Do affluent countries face an income-jobs tradeoff?
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.
|Date of creation:||2002|
|Contact details of provider:|| Postal: Paulstr. 3, 50676 Köln|
Phone: + 49 (0) 221-2767-0
Web page: http://www.mpifg.de/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Adsera, Alicia & Boix, Carles, 2000.
"Must we choose? European unemployment, American inequality, and the impact of education and labor market institutions,"
European Journal of Political Economy,
Elsevier, vol. 16(4), pages 611-638, November.
- 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).
- 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.
- David Neumark & William L. Wascher, 2008. "Minimum Wages," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262141027, July.
- 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 302-308, May.
- Andrew Glyn & Wiemer Salverda, 1999. "Employment Inequalities," Economics Working Paper Archive wp_293, Levy Economics Institute.
- 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.
- Richard B. Freeman & Ronald Schettkat, 2000. "Low Wage Services: Interpreting the US - German Difference," NBER Working Papers 7611, National Bureau of Economic Research, Inc.
- Claudio Lucifora, 1999. "Wage Inequalities and Low Pay: The Role of Labour Market Institutions," Working Papers 1999.13, Fondazione Eni Enrico Mattei. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:zbw:mpifgd:0110. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics)
If references are entirely missing, you can add them using this form.