Norms of Inequality
Austen, Siobhan, Journal of Economic Issues
Norms of inequality have been the subject of renewed attention in recent years as explanations have been sought for the trend toward increased wage dispersion in many industrialized countries [see Atkinson 1997; Fortin and Lemieux 1997; Borland and Wilkins 1996]. One possibility is that community attitudes regarding the legitimacy of large wage differentials within the workplace have shifted and that these changes have contributed to the growth in earnings inequality [Atkinson 1997, 311]. Another possibility is that the experience of high levels of wage dispersion has weakened the community's adherence to existing norms of inequality, and that a wider range of wage payments is tolerable now [Atkinson 1997, 311].
The persistence of significant differences in wage dispersion across countries has also stimulated interest in community attitudes to inequality. Most industrialized countries have experienced an increase in demand for skilled labor and a reduction in demand for unskilled labor in recent decades. Yet these "market-based" pressures on the wage structure have not translated into similar changes in wage inequality around the globe. Some countries, such as the United Kingdom, have experienced rapid increases in wage inequality, while other countries, notably West Germany, Italy, and France, appear to have avoided this development [Atkinson 1997, 301]. International differences in social norms relating to wage inequality may help explain these patterns as well.
This paper focuses on a number of issues relating to norms of inequality with reference to data from six countries (the United States, West Germany, Great Britain, Hungary, Poland, and Australia). It examines the level of consensus in these communities on the legitimacy of pay inequality and the proper degree of inequality. The paper also provides an analysis of factors that influence attitudes to inequality and of the nature and importance of international differences in attitudes. It also examines the changes in attitudes to inequality that occurred between 1987 and 1992.
Data and Measurement
The results of the Inequality Modules of the 1987 and 1992 International Social Science Survey Program (ISSP)(1) are utilized throughout this paper. These results focus on attitudes to pay inequality across occupations, rather than, for example, across gender or racial groups.
The key data from the ISSP that are utilized in this paper are from a set of questions that asked the survey respondents to nominate a legitimate annual income for a number of occupations (unskilled factory work, farm work, shop assistant, skilled work, small-shop owner, doctor, chairman, factory owner, judge, solicitor, and cabinet minister). The respondents were asked: "What do you think people in job X ought to be paid - how much do you think they should earn each year before taxes, regardless of what they actually earn?"(2)
Because these occupations span a range of jobs in terms of skill, level of responsibility, and status, these data provide an insight into community attitudes on occupational pay differentials. Attitudes to inequality can also be gauged from this data through a comparison of two scales that measure the legitimate pay for the low- and high-status jobs in the survey. The "low-status" scale represents the average legitimate rate of pay for unskilled factory work, farm work, shop assistant duties, and skilled factory work. The "high-status" scale represents the average legitimate pay for the occupations of doctor, solicitor, factory owner, judge, cabinet minister, and chairman.(3)
Consensus on the Legitimacy of Differences in Pay
The data in Table 1 provide a comparison of the legitimate rates of pay for the high- and low-status occupations. The figures in the table show that there is broad agreement on the legitimacy of pay inequality. Virtually no one in the six countries would award the low-status occupations equal or higher pay than the high-status occupations. …