ABS201Y1 Lecture 4: Lecture 4 notes

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27 Jul 2016
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Memo 2
Purpose: compare and contrast USA and Sweden from 97’s to 99’s
Labour market policies
Johnas Pontusson, David Rueda and Christopher R. Way describe the role pf
partisanship and labour market insitutions. These authors explore the political
institutional variables that effect the upper and lower halves of wage distribution.
in OECD countries, wage inequality has increased.
In the united States, the "worker in the ninetieth percentile earned 4.63 times as
much as the worker in the tenth percentile in 196" (pentusson, et al, 2002, p.282).
At the other end of the cross-national spectrum, the 9010 ratio for Sweden was
only 2.27.
In Sweden, the "average 9010 ratio of 2.07, stands out as the OECD country with
the most compressed overall wage distribution.
Wage-barganining centralization
decentralized bargaining systems
left leaning governments are associated with compression of both halves of wage
distribution.
right leaning governments (USA)
the question these authors ask is " if these political-institutional variables promote a
more egalitarian wage structure by holding back wage growth for highly-paid wage-
earners at the upper end of the distribution, or by raising the relative wages of
people at the bottom of the wage hierarchy" (cite P. 283).
In the 97’s in USA most 9th percentile earners have seen an increase in earning
of 4.63 times of workers in the lowest percentile. In comparison, in the 97’s in
Sweden the 90th percentile group earned 2.27 times what the lowest percentile
workers made.
Among OECD countries, wage inequality has risen significantly. Today in the USA
the rise in income of the .% is much greater than it was in the 97’s as the
income of the top percentile has risen faster than that of the lowest percentile.
The average 90-10 ratio in the USA is 4.6, higher than the OECD average which is
between 2.34 and 2.29.
On the other hand, in Sweden the average 90-10 ratio is 2.07. That makes Sweden
the country with the most compressed overall wage distribution.
When it comes to wage inequality it is a function of many factors ranging from
institutional variables such as right or left political parties. There is also the Union
density factors and marginal tax rates in addition to public employment and market
forces.
It is important to note that USA and Sweden both have low employment rates. They
are also both high when it comes to innovation incentives.
There are important differences in how the factors of institutional variables, the
right or left governing parties, the union density, the marginal tax rates as well as
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