Trends In Wage Inequality Research Articles

Higher education and high-wage gender inequality

Over the past 60 years, we have witnessed a relocation of gender wage inequality. Whereas the largest wage gaps were once concentrated among lower-paid, lower-educated workers, today these wage gaps sit among the highest-paid, highly-educated workers. Given this reordering of gender wage inequality and the centrality of college graduates to total inequality trends, in this article, we assess the contribution of higher education mechanisms to top-end gender inequality. Specifically, we use Census and ACS data along with unique decomposition models to assess the extent to which two mechanisms rooted in higher education—bachelor’s-level fields of study and the attainment of advanced degrees—can account for the gender wage gap across the wage distribution. Results from these decomposition models show that while these explanatory mechanisms fare well among bottom and middle wages, their explanatory power breaks down among the highest-paid college workers. We conclude that women’s attainment of “different” education (via fields of study) or “more” education (via advanced degrees) would do little to close the gender wage gaps that are contributing most to contemporary wage inequality trends. We suggest some directions for future research, and we also take seriously the role of discriminatory pay-setting at the top of the wage distribution.

Global and institutional drivers of wage inequality between and within firms

Abstract Rising wage inequality in wealthy countries is disproportionately driven by widening differences in pay between workplaces, through increasingly homogenous workforces as well as widening differences in the pay of similar workers. While this is found consistently across countries, the variation in trends highlights the need to study institutional settings. This paper uses cross-national representative European data from the Structure of Earnings Survey to study the trends in wage inequality over time between and within firms, linking these to changes in structural and institutional factors. Indeed, common structural changes such as globalization and digitalization contribute to rising wage inequality across otherwise similar workers within and between establishments. However, the institutional context plays an important role: where employers’ pay setting is constrained through more biting minimum wages or multi-employer collective bargaining, this inequality is compressed and does not grow as much.

Were wages converging during the 2010s expansion?

This article uses multiple surveys and data sourced from administrative records to examine trends in wage inequality from 2003 to 2019. Survey evidence shows that wages were growing more unequal from 2003 to 2013 as wages grew faster among high-wage workers than among low-wage workers. However, from 2013 to 2019, the same surveys show substantial wage gains for workers in the second and third deciles of the wage distribution, particularly among material moving workers and health aides. Administrative tax data also show substantial gains in annual wage and salary earnings income for earners in the lower portion of the earnings distribution in the same years. Wage growth among lower wage workers was large enough to reduce overall wage inequality from 2013 to 2019 in Occupational Employment and Wages Survey data. In tax data, wage growth among lower earning workers was large enough to reduce overall earnings inequality from 2010 to 2018. In data from the Current Population Survey, a plateau was found in overall wage inequality—rather than the clear decline found in the other two data sources—in the later years of the economic expansion.

The minimum social guarantee of employees’ wages in Russia: 2020-2021

In 2021 the methodological approaches to the assessment of the minimum wage and the subsistence minimum level (SML) undergone significant changes. According to federal law No 473-FZ of December 29, 2020, these minimum social guarantees are to be calculated relative to the median wage (at 42%) and the median per capita income (at 44.2%) for the past year. This article reviews the changes in the minimum social guarantees as regards employees’ wages in Russia and its regions in the past two years. A new methodology for estimating the median wages had not been developed by the start of 2021. According to Law No 473-FZ the federal minimum wage was set using the Pension Fund data at the rate of 12792 rubles per month. The majority of regions used the federal minimum wage as the basis for defining regional minimum wages. A comparative analysis of regional minimum wages in 2020 and 2021 was carried out for two groups of regions, the regions with regular climate conditions and the regions with special (extreme) climate conditions where the regional coefficient for wages is applied. The analysis shows that in 2021 the minimum wage increased by 5,5% compared to 2020 in most regions. The exception is 11 regions of the Russian Federation, where the minimum wage was set at an increased rate compared to the federal level. The article analyses the ratio of the minimum wage and means wage of all employees in 45 regions of the Russian Federation with normal climate conditions and in 16 regions with extreme climate conditions, where a unified rayon coefficient is set up at the territory of the region. The dynamics of this indicator allows for estimating the trends in wage inequality

