For most people wage labour determines their life chances. Jobs are needed to sustain a living and also come with a certain status. Some jobs are valued more than others. Therefore, to understand wage inequality, researchers have long looked at the differences between occupations. But the focus is now increasingly turning to disparities between organisations. Research has shown that growing differences in how much organisations pay workers have been the dominant driver of rising wage inequality in recent years. The Netherlands is no exception to this widespread trend, as increasing wage inequality in the Dutch labour market since the early 2000s has been a predominantly inter-organisation phenomenon.

Where you work matters

The rising wage inequality between organizations can be explained by two dynamics says Janietz. ‘First there is the so-called “firm wage premium” – for example, workers in larger organisations frequently earn a higher wage than workers performing similar jobs in smaller organisations.’ Janietz explains how this is partly a result of decentralisation of collective bargaining, with many collective agreements setting minimum standards that allow for local deviations. ‘This difference in what firms pay for comparable positions is growing. It increasingly matters where you work.’

The trouble with outsourcing

The second dynamic that is leading to growing wage inequality between organisations is that of ‘occupational sorting’. ‘The highest paid occupations are gathered in the highest paying firms, while the lower paid occupations are isolated in lower paying organisations,’ explains Janietz. ‘So we increasingly find that lower paid workers are no longer directly employed by the better paying organisations, even when they are working at the same location. Instead their employment gets outsourced to other organisations where they typically get paid less – this is frequently the case with, for example, catering and facility services.’

The acceptance of wage inequality

In contemporary labour markets, wage inequality is often justified by meritocratic reasoning. The idea that you must have earned your better pay check because of your higher education and skills. ‘Generally, a better wage is seen as acceptable when a job is considered more important and complex than others’, says Janietz. ‘However, in this process, the important contributions to organisational success by workers in lower-paid occupations are often overlooked or discounted. Because it has been taken for granted that certain jobs earn so much more than others, the extent of wage gaps remains under-studied and under-discussed,’ says Janietz.

Intersection of wage inequality and gender inequality

During his research, Janietz also looked at the wage levels of jobs classified by the Dutch government as ‘essential’ during the Covid-19 pandemic. Janietz: ‘Here we quickly saw that wage inequality was intersecting with gender inequality. The wages of essential workers are on average lower in relation to other jobs with comparable skill prerequisites while women are over-represented in these essential occupations. Meritocratic explanations of pay differences are in this case insufficient because essential workers carry out societally vital and demanding work.’

Janietz: ‘If essential jobs such as nursing or teaching, mostly performed by female staff, become undesirable because of comparably lower pay, the whole of society will face the consequences collectively.’

Defence details

Christoph Janietz:  Inequality at work. Occupations, organizations, and the wage distribution. Supervisor is Prof. T. Bol. Co-supervisor is Dr B. Lancee.

Time and location

Janietz’s PhD defence ceremony will take place on Tuesday, 21 May, at 16.00, in the Agnietenkapel.