Boom did not boost wage inequality

LABOUR MARKET:WAGE INEQUALITY did not increase in Ireland during the Celtic Tiger period because of the nature of the jobs created, according to a new paper highlighted in the ESRI's latest research bulletin.

ESRI researchers Séamus McGuinness, Frances McGinnity and Philip O’Connell found that between 1994 and 2001 earnings inequality fell among workers, meaning the tendency for technology-driven booms to favour skilled and educated workers did not take place in Ireland.

The researchers said that it was “not at all clear” that employment growth was “heavily concentrated in industries employing a high concentration of skilled labour” over the period. If it had done, it may have been expected to lead to greater wage inequality, with a premium placed on the skills of higher educated workers.

There was a marked reduction in wage inequality among male workers over the period, particularly between 1997 and 2001, perhaps related to the construction sector being the engine of rapid employment growth among men.

Among women, jobs growth was most rapid in the transport and communication and finance and business sectors, which the ESRI researchers said were characterised by medium to high skills.

As the sharp increase in the number of educated females entering the labour market during the boom exceeded the growth in demand, the premium on wages paid to those with university degrees actually fell.

The researchers conclude that the Irish experience shows that economic growth does not always lead to wage inequality and that much depends on the changes in labour supply and the sectors driving the growth in employment during the period.

Meanwhile, research on job mobility found that workers in Ireland became more willing to switch jobs during the boom years as the concept of a “job for life” diminished in importance.

Research analyst at the institute Adele Bergin found that the rate at which workers voluntarily changed their jobs trebled during the period 1995 to 2000, as the upturn in Ireland’s economic fortunes created more vacancies in a buoyant jobs market.

In 1995, some 6.5 per cent of workers changed jobs, but this rate doubled to 13.5 per cent by 2000, with voluntary job switches outweighing involuntary partings.

After analysing data from the ESRI’s Living in Ireland surveys, Ms Bergin found that being “overskilled” was one of the main factors prompting voluntary job switching. Workers who reported having the skills and qualifications to do more demanding work were more likely to seek a new job.

Younger workers are also significantly more likely to switch jobs, as they are more eager to try different types of employment to discover their own preferences and abilities – a process known as “job shopping”.

The average age of workers who voluntarily switched jobs in 2001 was 34, up from 28 in 1995. Young workers in Ireland were also found to have a relatively high rate of job mobility during the boom period compared to their counterparts in other European countries.

Workers in larger firms – those with more than 50 employees – were found to have a lower probability of changing jobs, as were public sector workers.

Gender does not significantly affect the probability that a person will change their job, Ms Bergin said, despite expectations that women may be less likely to move jobs voluntarily if they are constrained in their choice of work by childcare arrangements or the location of their partner’s job. Married people were found to be less likely to switch jobs, but not to a statistically significant degree.

Medium-skilled workers have a slightly higher propensity to change jobs voluntarily than low- or high-skilled workers, while over half of the job changes analysed involved a change of occupation.