Skip to main content

Advertisement

SpringerLink
Log in

How large are wage differentials in Austria?

  • Original Paper
  • Published:
Empirica Aims and scope Submit manuscript

Abstract

The OECD has repeatedly recommended that wage bargaining in Austria be decentralised to allow wage diferentials to widen. But the status quo itself is in question. While studies of aggregate industry data indicate a high degree of wage dispersion, research based on data from household surveys seems suggest that income inequality in Austria is as small as in the Scandinavian countries. This paper seeks to reconcile these opposing views. It shows that data from the household surveys underestimate the size of inter-industry wage differentials. An analysis of the structure of contractual wage rates supports the view that wage inequality is very pronounced in Austria and that a narrowing of the wage gap would lead both to an increase in productive efficiency and an increase in income equality.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1

Similar content being viewed by others

Notes

  1. For a discussion of this topic see, e.g., Arpaia and Mourre (2005), Björklund et al. (2007), Freeman (2005), Hartog et al. (2000), Gannon et al. (2007), Rycx and Tojerow (2007).

  2. For Austria, these data refer to the large-scale manufacturing sector (Industrie as opposed to Gewerbe, see Sect. 4 for a discussion of this distinction).

  3. A rising trend in wage dispersion in manufacturing in Austria was also found in studies of the cyclical behaviour of the wage structure; the increase in wage inequality was only interrupted in periods of cyclical peaks and at times when the share of foreign workers in Austria's employment dropped sharply (Pollan 1980, 2004).

  4. Scholar google lists 71 citations for Zweimüller and Barth (1994) and 15 citations for Barth and Zweimüller (1992).

  5. See also Zweimüller (1992).

  6. In some years the income data even included children's allowances.

  7. This data source was used in the studies by Barth and Zweimüller (1992) and by Zweimüller and Barth (1994) for their analysis of pay disparities.

  8. In the ISSP-1987/ISSP-1988 Survey, 26% of the respondents refused to answer the income question (or had no income at all). On the industry classification, see Sect. 4.

  9. Contractual wage rates (Kollektivvertragslöhne or Tariflöhne), arrived at in settlements between the unions and the employers, are also sometimes referred to as negotiated or basic wage rates. In this context, these terms also cover contractual salary rates of white-collar workers

  10. Austria does not have minimum wage legislation that provides for a minimum wage for the whole economy. Rather the contractual wage rate for the least skilled group of workers constitutes the de facto minimum wage rate for the industry covered by the collective wage contract.

  11. Rough calculations show that 20–25% of employees in the private sector (mostly in large-scale manufacturing and construction, the financial sector, the (formerly state-owned) postal service and federal railways) can be allocated to the high-pay sector, and 70–75% to the low-pay sector (mainly in the small-scale industry and crafts sector, and the service sector). About 6% of employees in the private sector are not covered by collective agreements (Bönisch 2008). About 2.7 million persons are employed in the private sector.

  12. After a merger in 2006, the union is now called the Union of Salaried Private Sector Employees, Printing, Journalism and Paper.

  13. For details see Pollan (2000, 2004).

  14. Biffl (2002), on the basis of a different data set, shows that this conclusion holds with regard to wages and salaries for all qualification levels.

  15. For details see Pollan (2000, pp. 51–57).

  16. The misspecification of the industry dummies may show up as bias somewhere else. One example may be the estimation of the gender wage gap (Gannon et al. 2007; Pollan 2005).

  17. Part of the misspecification problems concerning the improper industry classification may be alleviated by introducing dummy variables for the firm size, as, in general, businesses in the Industrie section are larger than businesses in the Gewerbe section. But this step raises the question as to the final determinants of the bargaining structure and of the institutional setup in general, a topic outside the scope of this paper. At a more practical level, it is not always the case that firms in the Industrie section are larger than firms in the Gewerbe section: some businesses in the food industry, though classified as Gewerbe (with lower wage rates), are larger than businesses classified as Industrie.

  18. For a review of these recommendations, see OECD (2004).

  19. Austria's position in the centralisation/co-ordination rankings, the other salient feature of such international comparisons, has also been questioned (Pollan 2004).

  20. Similar criticisms apply to the use of data from the International Social Survey Programme.

  21. However, the empirical evidence hardly allow us to rule out the efficiency wage hypothesis completely: the characteristics of industries likely to pay higher wages for efficiency reasons seem to overlap with those of firms likely to have powerful works councils, to obtain protection from competition and to be candidates for state ownership, but this topic is beyond the scope of this paper.

