Skills and wage inequality across labour markets
by Dirk Van Damme Head of the Innovation and Measuring Progress division, Directorate for Education and Skills Mean monthly earnings in USD (using Purchasing Power Parities) of individuals, by literacy proficiency level, gender, age and educational attainment (2012) In a completely open labour market, earnings from employment would compensate individuals for their contribution to the organisation’s economic success. The price put on one’s labour also depends on the abundance or scarcity of the individual’s specific set of skills in the market. But economic price-setting mechanisms do not operate in a vacuum, and are heavily influenced by political and institutional factors that, in themselves, are often the outcome of long histories of social conflict and compromise. Governments tend to regulate minimum wages and other framework conditions, while sectoral collective labour agreements set rules for salary increases by seniority or educational qualifications. Such arrangements serve ...