Instead of using skill proxies, some authors have measured the marginal contributions of different occupational categories to firm-level added-value econometrically. Such an approach can be problematic: without any direct measure of occupational productivity it is unclear to what extent the selected variables are acceptable proxies. This boils down to using variables such as educational attainment as proxies for labour productivity, one of the basic assumptions of human capital theory (cf. These characteristics are often lumped together under the catch-all term ‘skills’. Instead, occupational categories are distinguished according to their average educational attainments, on-the-job training, work experience, etc. This also holds for the case of occupational categories on which we focus in this article: empirical studies typically refrain from measuring productivity of occupations. In this literature, productivity-wage gaps are thought to be rational strategies with which firms address a range of market distortions (Lazear and Shaw, 2007).ģThe abundance of theories on productivity-wage gaps is not matched by a corresponding body of empirical literature. On the other hand, economists have also developed explanations of differences between productivity and wages without having to abandon the assumptions of individual rationality and profit-maximizing firms. Although each of these theories on inequality focuses on distinct social processes, they appear to have in common that they associate labour market inequality at least implicitly to an element of ‘unearned’ or ‘unjust’ allocation of resources to dominant groups.
Indeed, a range of labour market theories hypothesize sources of inequality other than labour productivity, such as collective action, labour market institutions, or the use of power and authority to obtain economic advantages (for overviews on sociological theories on labour market inequality, see Kalleberg and Sørensen (1979), Berg (1981), Müller and Schmid (2003)). Labour market inequality would then boil down to differences in productivity between workers.ĢThis explanation of pay inequality has been challenged by empirical and theoretical work on labour markets: “Sociologists have long been dissatisfied with, particularly with their silence about the many forces that generate a mismatch between marginal productivity or skills and wages in the ever-present short run” (Weeden, 2002, p. 71). 1According to standard economic theory, the competition among workers and among firms leads to relative factor prices that reflect economic forces: the closer labour markets are to perfect competition, the closer factor prices are to the value of the marginal product of labour.