Trends in Wage Inequality in the Netherlands

In this paper I analyze changes in the wage distribution in the Netherlands. I use a matched employer-employee dataset that covers the population of employees. Wage inequality increases over the period of 2001–2016. Changes in between-firm wage components are responsible for nearly the entire increase. Increases in the variance of workers’ skills and increases in worker sorting and worker segregation explain the majority of the rise in the variance of wages. These changes are accompanied by a pattern where variation in educational degree and firm average wages become more correlated over time. Finally, it is suggested that labor market institutions in the Netherlands play an important role in mediating overall wage inequality.

Decomposing the large firm wage premium in Germany

We use an extensive, matched employer–employee dataset to analyze the employer-size wage relation and its contribution to wage inequality in Germany. Applying models with additive fixed effects for workers and establishments, we document that the large firm wage premium (LFWP), which rose over 25 years, has only recently started to decrease. Our decomposition shows that firm size explains a significant share of the trends in wage inequality. The LFWP accounts for about 20% of the rise in wage inequality from the mid 80s to 2010. From 2010 onward, wage inequality has slightly declined and the LFWP accounts for 33% of this trend reversal.

Informal Employment and the Structure of Wages in India: A Review of Trends

The “alternative”, “atypical” or “informal” workforce has grown in developed and developing countries alike. One of the more recent evolutions of informal employment has been of informal employment within formal enterprises. In the interest of flexibility and cost‐reduction, many formal firms increasingly resort to hiring workers on a temporary or informal basis. Alongside, and perhaps, as a result of the persistence and pervasiveness of informal employment, issues relating to inequality have come to the fore. This paper is motivated by these two intertwining aspects of Indian labor market—informality and wage inequality. Using nationally representative sample data, the paper examines trends in wage inequality among various forms of informal workers, overlaying these findings with broader trends in inequality. Using a regression based inequality decomposition, the paper compares the sources of wage inequality across different employment groups and the reasons for differences in wage inequality.

Occupations and the recent trends in wage inequality in Europe

We aim to contribute to a better understanding of the role that occupations played in recent trends in wage inequality in some European countries. Using EU-SILC data, we observe that most of the changes in wage inequality between 2005 and 2014 were the result of changes in the distribution of wages within occupations. A longer term approximation using data from the Luxembourg Income Study (LIS) shows similar patterns. We conclude that occupational dynamics did not drive recent trends in wage inequality in Europe.

Recent Changes in British Wage Inequality: Evidence from Large Firms and Occupations

AbstractUsing a linked employer–employee dataset covering large firms, we present new evidence on British wage inequality trends over the past two decades. Differences between firms in the average wages they paid did not drive these trends. Between 1996 and 2005, greater wage variance within firms accounted for 86% of the total increase in wage variance among employees. In the following decade, wage inequality between firms continued to increase, whereas overall wage dispersion decreased. Approximately all the contribution to inequality dynamics from estimated firm‐specific factors, throughout the employee wage distribution, disappears after accounting for the changing occupational content of wages.

Recent trends in wage inequality from an EU perspective: a tale of two convergences

This paper presents an analysis of two processes of convergence between European countries, in wage levels and wage distributions, and the extent to which they explain recent trends in wage inequality for the EU as a whole. The results show that wage convergence was the main driver behind wage inequality trends for the EU as a whole in the last decade, which was significantly reduced prior to the crisis as a result of wage catch-up growth mainly in Eastern Europe, a process which was interrupted during the crisis but reactivated again in the most recent period. On the other hand, the contribution of within-country wage developments to explain changes in wage inequality for the EU as whole over the last decade was much more limited, although it is interesting to note as well a process of convergence in wage distributions between European countries towards intermediate inequality levels. Policies directed at reducing wage disparities within countries offer the best prospect to tackle wage inequalities both at the national and EU-wide level, as illustrated by the introduction of the German statutory minimum wage in 2015.

