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.

Keywords: administrative data; earnings; inequality; institutions; workplaces.