Structural changes in the employment composition and wage inequality: A comparison across European countries

For several years many countries have been experienced a progressive impoverishment of middle-skill jobs that has led to structural changes in their labour markets (job polarisation, upgrading or downgrading of occupations). This paper investigates how the shifts in the workforce affect wage inequality comparatively for a selection of European countries. The RIF regression, tested on the EU-SILC data (2005-2013), enables us to assess how much of inequality differentials over time is accounted for by workers' endowments rather than the capabilty of country's labour market to capitalise skills. An outright deterioration of all jobs, irrespective of skill levels required, and the lack of a well-defined structure of the labour market may jeopardise wage distribution and the return effect plays a leading role in this process.