Rising between-workplace inequalities in high-income countries

Abstract

It is well documented that earnings inequalities have risen in many high-income countries. Less clear are the linkages between rising income inequality and workplace dynamics, how within- and between-workplace inequality varies across countries, and to what extent these inequalities are moderated by national labor market institutions. In order to describe changes in the initial between- and within-firm market income distribution we analyze administrative records for 2,000,000,000+ job years nested within 50,000,000+ workplace years for 14 high-income countries in North America, Scandinavia, Continental and Eastern Europe, the Middle East, and East Asia. We find that countries vary a great deal in their levels and trends in earnings inequality but that the between-workplace share of wage inequality is growing in almost all countries examined and is in no country declining. We also find that earnings inequalities and the share of between-workplace inequalities are lower and grew less strongly in countries with stronger institutional employment protections and rose faster when these labor market protections weakened. Our findings suggest that firm-level restructuring and increasing wage inequalities between workplaces are more central contributors to rising income inequality than previously recognized.

The organizational production of earnings inequalities, Germany 1995–2010

“…This pointedly underlines the importance of organizational wage polarization as an emergent inequality generating phenomena. Our past research [6] has shown that this pattern is not confined to Germany, but exists in twelve of fourteen high-income countries examined.…”

“…We take advantage of fifteen years of German administrative data (1995-2010) on a large random sample of workplaces and all of their employees. Germany is the largest economy in Europe and the fourth largest in the world; it is also an important case in that earnings inequalities have risen rapidly both between and within workplaces [4,6]. Our estimates [6] are that by 2010 total inequality rose a remarkable 31% over its level in 1995.…”

“…Germany is the largest economy in Europe and the fourth largest in the world; it is also an important case in that earnings inequalities have risen rapidly both between and within workplaces [4,6]. Our estimates [6] are that by 2010 total inequality rose a remarkable 31% over its level in 1995. Within workplace earnings dispersion increased 22.7%, while between workplace earnings dispersion surged by 56.8%.…”

A promising front in the war on inequality

“…This latest finding on rising earnings inequality builds upon a preexisting country-specific literature showing that between-workplace or between-firm inequality accounts for a rising share of inequality in the United States (3), West Germany (4), and Sweden (5). The key contribution of Tomaskovic-Devey et al (1) is to show that this result is a very common one that holds in 12 of 14 well-off countries. Moreover, Tomaskovic-Devey et al (1) also show that between-workplace inequality is more prominent in the private sector than in the public sector, although it is frequently growing in both sectors.…”

“…Given that this topic has been worked for so long and with such success, it might be thought that the chances of uncovering an unusually important fact about trends in inequality are rather low. Although that may well be the case, the PNAS paper "Rising between-workplace inequalities in high-income countries" by Tomaskovic-Devey et al (1) has evidently beaten the odds, breaking ground by showing that the between-workplace share of earnings inequality is rapidly growing in most well-off countries. The inequality regime of contemporary well-off countries melds together 1) superstar workplaces that are chock full of relatively high-earnings workers and 2) low-end workplaces that are chock full of relatively low-earnings workers.…”