developed nations and weakening of social insurance programs.

Originality – This is the first study to report that the causes for pay inequality differed between the 1980s and the 1990s. It is also the first to document statistically that trade with the less developed nations systematically increases pay inequality in the developed world in the 1990s.

Wages have been spreading out across workers over time – or in other words, the 90th/50th wage ratio has risen over time. A key question is, has the productivity distribution also spread out across worker skill levels over time? Using our calculations of productivity by skill level for the United States, we show that the distributions of both wages and productivity have spread out over time, as the right tail lengthens for both. We add Organization for Economic Co-Operation and Development (OECD) countries, showing that the wage–productivity correlation exists, such that gains in aggregate productivity, or GDP per person, have resulted in higher wages for workers at the top and bottom of the wage distribution. However, across countries, those workers in the upper-income ranks have seen their wages rise the most over time. The most likely international factor explaining these wage increases is the skill-biased technological change of the digital revolution. The new artificial intelligence (AI) revolution that has just begun seems to be having similar skill-biased effects on wages. But this current AI, called “supervised learning,” is relatively similar to past technological change. The AI of the distant future will be “unsupervised learning,” and it could eventually have an effect on the jobs of the most highly skilled.

The minimum wage has been regarded as an important element of public policy for reducing poverty and inequality. Increasing the minimum wage is supposed to raise earnings for millions of low-wage workers and therefore lower earnings inequality. However, there is no consensus in the existing literature from industrialized countries regarding whether increasing the minimum wage has helped lower earnings inequality. China has recently exhibited rapid economic growth and widening earnings inequality. Since China promulgated new minimum wage regulations in 2004, the magnitude and frequency of changes in the minimum wage have been substantial, both over time and across jurisdictions. The growing importance of research on the relationship between the minimum wage and earnings inequality and its controversial nature have sparked heated debate in China, highlighting the importance of rigorous research to inform evidence-based policy making. We investigate the contribution of the minimum wage to the well-documented rise in earnings inequality in China from 2004 to 2009 by using city-level minimum wage panel data and a representative Chinese household survey, and we find that increasing the minimum wage reduces inequality – by decreasing the earnings gap between the median and the bottom decile – over the analysis period.

Long considered the classic coordinated market economy featuring employment security and relatively little employment precarity, the German labor market has undergone profound changes in recent decades. We assess the evidence for a rise in precarious employment in Germany from 1984 to 2013. Using data from the German Socio-Economic Panel through the Luxembourg Income Study, we examine low-wage employment, working poverty, and temporary employment. We also analyze changes in the demographics and the education/skill level of the German labor force. Although employment overall has increased, there has been a simultaneous significant increase in earnings and wage inequality. Moreover, there has been a clear increase in all three measures of precarious employment. The analyses reveal that models including a wide variety of independent variables – demographic, education/skill, job/work characteristics, and region – cannot explain the rise of precarious employment. Instead, we propose institutional change is the most plausible explanation. In addition to reunification and major social policy and labor market reforms, we highlight the dramatic decline of unionization among German workers. We conclude that while there are elements of stability to the German coordinated market economy, Germany increasingly exhibits substantial dualization, liberalization, inequality, and precarity.

While there has been intense debate in the empirical literature over the evolution of the college wage premium in the United States, its evolution in Europe has received little attention. This paper investigates the causes of the evolution of the college wage premium in 12 European countries from 1994 to 2009, assessing the relevance of the supply factor as a determinant of the college wage premium. I use cross-country variation in relative supply, demand, and labour market institutions to examine their effects on the trend in wage inequality. I address possible concerns of endogeneity of the relative supply using an IV strategy exploiting the differential legislations of university autonomy and their variations over time. Results show that the strong increase in the relative supply that European countries have experienced has decreased the college wage premium. The most relevant institution is the minimun wage, which significantly decreases college wage premium.

Focuses on the approach to interpreting earnings equality found in the writings of a variety of economists and in particular, technological change and its effects on the demand skill resulting in earning inequality. Argues that the evidence in favour of the technological effect is weak and presents some alternatives for further consideration.

The last two decades have been characterised by a rise in income and wage inequality in a wide range of countries, including European transition countries. The rise in globalisation is one major factor explaining this increasing wage inequality. International trade and FDI have increased significantly since the beginning of transition and the purpose of this paper is to focus on whether FDI plays an important role in explaining the pattern of wage inequality in selected transition countries.

A cross-country empirical investigation has been conducted using two alternative measures of wage inequality: the Gini coefficient and the Theil index. Several model specifications and estimation strategies have been employed to obtain consistent estimates and to check for the robustness of the results.

The results indicate that a rising share of inward FDI in gross domestic product (GDP) increased wage inequality in transition economies, though its overall effect was relatively small. Considering the long run, there is no clear evidence of a concave relationship between FDI and wage inequality, which may be a consequence of the relatively low levels of FDI in many transition countries.

Inwards FDI has made a small contribution to increasing wage inequality in European transition economies. However, its overall beneficial effects on labour markets in these countries suggest that rather than restricting FDI governments should target increasing the supply of skilled labour.

This new empirical evidence supports the hypothesis that an increased inward FDI stock as a share of GDP increases wage inequality in transition economies, however, this relationship is a complex one. Differences in average wages, wage differentials, employment shares of skilled workers and relative size of the foreign-owned sector are all likely to be important for the behaviour of wage inequality.