2
It is well known that wage inequality has increased dramatically in the United States
over the last three decades. From 1973 to 1998, the hourly earnings of a full-time worker in
the 90th percentile of the American earnings distribution (someone whose earnings exceeded
those of 90 per cent of all workers) relative to a worker in the tenth percentile grew by 25 per
cent, and the corresponding figure for men only was nearly 40 per cent. Wage inequality has
increased in most OECD countries, but the extent of this phenomenon varies a great deal, and
cross-national differences in levels of wage inequality remain as great as they were in the
1970s. In the US, the worker in the 90th percentile earned 4.63 times as much as the worker
in the tenth percentile in 1996. At the other end of the cross-national spectrum, the 90-10
ratio for Sweden was only 2.27.
While political commentators in Europe and the US alike frequently invoke
inegalitarian labor market trends to explain various manifestations of working-class political
disaffection (not only support for right-wing populist parties, but also falling turnout among
working-class voters), recent work by labor economists demonstrates that supply and demand
factors alone cannot account for cross-national variation in wage inequality.
1
Wage
inequality appears to have political determinants as well as political consequences. On both
counts, it deserves to be a central concern of comparative political economy as conceived and
practiced by political scientists. I use a new data set published by the OECD to engage in a
pooled cross-section time-series analysis of the determinants of wage inequality in sixteen
OECD countries for the period 1973-1995.
In the following pages, I will first present a description of the outcomes that I am
trying to explain. This brief analysis of the patterns of wage inequality in the OECD will
1
E.g., Richard Freeman and Lawrence Katz (eds.), Differences and Changes in Wage
Structures (Chicago: The University of Chicago Press, 1995), 1-24; Francine Blau and
Lawrence Kahn, “International Differences in Male Wage Inequality,” Journal of
Political Economy, 104 (1996), 791-836; and Peter Gottschalk and Timothy Smeeding,
“Cross-national Comparisons of Earnings and Income Inequality,” Journal of Economic
Literature, 35 (1997), 633-87.
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