  22. See Flanagan (1987), Hibbs and Locking (2000) and Moene and Wallerstein (1997).

References

  • Arpaia A, Mourre G (2005) Labour market institutions and labour market performance: a survey of the literature. European Commission Economic Paper 238

  • Atkinson A, Brandolini A (2001) Promise and pitfalls in the use of “secondary” data sets: income inequality in OECD countries as a case study. J Econ Lit 39:771–799

    Google Scholar 

  • Barth E, Zweimüller J (1992) Labour market institutions and the industry wage distribution, evidence from Austria, Norway and the US. Empirica 19(2):181–201

    Article  Google Scholar 

  • Biffl G (2002) Die Kosten des österreichischen Bildungssystems und der Wert der Ausbildung. WIFO Monatsberichte 75(6):385–395

    Google Scholar 

  • Björklund A, Bratsberg B, Erikson T, Jäntti M, Raaum O (2007) Inter-industry wage differentials and unobserved ability: siblings evidence from five countries. Ind Relat 46(1):171–202

    Article  Google Scholar 

  • Blau FD, Kahn LM (2003) Understanding international differences in the gender pay gap. J Labor Econ 21(1):106–144

    Article  Google Scholar 

  • Bönisch M (2008) Kollektivvertragliche Abdeckung in Österreich. Stat Nachr 3:207–211

    Google Scholar 

  • Dickens W, Katz L (1987) Inter-industry wage differences and industry characteristics. In: Lang K, Leonard J (eds) Unemployment and the structure of labor markets. Basil Blackwell, London, pp 48–89

    Google Scholar 

  • Flanagan R (1987) Efficiency and equality in Swedish labor markets. In: Bosworth B, Rivlin A (eds) The Swedish economy. Brookings Institution, Washington

    Google Scholar 

  • Förster M, d’Ercole M (2005) Income distribution and poverty in OECD countries in the second half of the 1990s. OECD Social Employment and Migration Working Papers 22, OECD, Paris

  • Förster M, Pearson M (2002) Income distribution and poverty in the OECD area: trends and driving forces. OECD Econ Stud 34:1

    Google Scholar 

  • Freeman RB (1988) Labour market institutions and economic performance. Econ Policy 6:64–80

    Google Scholar 

  • Freeman RB (2005) Labour market institutions without blinders: the debate over flexibility and labour market performance. Working Paper 11286, NBER, Cambridge

  • Gannon B, Plasman R, Rycx F, Tojerow I (2007) Inter-industry wage differentials and the gender wage gap: evidence from European countries. Econ Soc Rev 38(1):135–155

    Google Scholar 

  • Guger A (1987a) Arbeitskosten und Produktivität als Determinanten der kostenbestimmten Wettbewerbsfähigkeit der österreichischen Industrie. In: Österreichische Strukturberichtserstattung, Kernbericht 1986, Band II, Austrian Institute of Economic Research, Vienna

  • Guger A (1987b) Der Einfluß der Staatstätigkeit auf die ‘Wohlstandsverteilung. Von der Primär- zur Sekundärverteilung. In: Guger A (ed) Umverteilung durch öffentlichen Haushalte in Österreich. Austrian Institute of Economic Research, Vienna, pp 3–60

    Google Scholar 

  • Guger A (1991) Arbeitskosten nach Branchen deutlich differenziert. WIFO Monatsberichte 65(10):571–576

    Google Scholar 

  • Guger A (1996) Umverteilung durch Steuern und Abgaben. In: Guger A (ed) Umverteilung durch öffentliche Haushalte in Österreich. Austrian Institute of Economic Research, Vienna, pp 20–36

    Google Scholar 

  • Hartog J, Pereira PT, Vieira JAC (2000) Interindustry wage dispesion in Portugal. Empirica 27:353–364

    Article  Google Scholar 

  • Hedström P, Swedberg R (1985) The power of working class organizations and the inter-industrial wage-structure. Int J Com Sociol 26:90–99

    Article  Google Scholar 

  • Hibbs D, Locking H (2000) Wage dispersion and productive efficiency: evidence for Sweden. J Labor Econ 18(4):755–782

    Article  Google Scholar 

  • Hofer H (1992) Eine Untersuchung über die Ursachen der sektoralen Lohnunterschiede in Österreich. Forschungsbericht 311. Institute for Advanced Studies, Vienna

    Google Scholar 

  • Kahn LM (1998) Collective bargaining and the interindustry wage structure: international evidence. Economica 65:507–534

    Article  Google Scholar 

  • Kahn LM (2000) Wage inequality, collective bargaining, and relative employment from 1985 to 1994: evidence from fifteen OECD countries. Rev Econ Stat 82(4):564–579

    Article  Google Scholar 

  • Katz L, Summers L (1989) Industry rents: evidence and implications. Brookings Pap Econ Act: Microecon 1989:209–290 [Special Issue]

    Article  Google Scholar 

  • Kronsteiner C, Wolf W (1994) Personen- und Haushaltseinkommen der unselbständig Beschäftigten 1993. Stat Nachr 12:994–1003

