HAL_F_02 The Role of Firms for Regional Wage Inequality and Mobility
Objectives/ Research Questions
Since the 1980s, wage inequality has been increasing, which is clearly a visible sign for the increasing economic division in society. This is not least due to socioeconomic developments at the macro-level, such as globalization and technological change. Recent studies also show that the division into low-paying versus high-paying firms has deepened. Furthermore, the selection of high earners into high-paying companies has increased. An important question that has hardly been addressed so far is therefore to what extent the increasing wage inequality between firms and the increasing segregation of workers have led to an increase in regional disparities (East-West and urban-rural) and whether this contributed to leaving entire regions behind. In addition, previous studies have mostly examined inequality at a certain point in time. This does not consider that people can move up and down in the wage distribution over time. A decrease in promotion opportunities would intensify and cement inequality.
Against this background, this project addresses the following research questions: (1) What is the role of firms for regional wage inequality? (2) To what extent are regional wage disparities driven by selective mobility, especially of highly qualified employees? (3) Has the increase in firm-specific wage differentials led to selective outward migration from rural and East German areas? (4) Do individual promotion opportunities in the wage distribution differ between regions (East-West and urban-rural)? (5) What is role of mobility between firms with different wage levels for the promotion prospects in the wage distribution?
Thematic Reference to Social Cohesion
Even if structural change, technological progress, and international trade have overall positive effects on economic prosperity, they also generate adjustment costs and produce both winners and losers. First, studies show that these processes affect regions differently, that social polarization particularly increases in strongly affected regions, and that this often goes along with higher vote shares for right-wing populist parties.
The solidification of social milieus and their position in the income distribution is a threat for social cohesion and regional disparities seem to play a non-negligible role in this process. However, we know little about the determinants of regional wage disparities and selective migration between regions. The division of society along spatial and firm characteristics is particularly problematic if mobility between firm types and regions is impeded. Decreasing promotion opportunities might impel people to refuse the existing social and political system, especially if entire regions face a lack of perspectives.
Focusing on firm-specific and regional aspects, this project addresses the relationship between labour market adjustments, inequality, and social cohesion, thereby focusing on the socioeconomic dimension of social cohesion. It investigates empirically how economic inequality and mobility have changed over the last decades. Various studies suggest that earnings inequality has increased, whereas mobility has decreased. These developments are likely a major threat to social cohesion, but their regional dimension has been addressed very little so far.
