Wage Inequality Research Articles

Black and Latinx workers reap lower rewards than White workers from years spent working in big cities

The large labor markets of big cities offer greater possibilities for workers to gain skills and experience through successively better employment opportunities. This "experience effect" contributes to the higher average wages that are found in big cities compared to the economy as a whole. Racial wage inequality is also higher in bigger cities than in the economy on average. We offer an explanation for this pattern, demonstrating that there is substantial racial inequality in the economic returns to work experience acquired in big cities. Using data from the National Longitudinal Survey of Youth, 1979 we find that each year of work experience in a big city increases Black and Latinx workers' wages by about one quarter to half as much as White workers' wages. A substantial amount of this inequality can be explained by further racial disparities in the benefits of high-skill work experience. This research identifies a heretofore unknown source of inequality that is distinctly urban in nature, and expands our knowledge of the challenges to reaching interracial wage equality.

OPTIMAL REDISTRIBUTION AND EDUCATION SIGNALING

AbstractWe develop a theory of optimal income and education taxation under asymmetric information between firms and workers. Our results show that a max–min optimal tax code can achieve predistribution by pooling wages across ability levels, conditional on income. We identify conditions under which the optimal solution leads to pooling or separating equilibria, highlighting bidirectional incentive constraints. Implementation requires nonlinear income taxes coupled with education subsidies or mandates. Predistribution is only feasible when income taxes are complemented by policies that restrict signaling opportunities. Our framework provides new insights into reducing wage inequality through optimal tax policy and labor market information management.

Long-term wage inequality in imperial China: From 202 BCE to 1912 CE.

This paper attempts to describe and explain the long-term evolution of wage inequality in imperial China, covering over two millennia from the Han dynasty to the Qing dynasty (202 BCE-1912 CE). Based on historical government records of official salaries, commodity prices, and agricultural productivity, we convert various forms of salaries to equivalent rice volumes and comparable salary benchmarks. Wage inequality is measured by salary ratios and (partial) Gini coefficients between official and peasant classes as well as within the official class. The inter-class wage inequality features an "inverted U-u" pattern-first rose before the Tang dynasty and then declined afterwards (the "inverted U" trends) with "inverted u" dynastic cycles. The intra-class wage inequality has a secular decline trend. We propose a unified framework incorporating technological, institutional, political, and social (TIPS) mechanisms to explain both long-term and short-term patterns. It is concluded that the technological mechanism dominated the rise of wage inequality, while the political mechanism (emperor-bureaucracy power tensions) drove the decline.

Embedding Skill Bias: Technology, Institutions, and Inequality in Wages and Benefits

Is rising inequality an inevitable consequence of the transition to a knowledge-based economy? Departing from existing approaches in labor economics and comparative political economy, we develop an account of inequality in the knowledge economy that foregrounds the role of labor market institutions. We argue that collective bargaining institutions play a critical role in mediating the skill bias commonly associated with the diffusion of information and communications technologies (ICT), because they determine whether employers have the discretion to selectively reward strategically important high-skilled workers with greater wages and benefits. We then test our argument by carrying out cross-country analyses of both wage premia and non-wage benefits in the OECD countries. We find robust evidence in support of our theoretical propositions across a range of model specifications.

Essential Workers and Wage Inequality: Wage Differentials before and during the Covid-19 Pandemic, 2006 to 2022

Abstract In 2020, several governments declared specific occupations as essential for maintaining the functioning of society in response to the Covid-19 pandemic. A current question in the public debate on fair pay is whether essential workers are sufficiently remunerated. Using data from the Netherlands, I analyze the wages of essential workers relative to other workers before and during the Covid-19 pandemic. Wage decompositions indicate that, between 2006 and 2019, essential workers earned less compared to other workers within higher-paid strata, while they earned more within lower-paid strata of the occupational structure in the Netherlands. These wage differentials are shaped by sex composition and sectoral employment. In addition, I employ a difference-in-differences design based on quarterly data between 2017 and 2022 to assess whether the onset of the Covid-19 pandemic reduced an existing average wage gap in response to an increasing public appreciation of essential work. Results indicate that the collective experience of the Covid-19 pandemic has not benefited essential workers in the short-term.