Diverging trends of wage inequality in Europe

Abstract Since the middle/end of the 2000s wage inequality has increased in some European countries (such as Portugal or the UK) and decreased in others (especially in Hungary and Poland). In this article, we analyse the role of the minimum wage and of workers’ and firms’ observed characteristics behind these diverging trends in wage inequality. Our findings indicate that compositional changes as regards education are a key factor pushing up inequality in the majority of the countries, but particularly in Italy and Portugal. Other factors either contribute to increased or decreased inequality, specifically minimum wage changes, the percentage of non-native employees and native wage premiums. Minimum wage changes seem to be of crucial importance in Greece, Hungary and Poland. Finally, the presence of non-natives in the labour market is a key determinant in the UK, but also to some extent in Austria and Hungary.

The Drivers of Life‐Cycle Wage Inequality in Australia

Why does wage inequality rise with age? Using panel data on male wages, we explore the relative importance of unobserved worker heterogeneity versus random wage shocks in explaining this life‐cycle trend in Australia. While we find significant heterogeneity in wage levels (via differences in starting wages), we find no evidence of systematic heterogeneity in wage growth. Instead, highly persistent wage shocks are found to account entirely for the rise in wage inequality with age. We also find evidence that the upward trend in wage inequality since the early 2000s reflects an increase in permanent rather than transitory wage inequality.

Wage Inequality Within and Between Occupations

Western countries, including Scandinavian nations, have witnessed an increase in wage inequality over the past decades. Recent studies attribute rising wage inequality in the United States and United Kingdom primarily to between-occupation inequality, while changes in within-occupation wage inequality were less important for the overall growth. We investigate this hypothesis in the Norwegian context. Our results show a slight increase in inequality from 2003 to 2012, mostly accounted for by between-occupational wage inequality. Occupations became a more important determinant of wages, but the increase in total wage inequality was small. In order to explain trends in wage inequality, we turn to three occupational characteristics: licensure, unionization, and credentialization.

Tracking wage inequality trends with prices and different trade models: evidence from Mexico

Mexican wage inequality rose following Mexico's accession to the General Agreement on Tariffs and Trade/World Trade Organization in 1986. Since the mid-1990s, however, wage inequality has been falling. Since most trade models suggest that output prices can affect factor prices, this paper explores the relationship between output prices and wage inequality. The rise of inequality can be explained by the evolution of the relative price of skill-intensive goods relative to unskilled-intensive goods, but these prices flattened by 1999 and thus cannot explain the subsequent decline in wage inequality. An alternative trade model with firm heterogeneity driven by variations in the relative price of tradable relative to non-tradable goods can explain the decline in wage inequality. The paper compares this model’s predictions with Mexican inequality statistics using data on output prices, census data, and quarterly household survey data. In spite of the model's simplicity, the model’s predictions match Mexican variables reasonably well during the years when wage inequality fell.

Wage Inequality of IT Professionals in India

Using annual survey data from 6 cities in different regions of India, the author analyzes the rapid increase in wage inequality of information technology (IT) professionals in India from 2002 to 2015. The author describes within-group and between-group wage inequality trends and decompose wage inequality change into changes in the distribution of IT professionals in IT sectors attributes, both observed and unobserved, and changes in the returns to those attributes. The author finds that growing regional wage disparities, rising returns to unobserved IT skills, and rising returns to IT education explain most of the wage inequality increase. Rising IT skill premiums are due primarily to increasing relative demand for IT skilled professionals within IT sectors rather than to demand shifts across IT sectors. The timing of wage inequality change has been erratic, suggesting a key role played by reform policies.

