Press release - Is job polarisation accompanied by wage polarisation?
The labour market is changing, partly as a result of the globalisation of economies and technological progress. Economic crises are accelerating the consequences of these changes. Industry, which traditionally provided a large number of medium-skilled jobs, has been particularly affected and its workforce has shrunk in the advanced economies, which are increasingly becoming service-based.
If jobs are classified by occupation it appears that the proportions of highly skilled (best paid) occupations and low-skilled occupations (the lowest paid) have increased over the years, while the share of medium-skilled jobs has declined. The labour market is thus becoming polarised between low-skilled (“lousy jobs”) and highly skilled (“lovely jobs”), at the expense of medium-skilled jobs. 'Middle-class' jobs are tending to disappear.
While this phenomenon is well-documented by American data, our contribution shows that it applies equally to Belgium, and to most other European countries. Over the past fifteen years, job polarisation in Belgium has been relatively limited in comparison with other advanced economies, with medium-skilled jobs declining primarily in favour of highly skilled jobs.
Wage differentiation is low in Belgium. According to the OECD data, the ratio between the ninth and first deciles was 2.4 in 2015. Only Italy and Sweden have an even lower wage dispersion. In addition, wage inequality in Belgium has tended to diminish over the past decade, in contrast to what is seen in the United States, the Netherlands, Denmark and France.
Are wages in Belgium polarising too? Is there a widening pay gap in favour of the most highly skilled, and wage decline or stagnation in the case of intermediate jobs? Has the pay gap between low-skilled and medium-skilled employees narrowed over the past decade? The article describes the situation in Belgium in the European context.
According to the structure of Earnings Survey (SES), real wages declined slightly in Belgium between 2004 and 2014. The fall was most marked in the case of the lowest skilled jobs, but was also apparent for the highly skilled and to a lesser extent for the medium skilled.
The average pay gap for the years 2004 and 2014 was broken down according to the Oaxaca-Blinder technique to disentangle the effect of the change in employee characteristics from the other factors over the period. The breakdown shows that these composition effects have had a positive impact on wage growth. As in reality, real wages have fallen slightly, this means that other factors have counteracted these composition effects. If we perform this same type of decomposition for the quantiles, we obtain a similar result.
As regards economic policy recommendations, the polarisation (confirmed at least where jobs are concerned) raises the question of worker mobility and reallocation. Labour market policies must make it as smooth as possible for employees in medium skilled jobs to retrain in other sectors of activity or other labour market segments. Vocational training certainly has a role to play in assisting this transformation of the labour market.