Occupational dynamics and wage inequality in Europe

Highlights • The analysis shows two patterns in the share of wage inequality explained by between-occupation differentials: while the relative importance of between-occupation trends has grown in Finland and the UK, it has diminished in Spain, France, Poland and Romania. • Although between-occupation differentials account for a great share of total wages’ variance, changes in the occupational structure have not driven recent wage inequality trends in Europe. • Wage inequality has been mostly driven by changes in wage differentials within occupations. • We found that the explanatory significance of occupations markedly declines at the highest wage tiers. This article presents a comparative analysis of the role played by occupational changes in recent wage inequality trends in six European countries. This work contributes to a better understanding of how within- and between-occupation differences have influenced wage inequality trends in Europe. The database used is the European Union Structure of Earnings Survey for the period 2002-2018. The analysis shows two patterns in the share of wage inequality explained by between-occupation differentials: while the relative importance of between-occupation trends has grown in Finland and the UK, it has diminished in Spain, France, Poland and Romania. And although between-occupation differentials still account for a great share of total wages’ variance, changes in the occupational structure (in particular, the patterns of job polarisation and upgrading widely discussed in the literature) have not driven recent wage inequality trends in Europe. Wage inequality, instead, has been mostly driven by changes in wage differentials within occupations. Finally, we found that the explanatory significance of occupations markedly declines at the highest wage tiers.