Italian male wage inequality has increased at a relatively fast pace from the mid-1980s until the early 2000s, while it has been persistently flat since then. We analyse this trend, focusing on the period of most rapid growth in pay dispersion. By accounting for worker and firm fixed effects, it is shown that workers' heterogeneity has been a major determinant of increased wage inequalities, while variability in firm wage policies has declined over time. We also show that the growth in pay dispersion has entirely occurred between livelli di inquadramento, that is, job titles defined by national industry-wide collective bargaining institutions, for which specific minimum wages apply. We conclude that the underlying market forces determining wage inequality have been largely channelled into the tight tracks set by the centralized system of industrial relations.
In this paper we study the evolution of the Italian wage inequality, and of its determinants, using two decades of matched employer-employee data covering the entire population of private-sector workers and firms in the Veneto region. We find that wage inequality has increased since the mid-1980s at a relatively fast pace, and we decompose this trend by means of wage regression models that account for both worker and firm fixed effects. We show that the observed and unobserved heterogeneity of the workforce has been a major determinant of the overall wage dispersion and of its evolution. Instead, we find that the importance of the dispersion in firm-specific wage policies has declined over time. Finally, we show that the growth in wage dispersion has almost entirely occurred between job titles (livelli di inquadramento) for which a set of minimum wages is bargained at the nation-wide sectoral level. We conclude that, even in the presence of the underlying market forces, trends in wage inequality have been channelled through the rules set by the country's fairly centralized system of industrial relations.
When wage contracts are relatively short-lived, rent sharing may reduce the incentives for investment since some of the returns to sunk capital are captured by workers. In this paper we use a matched worker-firm data set from the Veneto region of Italy that combines Social Security earnings records for employees with detailed financial information for employers to measure the degree of rent sharing and test for holdup. We estimate wage models with job match effects, allowing us to control for any permanent differences in productivity across workers, firms, and job matches. We also compare OLS and instrumental variables specifications that use sales of firms in other regions of the country to instrument value-added per worker. We find strong evidence of rent-sharing, with a "Lester range" of variation in wages between profitable and unprofitable firms of around 10%. On the other hand we find little evidence that bargaining lowers the return to investment. Instead, firm-level bargaining in Veneto appears to split the rents after deducting the full cost of capital. Our findings are consistent with a dynamic bargaining model (Crawford, 1988) in which workers pay up front for the returns to sunk capital they will capture in later periods
When wage contracts are relatively short-lived, rent sharing may reduce the incentives for investment since some of the returns to sunk capital are captured by workers. In this paper we use a matched worker-firm data set from the Veneto region of Italy that combines Social Security earnings records for employees with detailed financial information for employers to measure the degree of rent sharing and test for holdup. We estimate wage models with job match effects, allowing us to control for any permanent differences in productivity across workers, firms, and job matches. We also compare OLS and instrumental variables specifications that use sales of firms in other regions of the country to instrument value-added per worker. We find strong evidence of rent-sharing, with a "Lester range" of variation in wages between profitable and unprofitable firms of around 10%. On the other hand we find little evidence that bargaining lowers the return to investment. Instead, firm-level bargaining in Veneto appears to split the rents after deducting the full cost of capital. Our findings are consistent with a dynamic bargaining model (Crawford, 1988) in which workers pay up front for the returns to sunk capital they will capture in later periods
This paper estimates the extent of downward wage rigidity in Italy using a micro-econometric model and the recently released WHIP longitudinal data. The econometric approach distinguishes between downward nominal wage rigidity – i.e., the impediment to nominal wage cuts – and downward real wage rigidity – i.e., when nominal wages cannot grow by less than a minimum positive threshold. The model accounts for measurement error and flexibly specifies the counterfactual, rigidity-free wage change distribution. The period analyzed goes from the mid eighties to the end of the century, within which the 1992-1993 income agreements – with the abolition of the scala mobile – are situated. Overall, downward wage rigidity impacts on about 70% of the observations. However, in the periods following the income agreements, the impact of wage rigidity is reduced, in particular with regards to real rigidities (with a slight increase in nominal rigidities). In each sub-period, however, real rigidities prevail over nominal rigidities
A key objective of modernising the European social model is ensuring greater social protection for workers, while also increasing labour market competitiveness in light of globalisation. In the ongoing debate at European level on labour market and employment policies, the concept of 'flexicurity' – the balance between flexibility and security needs of employers and employees – has emerged as a central issue. Against this background, the European Foundation for the Improvement of Living and Working Conditions has, since 1990, been collecting data on developments pertaining to working conditions – a key area of life in Europe. The latest of these surveys, the fourth European Working Conditions Survey (EWCS), provides a comprehensive overview of working conditions across 31 countries in Europe. Among the central themes of this survey is the debate on flexicurity – a subject which forms the basis of this current report. The analysis focuses on the lessons drawn from the results of the EWCS at the worker's individual level that could support the discussion on creating and developing flexicurity policies. The report proposes a set of four new indicators that may contribute to the debate on flexicurity: objective job insecurity, subjective job insecurity, employability and vulnerability. It also measures how these indicators are linked to each other at the individual level, as well as how they are linked to institutional factors at the country level. The most widespread reform aiming to achieve a more flexible labour market has most likely been the introduction of temporary employment contracts. This report also looks at what happens after a worker enters a temporary job. It questions whether temporary jobs are a port of entry towards permanent employment or whether the workers run the risk of being trapped repeatedly into taking up temporary jobs. Finally, the report focuses on gender issues, including differences in terms of employability and wages, with particular attention given to part-time work. The findings reveal a remarkable variability across countries in terms of the legal, institutional and political frameworks, and highlight the national differences regarding the indicators that have been taken into consideration in promoting flexicurity. As the European Union moves towards implementing the Lisbon objectives, we trust that this report will contribute to a better understanding of what is required to foster the necessary reforms that can support an adequate balance between flexibility and security needs, thus improving the employment conditions and work–life balance of Europe's workforce
