Conference Agenda

Introduction

Wages in Western Europe have diverged across occupations, contributing to rising wage inequality. Previous arguments based on the idea that wages decline in occupations being replaced by machines or offshored to low-wage countries do not fit the data. Instead, we propose autonomy, defined as the degree of control workers have over their work process, as a new predictor of wage dispersion across occupations.

Research questions

This study answers two research questions:

1. Do wages in occupations with higher autonomy grow faster?

2. How do technological change, institutions, and demographics impact the return to autonomy?

Methodology

Our study applies advanced micro econometric analysis to explore the connection between worker autonomy and job wage growth in Western Europe. We use high-quality individual-level wage data from the European Union Survey of Income and Living Conditions (EU SILC) for 15 Western European countries between 2003-2018, with jobs defined as occupation-industry cells.

Contribution to literature

This study advances our understanding of wage inequality in European by presenting the first cross-country analysis of the relationship between occupational autonomy and wage growth. We contribute to the literature on occupational wage divergence, which has previously focused on the automation or offshoring risk of occupations.

Our second contribution is to examine the determinants of wage dispersion between high- and low-autonomy occupations. Economic theory suggests that technological change and institutions influence the relationship between wages and autonomy. We use data on computer adoption and ICT capital as well as differences in labour market institutions across European countries to test whether the wage gap between high- and low-autonomy occupations is driven by technological change or the decline in collective bargaining institutions.

Findings

Our study shows that workers in high-autonomy jobs have experienced significantly faster wage growth than those in low-autonomy jobs, resulting in an increased "autonomy wage premium." We also find that faster computer adoption and investment in ICT technology lead to faster increases in this wage dispersion. Collective bargaining reduces the autonomy wage premium but has not prevented rising wage inequality in recent years. Lastly, the increase in the autonomy premium increases wage inequality between men and women and between younger and older workers. Since higher autonomy is usually associated with higher bargaining power, our study confirms that recent technological advances are not distributionally neutral and have disadvantaged low-autonomy workers.

This paper estimates explained and unexplained components of wage differentials between formal or informal employment in eight EU transition countries (Bulgaria, Czech Republic, Estonia, Hungary, Lithuania, Latvia, Poland, and Slovakia) utilizing the data of the EU Survey on Income and Living Conditions for the period of 2009-2016 among 445,931 individuals. We apply the Oaxaca and Blinder (1973) model with selection bias correction to decompose the wage gap at the mean of income into explained and unexplained parts. The results demonstrate that both males and females experience wage discrimination in informal employment. The hourly wage rate among individuals in informal employment is on average 23.7% lower than among individuals in formal employment. For males, this difference is 24.8%, and 23.9% for females. When the model is run without correcting for endogenous selection into informal employment, the ‘unexplained component’ that can be attributed to wage discrimination is estimated at 20% for males and 30% for females. When the model is corrected for employment status selection, the estimated wage discrimination reaches 34% for males and 44% for females.

Employer non-compliance with minimum wage laws is widespread in developed nations. This presents a challenge to state regulators seeking to enforce labour laws to benefit underpaid workers and compliant employers robbed of a level playing field. The large literature seeking to explain employer non-compliance with wage laws has rarely drawn on primary data from employers, instead relying mainly on the employee perspective. Related in part to this empirical limitation, extant research has tended to assume deliberate wage theft, focusing on the contribution of vulnerable, in particular migrant, workers. Despite the paucity of reliable insight into why employers breach minimum wage laws, countries like Australia have introduced new strategies for labour law enforcement including increased civil penalties and new criminal sanctions. This research addresses the empirical gap by examining the employer perspective of wage law compliance.

The key research questions are: Why do employers breach or comply with minimum wage laws; and what are the implications for the effectiveness of traditional and new strategies for labour law enforcement?

The main research method employed is qualitative analysis of in-depth interviews with 60 business owners and managers, and eight key informants. These employers operated businesses in the retail, hospitality and horticulture industries, in which employer non-compliance has been identified as common. The businesses examined ranged in size from one employee to thousands of employees, and operated in a variety of Australian city, suburban and regional locations.

The study found that, in addition to deliberate non-compliance, employers often lacked full knowledge of their breaches of minimum wage laws. They were either unknowingly or wilfully ignorant of their minimum wage obligations, of potential penalties for non-compliance, and of state enforcement. This research contributes to literature on why employers breach minimum wage laws through detailed analysis of these findings with particular attention to the novel employer perspective and non-deliberate forms of employer non-compliance. By providing greater insight into employer decision making and actions, this research also contributes to understanding of effectiveness of strategies for labour law enforcement.