    Google Scholar 

  • Krueger A, Summers L (1988) Efficiency wages and the inter-industry wage structure. Econometrica 56(2):259–293

    Article  Google Scholar 

  • Martins P, Pereira P (2000) Does education reduce wage inequality? Quantile regressions. Evidence from Fifteen European Countries. IZA Discussion Paper 120

  • Milanovic B (2002) True world income distribution, 1988 and 1993: first calculation based on household surveys alone. Econ J 112:51–92

    Article  Google Scholar 

  • Moene K, Wallerstein M (1997) Pay inequality. J Labor Econ 15(3):403–430

    Article  Google Scholar 

  • OECD (1994) The OECD jobs study: facts, analysis, strategy. OECD, Paris

    Google Scholar 

  • OECD (1997) OECD country report: Austria. OECD, Paris

    Google Scholar 

  • OECD (1999) Implementing the OECD jobs strategy: assessing performance and policy. OECD, Paris

    Book  Google Scholar 

  • OECD (2001) OECD country reports: Austria. OECD, Paris

    Google Scholar 

  • OECD (2004) Wage-setting institutions and outcomes. OECD employment outlook, Chap. 3. OECD, Paris

    Google Scholar 

  • Österreichischer Gewerkschaftsbund (1999) ÖGB-Kurzbericht 1995–1998. Verlag des ÖGB, Vienna

    Google Scholar 

  • Pollan W (1997a) Grosse Lohnunterschied nach Branchen in der Industrie. WIFO Monatsberichte 70(3):171–178

    Google Scholar 

  • Pollan W (1997b) Political exchange in Austria’s collective bargaining system: the role of the nationalized industries. In: Sverke M (ed) The future of trade unionism. Ashgate, Aldershot

    Google Scholar 

  • Pollan W (1980) Wage rigidity and the structure of the Austrian manufacturing industry—an econometric analysis of relative wages. Weltwirtschaftliches Archiv 116(4):697–728

    Article  Google Scholar 

  • Pollan W (2000) Einige Aspekte der Lohnbildung in Österreich. Lohnunterschiede und die Zentralisierung der Lohnverhandlungen. Austrian Institute of Economic Research, Vienna

    Google Scholar 

  • Pollan W (2004) Austrian exceptionalism. Labour market institutions and wage disparity. Austrian Institute of Economic Research, Vienna

    Google Scholar 

  • Pollan W (2005) How large are wage differentials in Austria? Working Paper 265, Austrian Institute of Economic Research, Vienna

  • Pollan W, Leoni T (2003) Die Einkommensunterschiede nach Wirtschaftsbranchen in Österreich. Ein Vergleich zwischen Mikrozensus und Leistungs- und Strukturerhebung. WIFO Monatsberichte 76(12):901–909

    Google Scholar 

  • Rowthorn R (1992) Corporatism and labour market performance. In: Pekkarinen J, Pohjola M, Rowthorn R (eds) Social corporatism. Clarendon Press, Oxford, pp 44–81

    Google Scholar 

  • Rycx F, Tojerow I (2007) Inter-industry wage differentials: what do we know? Reflets et Perspectives de la vie économique XLVI(2/3):13–22

    Article  Google Scholar 

  • Statistics Austria (2004) Ausgewählte Kollektivvertragslöhne, 31. Dezember 2003, Vienna

  • Teulings C, Hartog J (1998) Corporatism or competition? Labour contracts, institutions and wage structure in international comparison. Cambridge University Press, Cambridge

    Google Scholar 

  • Walterskirchen E (1987) Lohnunterschiede nach Betrieben und Branchen. WIFO Monatsberichte 60(8):492–497

    Google Scholar 

  • Windmuller J (1987) Comparative study of methods and practices. In: Windmuller J et al (eds) Collective bargaining in industrialized market economies: a reappraisal. International Labour Organisation, Geneva

    Google Scholar 

  • Wolf I, Wolf W (1991) Wieviel weniger? Einkommensunterschiede zwischen Frauen und Männern in Österreich. Bundesministerium für Arbeit und Soziales, Wien

    Google Scholar 

  • Zweimüller J (1992) Survey non-response and biases in wage regressions. Econ Lett 39:105–109

    Article  Google Scholar 

  • Zweimüller J, Barth E (1994) Bargaining structure, wage determination, and wage dispersion in six OECD countries. Kyklos 47(1):81–93

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Austrian Institute of Economic Research, P.O. Box 91, A-1103, Vienna, Austria

    Wolfgang Pollan

Authors
  1. Wolfgang Pollan
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Wolfgang Pollan.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Pollan, W. How large are wage differentials in Austria?. Empirica 36, 389–406 (2009). https://doi.org/10.1007/s10663-008-9099-7

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10663-008-9099-7

Keywords

JEL codes

Search

Navigation