Project 5

Occupations, organizations, and wage inequality

Aim

To study how occupations and organizations affect the wages of workers and aggregate wage inequality in the Netherlands, Germany, Norway, and the United States.

Theoretical background

Sociologists have long argued that occupations are the central unit of stratification in labor markets and “the backbone” of the social inequality system. Several studies have found that the rapid growth in wage inequality that has been observed in most Western countries is largely explained by some occupations increasingly getting higher wages, while the wage returns to other occupations decrease or remain stable. While occupations are important in the wage-setting process, only relatively recently studies have aimed to identify why some occupations pay more than others. On the one hand, economists argue that wage differentials between occupations are fully explained by the complexity of tasks that workers perform (Autor, 2013). From this perspective, the wage difference between airplane pilots and cleaners is explained by the more demanding tasks that pilots have to perform. Sociologists, on the other hand, have focused on occupational closure: barriers that restrict access to occupations (Weeden, 2002). Occupational licenses are, for example, a form of closure, as some occupations by law require a license to work in that occupations (e.g., a pilot), while others do not (e.g., a cleaner). The central argument is that occupational closure creates economic rents: whenever there is a monopoly on occupational tasks, returns to those tasks will be higher than they would have been in a fully competitive market.

The first goal of this project is to investigate the role of occupations in the wage setting process, and explore the different mechanisms that might drive occupational wage differences. The second goal is to add the organizational dimension to the study of wage inequality. Recent studies have argued that wages are set within organizations, so in order to understand why some earn more than others, we need to take the organizational context into account (Avent-Holt & Tomaskovic-Devey, 2014). Organizations can both affect wage inequality because there are wage differences between organizations (average pay is higher in some organizations than in others), but also within organizations (wage differences within an organization). Research for example shows that a small group of workers obtains an increasing proportion of the organization’s profit. Until now organizations and occupations have been studied in isolation. This PhD project will combine both occupational and organizational perspectives, for example by studying the relative importance of occupations and organizations for wage inequality, or what occupations obtain the highest profits in organizations.

Research design

This project will use quantitative methods to investigate how occupations and organizations affect wage outcomes and structure wage inequality. Repeated cross-sectional data (the Netherlands, Germany, US), panel data (Germany, US) and register data (the Netherlands, Norway) will be analyzed using different multivariate techniques. In most studies occupation-level data (e.g., does the occupation require a license?) and organization-level data (e.g., public or private sector organization) will be combined with individual level data.

Literature
  • Autor, D. H. (2013). The “task approach” to labor markets: an overview. Journal for Labour Market Research, 46(3), 185–199.
  • Avent-Holt, D., & Tomaskovic-Devey, D. (2014). A Relational Theory of Earnings Inequality. American Behavioral Scientist, 58(3), 379–399.
  • Weeden, K. A. (2002). Why Do Some Occupations Pay More than Others? Social Closure and Earnings Inequality in the United States. American Journal of Sociology, 108(1), 55–101.
Project initiators

Thijs Bol (UvA)

Location

University of Amsterdam

Note: There will be maximally two of the three UvA projects funded.