Abstract:

The economic crisis, started in the United States, hit all the EU Member States hard, even though its impact on employment, income and inequality varies considerably by country, and within the same country, workers with varying levels of skills may suffer with different intensity. Nations with weaker economies suffered the most, and in the Southern countries the unemployment rate rose more than the European average. For some years, a rising number of researchers have been investigating the causes of the increase in unemployment rate and the consequent changes that have occurred in the employment structure, e.g., job polarisation or upgrading of occupations. Job Polarisation consists of a decrease in the demand for middle-skill workers, with a contemporary growth in the demand of jobs requiring high and low skills, whereas the upgrading of occupations favours activities with high qualifications.

In this field, wage is usually used as a proxy of the level of competence in order to classify workers in high-, middle-, and low-skilled, and, then, to evaluate the changes over time of employment shares in each category. However, in this way, the changes in employment structure are associated with the wage structure rather than with the effective competences of workers. Instead, in this work, we use the average level of formal education to rank activities with the aim of analysing, in a cross-country comparison, the main changes occurred in the employment composition between 2005 and 2013 in the PIGS countries (Greece, Italy, Portugal, and Spain). In particular, the RIF (Recentered Influence Function) regression on Gini index, drawn upon EU-SILC data, allows a comparison of Italy with each other Southern country considered in the analysis. This procedure allows estimating the spatial gap, in terms of wage inequality, among the countries and exploring its leading determinants. In this ground, the study investigates the relationships between personal education and professional career opportunity and their effects on wage inequality. The procedure decomposes the total spatial gap into two components: first, the portion of the gap attributable to the employees’ characteristics (composition effect), and second, the portion of the gap attributable to the capability of the country’s labour market to transform individual skills into job opportunities and earnings (wage structure).

In sum, the results highlight different patterns of employment structure. While Greece and Portugal are clearly characterized by job polarization and upgrading of occupations, respectively, in Italy and Spain, none of the two phenomena visibly prevails. The spatial comparison suggests a lower level of wage inequality in Italy. The workers’ endowments (composition effect) play a key role to explain the lower inequality in Italy, especially in comparison with Greece where a more polarised employment structure exists. On the contrary, the country’s ability to promote employment (wage structure) has greater weight in Italy in comparison with Spain (with a more hybrid structure) and Portugal (upgrading).