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Do affluent countries face an income-jobs tradeoff?

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  • Kenworthy, Lane

Abstract

A commonly-held view suggests that affluent nations face a tradeoff between incomes and jobs. According to this view, in the United States pay for workers at the bottom of the earnings distribution (relative to those in the middle) is very low and government unemployment-related benefits (the replacement rate) are stingy, but this facilitates the creation of lots of new jobs and encourages such individuals to take those jobs. The result is a high rate of employment and low unemployment. In much of Western Europe relative pay levels are higher for those at the bottom and benefits are more generous, but this is said to discourage job creation and to reduce the willingness of the unemployed to accept low-wage jobs. The consequence is low employment and high unemployment. I undertake a comparative assessment of this tradeoff view, based on pooled cross-section time-series analyses of 14 OECD countries in the 1980s and 1990s. The findings suggest that greater pay equality and a higher replacement rate do reduce employment growth in low-productivity private-sector service industries and in the economy as a whole. However, these effects are relatively weak. The results point to a variety of viable options for countries wishing to maintain or move toward a desirable combination of jobs and equality. -- Eine weit verbreitete Ansicht ist, dass in Industrienationen ein Zielkonflikt zwischen Einkommen und Beschäftigung besteht. Demzufolge sind die Löhne in den USA am unteren Ende der Einkommensverteilung im Vergleich zu den mittleren Einkommen sehr niedrig und gesetzliche Arbeitslosenbezüge ausgesprochen gering bemessen. Dies aber stimuliert sowohl die Schaffung neuer Arbeitsplätze als auch die Bereitschaft der Erwerbstätigen, sich mit niedrigen Einkommen zufrieden zu geben. Das Resultat ist eine hohe Beschäftigungs- und eine niedrige Arbeitslosenquote. In vielen westeuropäischen Ländern ist das Niveau der Niedrigeinkommen höher und sind Arbeitslosenbezüge großzügiger. Dies aber hemmt, nach Ansicht vieler, die Entstehung neuer Arbeitsplätze und die Bereitschaft von Arbeitslosen, niedrig bezahlte Arbeit anzunehmen. Das vorliegende Discussion Paper ist eine vergleichende Untersuchung dieser Zielkonflikt-Ansicht auf der Basis von kombinierten Querschnitts-/Zeitreihenanalysen in 14 OECD-Ländern in den 1980er- und 1990er-Jahren. Die Ergebnisse lassen den Schluss zu, dass eine gerechtere Einkommensverteilung und eine höhere Arbeitslosenvergütung ein geringes Beschäftigungswachstum zur Folge haben, sowohl in Bereichen der Wirtschaft mit geringem Produktivitätsausstoß (Dienstleistungssektor) als auch gesamtwirtschaftlich. Gleichwohl sind die Auswirkungen relativ geringfügig. Die Ergebnisse deuten überdies darauf hin, dass es eine Vielzahl von Lösungsmöglichkeiten zur Herstellung beziehungsweise Erhaltung eines ausgewogenen Verhältnisses von Beschäftigung und gerechter Einkommensverteilung gibt.

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Bibliographic Info

Paper provided by Max Planck Institute for the Study of Societies in its series MPIfG Discussion Paper with number 01/10.

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Date of creation: 2002
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Handle: RePEc:zbw:mpifgd:0110

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  1. Claudio Lucifora, 1999. "Wage Inequalities and Low Pay: The Role of Labour Market Institutions," Working Papers 1999.13, Fondazione Eni Enrico Mattei.
  2. Andrew Glyn & Wiemer Salverda, 1999. "Employment Inequalities," Economics Working Paper Archive wp_293, Levy Economics Institute.
  3. David R. Howell, 2002. "Increasing Earnings Inequality and Unemployment in Developed Countries: Markets, Institutions and the "Unified Theory"," SCEPA working paper series. SCEPA's main areas of research are macroeconomic policy, inequality and poverty, and globalization. 2002-01, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
  4. David Neumark & William L. Wascher, 2008. "Minimum Wages," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262141027, December.
  5. Nickell, Stephen & Bell, Brian, 1996. "Changes in the Distribution of Wages and Unemployment in OECD Countries," American Economic Review, American Economic Association, vol. 86(2), pages 302-08, May.
  6. Bazen, Stephen, 2000. "The Impact of the Regulation of Low Wages on Inequality and Labour-Market Adjustment: A Comparative Analysis," Oxford Review of Economic Policy, Oxford University Press, vol. 16(1), pages 57-69, Spring.
  7. Richard B. Freeman & Ronald Schettkat, 2000. "Low Wage Services: Interpreting the US - German Difference," NBER Working Papers 7611, National Bureau of Economic Research, Inc.
  8. Adsera, A. & Boix, C., 1998. "Must We Choose? European Unemployment, American Inequality and the Impact of Education and Labour Market Institutions," UFAE and IAE Working Papers 414.98, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
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Cited by:
  1. Caroline Dewilde, 2008. "Individual and institutional determinants of multidimensional poverty: A European comparison," Social Indicators Research, Springer, vol. 86(2), pages 233-256, April.
  2. Oesch, Daniel, 2009. "Explaining high unemployment among low-skilled workers: Evidence from 21 European and Anglo-Saxon countries, 1991-2006," MPRA Paper 21041, University Library of Munich, Germany.
  3. Destefanis, Sergio & Mastromatteo, Giuseppe, 2010. "Wage Inequality and Labour-market Performance. A Role for Corporate Social Responsibility - Disuguaglianza salariale e performance del mercato del lavoro," Economia Internazionale / International Economics, Camera di Commercio di Genova, vol. 63(1), pages 91-120.
  4. Oesch, Daniel & Rodriguez Menes, Jorge, 2010. "Upgrading or polarization? Occupational change in Britain, Germany, Spain and Switzerland, 1990-2008," MPRA Paper 21040, University Library of Munich, Germany.
  5. Ganghof, Steffen, 2001. "Global markets, national tax systems, and domestic politics: Rebalancing efficiency and equity in open states' income taxation," MPIfG Discussion Paper 01/9, Max Planck Institute for the Study of Societies.

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