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Structural Changes in the Employment Composition and Wage Inequality: A Comparison across European Countries
Gennaro Punzo, Mariateresa Ciommi

Last modified: 2017-05-20


The recent global crisis represents the worst macroeconomic downturn since the 1930s with lasting effects in the labour market and income distribution of most European countries. In particular, the progressive impoverishment of middle-skilled activities, which has been varying the workforce composition over time, is the common element that allows defining the structural changes of job polarisation, upgrading and downgrading of occupations.

In this respect, the paper aims at investigating how shifts in employment structures affect wage dynamics and inequality comparatively in a selection of European countries. The objective of the research hypothesis is to explore the potential link between the employees’ skills and earnings inequality and, if it exists, to quantify how strong this connection is.

The RIF regression on the EU-SILC data enables an exploration of the primary factors that are likely to explain the differences in generation personal labour earnings and a decomposition of the changes in wage inequality during the Great Recession. Thereby, it is possible to evaluate how much of the overall wage inequality gap is accounted for by the endowment in workers’ characteristics rather than the capability of the country’s labour market to transform individual skills into job opportunities and earnings.