Wages and Wage Inequality in South Africa 1994–2011: Part 1 – Wage Measurement and Trends

AbstractWe analyse the long‐term trends in wage inequality in South Africa, using household survey data. We show that the trends in household income inequality are largely driven by changes in wage inequality. Given the detailed nature of our series we show that measurement issues and breaks in the series need to be dealt with in order to draw robust conclusions from the data. Most standard inequality measures show that wage inequality has increased over the period. Nevertheless the choice of measure matters, because there are different trends in different parts of the distribution. It appears that the distribution below the median has become more compressed, while the top of the wage distribution has moved away from the median. The inequality in the labour market translates into even higher inequality in society given that high earners tend to live together with other high earners while low wage individuals often end up sharing their incomes with the unemployed. Furthermore there are many South Africans with access to no wage income. Given the trends analysed here it is not surprising that overall inequality in South Africa has not come down or has even increased since the end of apartheid.

Wages and Wage Inequality in South Africa 1994–2011: Part 2 – Inequality Measurement and Trends

AbstractWe analyse the long‐term trends in wage inequality in South Africa, using household survey data. We show that the trends in household income inequality are largely driven by changes in wage inequality. Given the detailed nature of our series we show that measurement issues and breaks in the series need to be dealt with in order to draw robust conclusions from the data. Most standard inequality measures show that wage inequality has increased over the period. Nevertheless the choice of measure matters, because there are different trends in different parts of the distribution. It appears that the distribution below the median has become more compressed, while the top of the wage distribution has moved away from the median. The inequality in the labour market translates into even higher inequality in society given that high earners tend to live together with other high earners while low wage individuals often end up sharing their incomes with the unemployed. Furthermore there are many South Africans with access to no wage income. Given the trends analysed here it is not surprising that overall inequality in South Africa has not come down or has even increased since the end of apartheid.

Collective Bargaining and the Evolution of Wage Inequality in Italy

In this paper we study the evolution of the Italian wage inequality, and of its determinants, using two decades of matched employer-employee data covering the entire population of private-sector workers and firms in the Veneto region. We find that wage inequality has increased since the mid-1980s at a relatively fast pace, and we decompose this trend by means of wage regression models that account for both worker and firm fixed effects. We show that the observed and unobserved heterogeneity of the workforce has been a major determinant of the overall wage dispersion and of its evolution. Instead, we find that the importance of the dispersion in firm-specific wage policies has declined over time. Finally, we show that the growth in wage dispersion has almost entirely occurred between job titles (livelli di inquadramento) for which a set of minimum wages is bargained at the nation-wide sectoral level. We conclude that, even in the presence of the underlying market forces, trends in wage inequality have been channelled through the rules set by the country's fairly centralized system of industrial relations.

Tracking Wage Inequality Trends with Prices and Different Trade Models: Evidence from Mexico

Mexican wage inequality rose following Mexico's accession to the General Agreement on Tariffs and Trade/World Trade Organization in 1986. Since the mid-1990s, however, wage inequality has been falling. Since most trade models suggest that output prices can affect factor prices, this paper explores the relationship between output prices and wage inequality. The rise of inequality can be explained by the evolution of the relative price of skill-intensive goods relative to unskilled-intensive goods, but these prices flattened by 1999 and thus cannot explain the subsequent decline in wage inequality. An alternative trade model with firm heterogeneity driven by variations in the relative price of tradable relative to non-tradable goods can explain the decline in wage inequality. The paper compares this model?s predictions with Mexican inequality statistics using data on output prices, census data, and quarterly household survey data. In spite of the model's simplicity, the model?s predictions match Mexican variables reasonably well during the years when wage inequality fell.

Income Inequality and the Veteran Experience

Previous researchers have evaluated how the dramatic rise in income inequality has affected the members of various groups of workers, such as those defined by gender, union status, and educational attainment. Yet apparently no researchers have yet explored how this increase may have affected people grouped by previous military service. This chapter addresses this gap by assessing trends in wage inequality between male veterans and nonveterans, and among veterans between 1979 and 2010. The findings suggest that similar to other groups, veterans have experienced decreased between-group inequality and increased within-group inequality and that these changes may stem not just from period but also from cohort effects.