Winners and Losers in Transition: Returns to Education, Experience, and Gender in Slovenia

The authors identify winners and losers in Slovenia's economic transition by tracing changes in returns to education, experience, and gender and changes in wage inequality from 1987 to 1991. They find the following. Relative wages and employment rose for the most educated and fell for the least educated, in all industries. Relative wages and employment rose with years of work experience until pensionable age. At pensionable age, relative wages increased very rapidly and relative employment was greatly reduced. Using pension policies to encourage early retirement drastically reduced the supply of very experienced workers. Either the policy caused firms to bid up wages for workers of pensionable age to keep them from retiring, or it caused a selection process in which only the highest-paid workers remained in the workforce. Regardless, the pension policy has proved to be costly, and early retirements did not make room forthe youngest workers but for those just under pensionable age. Women gained relative to men in both wages and employment primarily because they occupy education and industry groups less adversely affected by the transition, not because of economywide reductions in discrimination against women. Increasing returns to education and experience contributed to wage inequality, but the variance in wages also increased for individuals with identical skills. Big changes in relative wages should signal future reallocation of labor toward more productive, higher-paying sectors. Setting minimum wages, fixing ranges of pay, and indexing wages to inflation did not prevent increases in wage variation from occuring. Wage minimums did not appear to have an effect, presumably because inflation reduced real minimum wages so quickly that most workers were paid above the minimums. In Slovenia, policy changes are reflected in labor market outcomes. Disabling the tax-transfer policy from relatively profitable to relatively unprofitable firms and eliminating worker referendu(This abstract was borrowed from another version of this item.)