The role of social conventions on wage inequality: the Brazilian trajectory and the missed “Great Leveling”

This paper discusses the role of social conventions in the dynamics of wage inequality. More specifically, it argues that (a) the reconstruction of social conventions of equity helps to explain the “Great Leveling” of wage inequality (and its maintenance) in developed countries during the twentieth century and (b) the absence of this reconstruction can be associated with the relative inflexibility of Brazilian (and Latin American) inequality since the nineteenth century. This preliminary investigation is based on available estimates on national trajectories of wage inequality, as well as on analysis of changes in social conventions, especially regarding the wage structure. The first part explores the trajectory of labor income inequality in developed countries. It highlights the “Great Leveling” of the twentieth century. The second part investigates Latin American inequality in the long term, considering the absence of this leveling. The third part analyzes the nature of the great transformation promoted by the twentieth century. Based on studies that revisited or witnessed this transformation, we argue that it concerns not only the compression of capital and its income, but also the reconstruction of the wage structure through new social conventions. The main conclusion is that, among the explanations for the high and persistent Brazilian inequality, the absence of this reconstruction—which made developed countries less unequal during the last century—should be emphasized.