Wage and Compensation Inequality — How Different?

The paper compares the distribution of individuals’ wage to the distribution of labor compensation when important non-wage benefits are included. In our study for Sweden focus is on pensions, survivors’ benefits and sickness benefits. These are non-observed. A method of estimating these benefits indirectly is proposed and used to examine their contributions to overall earnings inequality. We find that insurance benefits increased annual earnings inequality by 40 percent. The share of the benefits to total earnings is 22 percent. The effect of the benefits is minor for blue collars and municipal white collars, while it is high for private white collars.