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Launch firms and wage inequality

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Launch firms and wage inequality

  1. 1. THE ROLE OF FIRMS IN WAGE INEQUALITY: POLICY LESSONS FROM A LARGE- SCALE STUDY Laurence Boone OECD Chief Economist Launch, 9 December 2021
  2. 2. Productivity gaps between firms are widening Source: OECD calculations based on the OECD Orbis productivity database, following Andrews, Criscuolo and Gal (2016) Source: OECD calculations based Schwellnus, Pak and Pionnier (2018) -0.1 0 0.1 0.2 0.3 0.4 0.5 0.6 2001 2003 2005 2007 2009 2011 2013 2015 2017 Labour Productivity Frontier firms - top 5% Non-frontier firms 0 0.05 0.1 0.15 0.2 2001 2003 2005 2007 2009 2011 2013 2015 Real wages 90th percentile of workers 10th percentile of workers
  3. 3. 3 Market concentration is on the rise Share of sales of 8 largest groups by intangible investment intensity Source: Bajgar, Criscuolo and Timmis “Intangibles and Concentration: Supersize me”, (2021) 0 0.01 0.02 0.03 0.04 0.05 0.06 0.07 0.08 2002 2004 2006 2008 2010 2012 2014 Change since initial year Less intensive More intensive
  4. 4. 4 Why do widening productivity gaps matter for wage inequality? Globalisation Worker-centred Race between education and technology Wages are determined exclusively by worker skills Large wage differences between similarly-skilled workers in different firms Firm-centred Firms have some wage-setting power Wages also depend on firm characteristics
  5. 5. • Mobilises linked employer-employee data for 20 OECD countries with harmonised data treatment and methodology • Documents key stylised facts about the role of firm pay policies in wage inequality and the influence of structural and public policy factors • Draws broad policy conclusions from the empirical evidence to strengthen broadly shared productivity growth 5 Contribution
  6. 6. DATA
  7. 7. 7 LinkEED data • Linked employer-employee microdata from 20 OECD countries, often on the universe of workers and firms • Harmonised data treatment and methodology enable cross-country comparisons • Cross-country analysis made possible by a network of 19 external collaborators with direct microdata access
  8. 8. MAIN FINDINGS
  9. 9. 9 Finding #1: Firm pay practices account for about one-third of overall wage inequality Globalisation
  10. 10. 10 Finding #2: High productivity dispersion contributes to high wage dispersion Globalisation
  11. 11. 11 Finding #3: Barriers to job mobility widen firm wage gaps Globalisation
  12. 12. POLICY IMPLICATIONS
  13. 13. 13 A new perspective on policies to address wage inequality Globalisation Traditional policy approach Wage-setting institutions (mínimum wages, collective bargaining) Skills policies (education, adult learning) Complement This report Catch-up of lagging firms Integrate labour market considerations into competition policy Reduce barriers to job mobility, especially for low-skilled
  14. 14. 14 Thank you! Contacts Chiara Criscuolo (Chiara.criscuolo@oecd.org, STI) Alexander Hijzen (Alexander.hijzen@oecd.org, ELS) Cyrille Schwellnus (Cyrille.schwellnus@oecd.org, ECO) OECD team Antton Haramboure Michael Koelle Nathalie Scholl Wouter Zwysen (now ETUI) LinkEED network Wen-Hao Chen (Canada) Valerie Lankester, Catalina Sandoval, Jonathan Garita (Costa Rica) Antoine Bertheau (Denmark) Satu Nurmi (Finland) Duncan Roth, Alfred Garloff (Germany) Balazs Murakozy (Hungary) Ryo Kambayashi (Japan) Katarzyna Grabska-Romagosa (Netherlands) Richard Fabling (New Zealand) Erling Barth (Norway) Priscilla Fialho (Portugal) Vladimir Peciar (Slovak Republic) Andrei Gorshkov, Oskar Nordstrom Skans (Sweden) Richard Upward (United Kingdom) Kevin Rinz (United States)

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