Academic journal article Nordic Journal of Working Life Studies

Wage Inequality within and between Occupations

Academic journal article Nordic Journal of Working Life Studies

Wage Inequality within and between Occupations

Article excerpt


Most western countries have witnessed increasing inequality in wage income and wealth in recent decades (Piketty, 2014; Stiglitz, 2012). This trend holds true even in Scandinavian countries, such as Norway, albeit from comparably low inequality levels (Cholezas & Tsakloglou, 2009; Markussen & Røed, 2016; Mastekaasa, 2011;). Here, we study the role of occupations in this development. Occupations are often seen as the backbone of the class structure (e.g., Goldthorpe, 1987, p. 29) and are central to most studies on social inequality and social stratification (e.g., Weeden & Grusky, 2005), to operationalizations of social class (e.g., Erikson & Goldthorpe, 1993; Oesch, 2006; Wright, 1997), and to scales of socioeconomic status (e.g., Prandy, 1990). If occupations are this crucial to life chances and social inequalities, they probably have played some role in the development toward increasing wage differences. Researchers have established that the rise in wage inequality in the United States (US) (Mouw & Kalleberg, 2010) and United Kingdom (UK) (Williams, 2013) is found primarily between occupations, with slower growth of within-occupation wage inequality (Mouw & Kalleberg, 2010).

Rising wage inequality has numerous explanations. Stiglitz (2012) highlights rent-seeking activities as an important explanation for the rising wage gap. While there are different ways by which rents are accrued, an important mechanism is via creating a monopoly on a service or product (Weeden & Grusky, 2014). Occupational licenses are one example on how to create a monopoly on occupational tasks (Stiglitz, 2012, p. 54).1 This article examines how three institutions of occupational closure affect wage inequality in Norway. More specifically, we investigate how occupational licensure, credentialization, and unionization correlate with the (growing) earnings differences between and within occupations and in different parts of the income distribution. Our hypothesis is that closure institutions increase the average wage levels in occupations and equalize the distribution of residual inequality within occupations.

The current article complements previous research in two ways. First, it provides evidence on the trends in between- and within-occupation wage inequality in Norway, where this decomposition has not previously been performed. Both the US and UK are liberal market economies, whereas Norway has a coordinated market economy with lower overall inequality levels and a centralized bargaining system.

Second, we examine the role of licensure, credentialization, and union density for between- and within-occupation wage inequality. Research on occupational closure documents higher average wage levels from licensure and union density in the US (Humphris et al., 2010; Kleiner & Krueger, 2010; Weeden, 2002), the UK (Bol & Weeden, 2015; Humphris et al., 2010), Germany (Bol & Weeden, 2015), and Norway (Bol & Drange, 2016). The effects of these institutions on (changes in) aggregate wage inequality, however, remain unexplored.

We analyze public administrative register data on the working population from 2003 to 2012 to investigate the role of occupational closure in the development of overall wage inequality and in different parts of the wage distribution. Most research on occupational closure uses cross-sectional data, although wage setting is a dynamic process with power relations that likely shift over time with economic conditions. Longitudinal data reveal whether these institutions have an active or passive role in wage development: do these institutions simply maintain higher average wage levels, or do they generate continuously accumulating wage benefits?

The Norwegian context

The Norwegian labor market, similar to other Nordic countries' labor markets, is characterized by strong peak organizations and centrally coordinated collective-bargaining systems. Employment rates are comparably high, and union density is high. …

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