Gender-neutral vs gender-specific education subsidy: effects on schooling and earning inequality

PurposeDeveloping countries are characterized by gender wage inequality that can be largely attributed to gender-based disparities in education. Education subsidy can be an effective tool for reducing the inequality in human capital formation. However, the parents’ decision in response to the subsidy is a crucial determinant of gendered inequality in schooling and earnings. The paper aims to examine the effects of gender-neutral and gender-specific education subsidy policies on the gendered differences in schooling and earnings.Design/methodology/approachA three-sector full employment general equilibrium model is developed, where the amount of schooling of children is determined by the intertemporal utility maximizing behaviour of the parents over two periods.FindingsThe results indicate that higher gender-neutral education subsidy may raise the amount of schooling of boys more than girls and aggravate the schooling inequality in a society with traditional gender norms; the effect on earning inequality depends on the relative gendered returns to education and the marginal effects of the subsidy on relative schooling levels. However, gender-specific subsidy policies raise female schooling, thereby narrowing gender-based schooling and are likely to favourably affect the earning inequality.Originality/valueThe paper tries to analyse the linkage between education and labour market within a gender dimension. On the one hand, it tries to explain parental schooling decision due to gender-neutral and gender-specific education subsidies, and on the other, it examines the effects of these two subsidy policies on gendered schooling inequality and gender earnings inequality in a dynamic model.

Reforms and Inequality: Examining the Impact of China’s Primary Distribution System Reforms on Wage Inequality (1989–2015)

ABSTRACT This study provides a comprehensive analysis of wage inequality in China during its economic transition from 1989 to 2015, with a particular emphasis on the impact of primary distribution system reforms. Utilizing data from the China Health and Nutrition Survey (CHNS), the paper employs a quantile regression-based decomposition methodology to examine the dynamics of wage inequality. The study focuses on wage inequality across both urban and rural sectors. The findings indicate that the primary distribution system reforms significantly influenced wage inequality across all income strata. From 1989 to 1997, wage inequality was mainly driven by unexplained wage variances. However, between 1997 and 2006, reforms became a key factor exacerbating wage inequality, which was further accentuated by rising educational levels and shifts in employment sectors. After 2006, the reforms shifted towards promoting equity, helping to mitigate wage inequality. This research fills a gap in the literature by offering a detailed exploration of wage inequality in China during its transformative economic phase and by evaluating the effectiveness of primary distribution system reforms.

Socio-Economic Impact of Wage Inequality on Employee’s Satisfaction

This study addressed the research gap in understanding the factors that contribute to wage inequality and their impact on employee satisfaction in the public and private sectors. The study's objectives included exploring factors contributing to wage inequality, examining the impact of socio-economic factors on job satisfaction, and proposing measures to reduce wage inequality and improve job satisfaction in both sectors. The study collected primary data through questionnaire method from the public and private sectors of twin cities to estimate the direct effect of independent variables on employee satisfaction. The stratified sampling technique was used for the comparison of employees who are more satisfied either in the private or public sector. The study also used a binary logisticmodel to examine the null hypothesis, which stated that there was a significant gap in employee fulfillment among private or public sectors and that there was a significant difference in socio-economic factors of employees in both sectors. The analysis included 407 cases. The frequency of private institution employees was 186 while public institution employees was 221. It is believed that the study'sfindings will contribute to the current conversation about pay disparities and provide organizations and decision-makers with practical advice for raising satisfaction with work and decreasing wage inequality.

Women in Mining: a Perspective From Mining Engineering Alumnae at UNIFAL-MG

Objective: The main objective of this study was to conduct a qualitative and quantitative diagnosis of the working conditions of women graduates of the Mining Engineering program at the Federal University of Alfenas, addressing issues related to gender equity. Theoretical Framework: The expression "women in mining" refers to the presence and participation of women in the mining sector, a field traditionally dominated by men. This sector is often viewed as more suitable for men, historically and socially perceived as heavy work that demands physical strength and endurance, aligning with masculinity stereotypes. Gender disparity is not unique to the mineral sector but is present in the corporate world in general, where gender discrimination manifests in unequal salaries, fewer women in leadership positions, limited promotion opportunities, and even less favorable working conditions. Method: The methodology used can be classified as mixed, as it included both quantitative and qualitative elements. The study was developed based on responses collected through a survey sent to graduates of the Mining Engineering program at the Federal University of Alfenas (UNIFAL-MG). Results and Discussion: The results obtained revealed that, although women are gaining more space in the mining sector, they still face significant obstacles, such as low representation in leadership positions and persistent wage inequality. Data collected show that, while 45% of the former students interviewed hold leadership positions, 67% believe that gender is a limiting factor for advancement to such roles. Moreover, the presented graphs reveal that experiences of moral and sexual harassment are still a concerning reality. Research Implications: This research reinforces the importance of promoting the continuity and expansion of gender equity policies to create a fairer and more attractive mining sector for all professionals, as well as the need to increasingly discuss gender equity in the labor market. Originality/Value: This study contributes to the literature by discussing gender equity and presenting the current scenario of women's roles in the job market. The relevance and value of this research are highlighted by promoting the discussion of this crucial issue, contributing to a more egalitarian world.

