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Wiemer Salverda

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Wiemer Salverda

This chapter provides the context of the low-paid labour market to the analysis of in-work poverty. It discusses data and stylized facts of international comparison and evolution of low-wage employment. It points out that low pay is not at all identical with in-work poverty. The chapter singles out relevant strands of low-wage analysis: the ‘low-pay-no-pay’ cycle and state dependency of being low paid, and summarizes relevant elements grouped into the role of individual and job characteristics and individual transitions into and out of low pay, and broader theoretical explanations which distinguish between supply and demand without restraints on the one hand, and embedded in institutions on the other hand. It elaborates on the role of households in relation to the earnings distribution and advises broadening the scope of in-work poverty analysis to households which are not poor. Individual wage inequality provides only half the story of income inequality, as after the demise of the single-earner world a large majority of employees are now members of households with two or more earners. This affects the nature of the competition for jobs, including particularly for jobs at the lower end of the labour market. The thrust of the argument is that low-wage employment is not a matter of a stand-alone distribution of earnings in the labour market, but that it is rooted deeply in rapidly changing household labour supply behaviour.

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Wiemer Salverda

From the early 1990s, the Italian industrial relations system came to be described as an example of the ‘neo-corporatist revival’. ‘Negotiated flexibility’, implemented with the participation of the social partners, resulted in an increasingly polarised labour market, with a surge in precarious jobs concentrated mostly among the younger generations, and no lasting effects on employment. Since the crisis, labour legislation has turned from negotiated to unilateral. In the name of urgency, national governments have increasingly resorted to legislation by decree, sidestepping the social partners and national parliament to pass reforms in the fields of labour, welfare and industrial relations. The interaction of these reforms with austerity policies has eroded labour rights while weakening the labour unions, magnified the dualism marking the labour market and opened the way to greater precariousness, inequality and poverty. The case of Italy demonstrates that no degree of labour flexibility can amount to adequate response to the crisis, and that the multiple challenges raised by technological, organisational and social changes call for coordinated responses in the production, employment and social spheres.

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Wiemer Salverda

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Wiemer Salverda

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Wiemer Salverda

The Dutch polder model has practised secular moderation of bargained wages – 25 years’ standstill of purchasing power. Regulatory capture let the minimum wage lag behind and lowered the lowest wage scales, increasing wage inequality. This combined with strong employment growth – mostly in part-time jobs, often low paid and insecure. The household employment rate remained stagnant as single-earner and dual-earner households traded places. The frequent association of higher with lower earnings within dual-earner households mitigated the effects of wage inequality on household income inequality for the persons involved, but also increased inequality as it lifted many of these households higher up the distribution vis-à-vis other households. More than half of all actual aggregate wage growth has accrued to the top decile of the income distribution. Dual-earner world households’ joint access to jobs and working hours adds an essential dimension to income inequality that the polder model has missed.

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Wiemer Salverda

Inequality's rise and impacts deservedly receive much attention in scientific and public debates, with most of the attention being paid to the very top of the income or wealth distribution. This contribution complements this with a study of the broader top – the top 10 per cent – where labour-market outcomes play a predominant role. However, the analysis still needs to come to terms with the death of the single-breadwinner model and its replacement with two or more earners in the household. At the same time this brings in the (household distribution of) hours of work as an important new dimension of inequality, in addition to the traditional wage levels. It will be shown, using data for 26 EU countries, that these changes complicate the linkages of wage inequality and income inequality and add to the importance of employee earnings for income inequality. For this analysis, aggregate inequality measures will be put aside in favour of a more detailed consideration across the distributions of earnings and incomes. Some implications for analysis and policy are discussed in the conclusion.