Capitalist economies and wage inequality

This article presents new stylized facts on the incidence of low pay and mobility out of low pay for 13 European countries and the USA. Women, the young, the less skilled, and part-timers are generally most at risk, as are those who work in retail, hotels, catering, and personal services. However, the relative importance of these characteristics can vary from country to country. The incidence of low pay varies considerably across countries, as does its trend. No direct link is found to aggregate employment or to the employment rate of the less skilled. Nor does the industrial structure of employment have much effect. However, differences between the low-wage production of goods and of services are important. ‘Inclusive’ labour relations are central in containing the incidence of low-pay. By inclusiveness is meant the existence of mechanisms, formal or informal, to extend terms and conditions negotiated by workers with strong bargaining power to workers with less bargaining power. In some countries a national minimum wage is an essential accompaniment. The article considers the extent to which countries can maintain the more benign institutions that limit low pay.