Re-examining Wage Disparities Across Segments of the Indian Labor Market

This article examines income disparities by considering both employer and employee perspectives of informality to scrutinize labor market segmentation in India. Additionally, the research investigates the impacts of varying degrees of urbanization, migration patterns, and industrial structures on formal and informal employment in the labor force. Utilizing data from the National Sample Survey Employment and Unemployment Survey rounds, specifically the 2004–2005 (61st) and 2011–2012 (68th) rounds, along with the Periodic Labour Force Survey 2018–2019 round, quantile regression models and the Recentred Influence Function decomposition method were employed to analyze wage inequality. A selection-corrected wage equation and its estimate were also presented by applying Bourguignon, Fournier, and Gurgand’s model-based selection correction. The study’s findings indicate that by 2019, the labor market had divided into two groups: organized formal workers and others. Further, the study reports wage convergence at lower quantiles and a widening gap at higher quantiles between organized formal and unorganized informal workers. Organized formal workers witness rising earnings, indicating positive wage growth, yet their share in overall employment remains small, which is significant given low job creation and high educated unemployment. At higher wage quantiles, there is a premium for being an informal worker in the organized sector compared to the unorganized sector, indicating a queue for formal employment opportunities in the organized sector. Despite the service sector’s significant role in Indian growth, it lags in creating formal job opportunities, unlike the manufacturing and construction sectors, which emphasize their substantial contribution to formal job generation. This study underlines that categorizing a firm as merely organized or a worker as formally employed is insufficient. Upgrades in these classifications should be accompanied by premiums, with wages being a key consideration. JEL Classification J31, J42, J62, J71

Game Design for a Fiverr: Precarity, Regionality, and Platform-Mediation in the Gig Economy

In this article, we investigate users who sell complete design services (i.e., ostensibly creating a full, original game for a client) on the gig economy platform Fiverr. By studying the platform’s affordances and analyzing user profiles, we construct two central arguments: First, we contend that gig economy platforms facilitate, shape, and moderate labor in ways that vary from more commonly discussed models of game design. Second, we push back against Fiverr’s claims of a boundaryless workforce by analyzing local conditions that concentrate labor in particular jurisdictions. After briefly reviewing the history of gig labor, we use the walkthrough method to analyze Fiverr: reviewing registration processes, protocols between buyers and sellers, and platform governance structures. We then survey fifty seller listings to determine what services are available, how much they cost, and how they are clustered geographically. Next, we address the prevalence of Pakistani users among our sample of sellers by scrutinizing global wage inequities and regional initiatives that may push workers toward the gig economy. To close, we reflect on Fiverr’s place in the game design ecosystem, investigate how gig economy labor is framed in educational institutions, and touch upon our research limitations. While gig economy platforms are often critiqued for labor exploitation or mocked for providing poor-quality services, these are both oversimplifications of complex economic, institutional, and policy assemblages. Ideally, this article will serve as a first step in better understanding game development on gig economy platforms and their power to reshape geographies of game development.

Does Inflation-targeting Policies Worsen Income Inequality in its Trading Partner?

Interest rate hike as an instrument for inflation-targeting has been adopted quite aggressively in recent times by the Fed Bank of the United States, which has some far-reaching implications for emerging market economies like India. In such a context, this article explores implications of interest rate hike by a large foreign country for wage inequality between skilled and unskilled workers in a domestic economy. We focus on the supply side channel: hike in foreign interest rate affecting wage inequality through its impact on domestic investment, capital formation and consequent changes in the composition of aggregate output. We show that the wage inequality worsens if capital-cost share in a composite traded good is larger than the capital-cost share in a skill-based export-good Z. Domestic policies such as credit expansion by changing the cash-reserve ratio and increase in money supply help mitigate this worsening wage-inequality effect of interest hike abroad. This issue assumes relevance because of rising concerns among the major central banks the world over about the income distributional impacts of monetary policies, whereas most of the recent income inequality trends seem to have been contributed largely by rising skill premiums. JEL Codes: E52, F41, F11, E24

The pro-competitive consequences of trade in frictional labor markets

What are the pro-competitive consequences of trade in frictional labor markets? This paper develops and estimates a dynamic general equilibrium trade model to show that the interplay between endogenously variable markups in product markets and frictions in labor markets has important implications for aggregate as well as distributional consequences of trade. In particular, I show that once markups are allowed to respond to trade liberalization, unemployment and residual wage inequality rise almost three times more than in a model with constant markups (in the steady state). The presence of labor market frictions makes the pro-competitive gains from trade liberalization negative.

