Occupational Social Class and Earnings Inequality in Europe: A Comparative Assessment

Abstract

While there is renewed interest in earnings differentials between social classes, the contribution of social class to overall earnings inequality across countries and net of compositional effects remains largely uncharted territory. This paper uses data from the European Union Statistics on Income and Living Conditions to assess earnings differentials between social classes (as measured by ESeC) and the role of between-class inequality in overall earnings inequality across 30 European countries. We find that there is substantial variation in earnings differences between social classes across countries. Countries with higher levels of between-class inequality tend to display higher levels of overall earnings inequality, but this relationship is far from perfect. Even with highly aggregated class measures, between-class inequality accounts for a non-negligible share of total earnings inequality (between 15 and 25% in most countries). Controlling for observed between-class differences in composition shows that these account for much of the observed between-class earnings inequality, while in most countries between-class differences in returns to observed compositional variables do not play a major role. In all these respects we find considerable variation across countries, implying that both the size of between-class differences in earnings and the primary mechanisms that produce these class differences vary substantially between European countries.

Between-Class Earnings Inequality in 30 European Countries

“…For example, class cleavages in political attitudes have shown to be common but the strength of those cleavages differs across countries, which is sometimes explained by the level of income inequality or generosity of welfare arrangements in a society (Edlund and Lindh, 2015). However, as shown in Goedemé et al (2021a), while countries with higher levels of between-class inequality tend to have higher levels of overall earnings inequality, this relationship is far from perfect. Since class inequality is not the same as income inequality, economic inequality between social classes needs to be considered in its own right when we are seeking to understand class inequalities in other domains.…”

“…Empirically, trends over time in the relationship between social class and earnings have been studied for individual countries in Wodtke (2016); Wodtke (2017); Zhou and Wodtke (2019); Weeden et al (2007) for the US, Williams (2013); Williams (2017) for the UK, Bihagen et al (2010); Tåhlin (2007) for Sweden, and Albertini (2013) for Italy. Comparative studies are much less common, but see Le Grand and Tåhlin (2013); Albertini et al (2020), andGoedemé et al, 2021a. Limited interest in how between-class earnings differentials vary across countries is surprising since many of the reasons for being concerned with how those differentials are changing over time can also serve to motivate crosssectional comparative analysis. The primary motivation for us is to establish whether class structures earnings in a similar way across countries.…”

“…If widening gaps over time in earnings differentials between classes may be expected to strengthen class differentials in domains such as health, social mobility, life satisfaction, and political preferences and voting behaviour, then countries with wider earnings differentials would also be expected to display stronger class patterning in those domains: the implications of being in one class versus another will in all likelihood be stronger where earnings differentials between those classes are wider. Incorporating measures of country-level earnings inequality into the analysis, a common strategy, cannot be guaranteed to capture those differentials (Goedemé et al, 2021a). It is therefore important to investigate differences in earnings between classes across countries empirically.…”

“…The only comparative study we know focuses on how those differentials vary across countries is Le Grand and Tåhlin (2013) but they provide evidence on 11 countries using limited data. In another comparative study, we investigate the relation between overall earnings inequality and overall between-class inequality in earnings (Goedemé et al, 2021a). However, we did not look into specific class differences in earnings, and how these arise.…”

Perceptions of Pay Satisfaction and Pay Justice: Two Sides of the Same Coin?

“…This approach explicitly avoids overcontrol biases introduced by the inclusion of mechanism variables (mediators) und hence does not strive to maximize the explained variance of the model (Huntington-Klein, 2022; Morgan & Winship, 2015). Crucial control variables that have distinct influences on current pay (and hence on workplace pay inequality) as well as on both perceptions of pay are gender (Auspurg et al, 2017;Valet, 2018), age (Schneider, 2016), education (Bjälkebring & Peters, 2021), working hours (Adriaans & Targa, 2022), EGP-class (Goedemé et al, 2022) and size of the company (Roscigno et al, 2018). Table 1 shows the mean, standard deviation, minimum, and maximum for all variables.…”