Essays on labour economicsWage and income disparities in European labour markets amid the Great Recession

Resumen

This thesis consists of an introduction, five self-contained research outputs on wage and income disparities across European labour markets and a final chapter discussing the main conclusions. Although each one of these pieces of research stands by itself, they are all interrelated and jointly provide a consistent picture from different angles about the recent evolution of wage and income disparities for the European Union (EU) as a whole and within European national labour markets, both before and after the Great Recession, including a policy proposal. The first output is a paper mapping the evolution of low-paid work over the period 2005– 2013 and exploring its underlying causes. The analysis uses an inflation-adjusted low-pay threshold anchored at 60 percent of median wages in 2007 to assess the impact of the Great Recession, showing that the share of low-paid employees increased for the EU as a whole and in two-thirds of European countries. This is explained by a general decline in real wage levels, particularly intense in the European periphery countries and at the bottom of the wage distribution as well as among employees with shorter tenures. Growing part-time employment also emerges as a significant driver of expanding low-paid work from the onset of the crisis. Moreover, the analysis identifies the existence of compositional effects that may have prevented a larger expansion of low-pay shares and masked the real extent of the wage correction. The second output is a paper presenting an overview of wage inequality trends from an EUwide perspective over the period 2005-2015 and discussing the contribution of convergence in wage levels and wage distributions between countries. The analysis shows that EU-wide wage inequality fell strongly prior to the crisis as a result of upwards convergence in wage levels, which was mainly driven by catch-up growth in Eastern European countries. EU-wide wage inequality has remained stagnant from the onset of the crisis due to the interruption of this process of convergence, which nevertheless is reactivating again in the most recent years due to a continuation of catch-up growth in Eastern Europe. Simultaneously, there was a process of convergence towards intermediate wage inequality levels, also partially interrupted by the crisis. Trends in wage inequalities across European countries are mixed from the onset of the crisis, partially due to the existence of compositional effects resulting from lower-paid employees being more likely to exit employment. Our results capture as well the strong reduction in wage inequality levels observed in Germany in 2015 as a result of the introduction of the new German statutory minimum wage. The third output is a paper presenting an overview of household disposable income inequality trends from an EU-wide perspective over the period 2005-2015, therefore providing a wider context from which to interpret the evolution of wage inequalities, by incorporating the impact of compositional effects and employment turbulences into the picture. As it occurred with wages, the analysis shows that EU-wide income inequalities were notably reduced prior to the crisis mainly due to catch-up growth in eastern European countries, a process of convergence that was also largely interrupted by the crisis. EU-wide income inequality levels have increased slightly from 2008, largely as a result of a halt in this process of income convergence between European countries, which nevertheless is re-emerging in most recent years. On the other hand, even if the increase in EU-wide income inequality was very modest, the Great Recession pushed income inequalities significantly upwards among many European countries largely as a result of rising unemployment levels, although this impact has been significantly cushioned by the public benefits and transfers systems in place across European countries. The fourth output is an extensive report on which the third paper is based. It presents an overview of income inequality trends from an EU-wide perspective over the period 2005- 2013. It is a much wider study on inequalities, since many different income sources are covered jointly. Apart from what is presented in the third paper, this analysis shows that the impact of the Great Recession is better reflected by trends in income trends: real income levels suffered a downwards impact across most countries and the size of European middle classes has been generally squeezed. The fifth output is a paper discussing a policy tool that would have an effect in tackling wage (and income) disparities and low-pay work across European labour markets. It contributes to the growing debate on EU-level minimum wage coordination by considering the introduction of an hypothetical EU-wide policy that would set minimum wages at 60 percent of the median wage across European countries. The institutional impact of this policy would be larger in those countries where minimum wages are collectively agreed by social partners than in those countries where they are set by statutory regulation, but the analysis shows that this policy would affect a larger proportion of the workforce in the latter group of countries because they are typically characterised by a larger low-paid segment.