Earnings differentials and how the wage distribution has changed in Spain recently

What is it about?

Using administrative data from the Social Security and the Tax Administration National Agency, this paper describes the wage distribution in Spain, its evolution in recent years and the implications for increased wage dispersion. We estimate Ordinary Least Squares and quantile regression models in order to assess the impact of personal, job and workplace attributes on between- and within-groups wage inequality. Among other things, we find that, although the average wage has been increasing over time (until 2009), changes have not been uniform across the earnings distribution, making the dispersion fall during boom years but rise during downturn years. Furthermore, changes in the impacts of some characteristics (labour contracts, skills, regions and employer size) contributed to higher wage dispersion, while others (tenure) made the distribution more equal.

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Why is it important?

The contribution of the article is twofold. First, it investigates wages differentials for a set of personal, job and workplace attributes not only at the mean but also throughout the conditional earnings distribution, making it possible to assess the impact of these attributes on between- and within-groups wage inequality. Second, it analyses the potential influence of the recent recession on the magnitude of earnings differentials and wage dispersion. In order to do so, it concentrates on a period of time characterized by extremely diverging economic and labour market conditions (from one of rapid economic growth and intense job creation in 2005-2007 to another of sharp crisis and rising unemployment in 2008-2010).

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