Changes in the Wage Distribution in Austria: An Analysis Based on European Union Structure of Earnings Survey Data

The dispersion of hourly wages in Austria hardly changed between 1996 and 2002. Somewhat weaker growth at the bottom of the distribution implies that wage inequality increased slightly. Compared with other EU countries, however, the distribution of wages remained remarkably stable in Austria. A decomposition of the changes in the wage distribution shows that the relatively small overall change is attributable to some contrasting developments. Apparently, both market-driven and predetermined factors contributed to this marginal increase in wage inequality. In particular, higher education levels and higher returns to education caused stronger growth in the upper wage dispersion range. At the same time, the rise in women’s participation in the workforce was one of the main reasons for lower wages to grow less strongly. These developments caused higher wage inequality on the one hand; on the other hand, the returns to general work experience deteriorated, which, in turn, had an equalizing effect on wages. The data also show that the differences in wages for men and women remained almost unchanged over time.