Economic Theory and Artificial Intelligence: A Cross-model Perspective on Labour Market Dynamics

Abstract This study examines the relationship between labour market changes and artificial intelligence, utilising Romer’s Endogenous growth theory, Schumpeter’s Creative destruction, Solow’s Growth model and Becker’s Human capital theory as theoretical frameworks. The purpose of this research is to clarify the multifaceted impacts of artificial intelligence on economic growth, workforce adjustment and the emergence of novel employment trends, focusing specifically on job losses and gains, wage inequalities, and changing skill requirements. Using a structured literature review methodology, the economic implications of artificial intelligence in the labour market were systematically analysed and synthesised. The results suggest that although artificial intelligence significantly enhances productivity and innovation, it has a complex effect on the labour market, causing employment gains in technologically sophisticated industries and losses in sectors prone to automation. The study emphasises strategic policy interventions and pedagogical reforms that maximise the economic benefits of AI while minimising its disruptive effects on employment. Proponents of such policies argue that by cultivating a workforce that is resilient and capable of adjusting to changes driven by artificial intelligence, they can effectively mitigate inequality and safeguard economic stability.

Income Differentials among Migrants by Race/Color in Brazil-2000/2010

Individuals’ socioeconomic and demographic characteristics influence salary discrepancies arising from work. Given this, this article aims to investigate income differentials between inter-municipal migrants, dividing them into two specific groups: non-whites and whites, based on microdata from the Demographic Censuses of the years 2000 and 2010. Initially, the empirical literature on labor income differentials is reviewed. Then, a Mincerian income equation is used, estimated by Ordinary Least Squares, in order to analyze wage inequalities among migrants. The results showed that white migrants earned significantly higher incomes than non-whites and that the characteristics of thoseemployed had a different influence between the groups. However, it was found that these inequalities have reduced over time.

What Explains Differences in Minimum Wage Growth Between EU Member States?

Abstract There are considerable differences in minimum wage growth between EU member states with national minimum wages. Potential sources for these differences are discrepancies in economic fundamentals and institutional differences in how minimum wages are adjusted. Using a novel dataset based on macroeconomic data, institutional information on minimum wage setting and data on economic policy orientation and elections, the article tests whether growth differences in the minimum wage of 21 EU member states during the time period 2000 to 2020 can be explained by a catch-up dynamic in new EU member states, by different growth models of EU member states or by differences in the actors that are responsible for the adjustment of minimum wages. The results show that across the entire sample and irrespective of actors, minimum wage growth follows consumer price inflation and wage growth most closely. Higher than average minimum wage growth rates in EU member states stem from overshooting inflation during the period of EU accession, reducing wage inequality and increasing the Kaitz index. Actors also mattered for minimum wage growth. Adjustments by social partner consensus led to higher minimum wage growth than the benchmark of indexed minimum wages, introducing a distributive element to minimum wage adjustments.

Rural public investment and wage inequality under small‐scale agriculture modernization

Increasing rural public investment is crucial for sustainable rural development and can be an effective approach for reducing inequality. However, wage inequality has increased in some developing countries (e.g., China) after increasing fiscal support. This study explores how rural public investment influences skilled‐unskilled wage inequality by incorporating agricultural modernization in small‐scale agriculture. Agricultural modernization refers to introducing modern non‐agricultural intermediate inputs in agriculture. Owing to the small scale of agriculture, an intermediate sector, the agricultural producer service sector, is required to facilitate this process. We establish a three‐sector general equilibrium model with a two‐layer vertical production structure and investigate the effects of increased public investment in rural areas on the wage inequality between skilled and unskilled labour. The theoretical results show that while more rural public investment raises the wages of both skilled and unskilled labour, it also increases wage inequality. Overall, this study explains why inequality widens as rural public investment increases.

Agricultural land transfer and wage inequality in the presence of modern agriculture

ABSTRACT By constructing a three-sector general equilibrium model encompassing modern agriculture, this study shows that how agricultural land transfer impacts wage inequality. In the short run, it narrows the urban skilled-unskilled wage inequality but widens the urban-rural unskilled wage inequality and the average skilled-unskilled wage inequality. In the long run, it widens (narrows) the urban skilled-unskilled wage inequality if the skilled labor employment effect is large (small) enough, but narrows (widens) the urban-rural unskilled wage inequality and the average skilled-unskilled wage inequality if the unskilled labor employment effect is large (small) enough.

Offshoring and Wage Inequality: Theory and Evidence from China

Offshoring and Wage Inequality: Theory and Evidence from China

Unveiling the automation—wage inequality nexus within and across regions

Since the1800s, automation technologies have been interpreted as a source of displacement effects, largely conceptualised and empirically proved in a vast literature. This paper claims that, despite their non-manufacturing nature, metropolitan regions are not exempted by the negative effects of automation on wage inequalities across workers’ groups. The paper empirically proves this statement by analysing the effects on jobs and wage differentials among groups of workers associated with the diffusion of robot technologies in Italian NUTS3 regions in the period 2012–2019. Results show that automation technologies in the form of robotisation do displace jobs, harming particularly low-skilled workers in non-metropolitan manufacturing regions, where inter-group wage inequalities increase. However, through the creation of high-skilled jobs, also cities experience a rise of inter-group workers inequalities. These results call for appropriate policies to cope with the changing occupational profiles requested by the labour market.