Lohnspreizung und Effizienz
Wage Dispersion and Efficiency. It is often assumed that markets generate efficient allocations, but these are not necessarily fair. The widening of wage differentials that is currently observed is interpreted in this manner: Skill-biased technological progress increases demand for skilled work and makes unskilled labor redundant. Increasing wage dispersion is seen as a market response to an increased scarcity of skilled workers. While wage differentials are widening, we observe at the same time increasing over-qualification in all segments of the labor market. This suggests an increasing abundance of skilled workers, rather than shortage. This paper suggest an explanation for the joint occurrence of wage dispersion and over-qualification. Wage dispersion is brought about by the wage-setting policies of firms that respond to an increased importance of skill differences among workers. The widening wage differentials render the acquisition of skills more rewarding. As a result, wage dispersion and over-qualification increase together. Both are inefficient. Policies that bring wage differentials closer to compensating differentials will increase both efficiency and fairness, quite in line with the classical position taken by Adam Smith on these issues.
|Date of creation:||14 Feb 2008|
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- Clemens Fuest & Bernd Huber, 1998.
"Efficiency wages, employment, and the marginal income-tax rate: A note,"
Journal of Economics,
Springer, vol. 68(1), pages 79-84, February.
- Fuest, Clemens & Huber, Bernd, 1998. "Efficiency wages, employment, and the marginal income-tax rate: A note," Munich Reprints in Economics 20301, University of Munich, Department of Economics.
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- Gerlach, Knut & Stephan, Gesine, 2005. "Wage distributions by wage-setting regime," IAB Discussion Paper 200509, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
- Schlicht, Ekkehart, 1981. "Training Costs and Wage Differentials in the Theory of Job Competition," Munich Reprints in Economics 1347, University of Munich, Department of Economics.
- Freeman, Richard B., 1998. "War of the models: Which labour market institutions for the 21st century?1," Labour Economics, Elsevier, vol. 5(1), pages 1-24, March.
- Paul J. Devereux, 2004. "Cyclical Quality Adjustment in the Labor Market," Southern Economic Journal, Southern Economic Association, vol. 70(3), pages 600-615, January.
- Michael Hoel, 1990. "Efficiency wages and income taxes," Journal of Economics, Springer, vol. 51(1), pages 89-99, February.
- Alexandra Spitz-Oener, 2006. "Technical Change, Job Tasks, and Rising Educational Demands: Looking outside the Wage Structure," Journal of Labor Economics, University of Chicago Press, vol. 24(2), pages 235-270, April. Full references (including those not matched with items on IDEAS)
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