Between-Group and Within-Group Components of Wage Inequality in Russia: an Empirical Analysis

This paper analyzes the structure of wage inequality in Russia through the relationship between its between-group and within-group components. Aggregate measures of pay differentiation do not reveal what share of inequality stems from observable differences across socio-demographic, occupational, sectoral, and territorial groups of workers, and what share persists within these groups. Education and work experience likewise account for only part of the differences between earnings among workers. The remaining within-group differentiation may reflect both unobserved individual heterogeneity and the specificity of particular jobs, firms, and local labor markets. The main analytical tool employed is Theil index decomposition, which has the property of additive decomposability into between-group and within-group components. The empirical analysis draws on data from the Federal State Statistics Service (Rosstat) and several waves of the Russia Longitudinal Monitoring Survey–HSE (RLMS-HSE). Eight factors associated with wage inequality were examined. A nested decomposition was also performed for combinations of these factors. The results show that, across the periods studied, differences in average wages between settlement types, industries, and occupational groups consistently form the main structure of between-group inequality, while the contributions of the other factors in 2024 were considerably smaller or even minimal. Nevertheless, in our data, these three leading factors jointly account for only about half of overall wage inequality. A substantial share therefore remains within relatively detailed groups of workers and cannot be attributed solely to differences between regions, industries, and occupations.