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Socio-economic determinants of inequality in the labor market

Priority areas of development: economics
2018
The project has been carried out as part of the HSE Program of Fundamental Studies.

Goal of research: Determination of characteristics of inequality in the Russian labor market formed by heterogeneous socio-economic factors. Object of study – enterprises and individuals in the labor market.

Methodology

Analysis was carried out through using of different econometric methods and models, including Ordinary least squares (OLS-regression), logistic regression, probit regression, two-stage least squares regression, Oaxaca-Blinder decomposition, fixed and random effects models.

Empirical base of research

  1. Enterprise survey «Interaction of internal and external labor markers»
  2. Russian Longitudinal Monitoring Survey of National Research University Higher School of Economics
  3. Data of Russian Federal State Statistics Service
  4. Monitoring of education markets and organizations data
  5. Data of Centre for Internal Monitoring of National Research University Higher School of Economics

Results of research

The results of the research characterize different aspects and socio-economic factors of inequality in the Russian labor market. The study depicted the main patterns of inequality in the labor market of graduates of vocational training programs. We found that around 40% of graduates of vocational programs are job-education mismatched, overeducated and disadvantaged in the labor market. Combining vocational studying and work positively affects probability of employment after graduation. If the job is related to the field of study and occupation, graduates are more likely to find jobs, which are matched with the field of study. If the job is not related to field of study, graduates are more likely to be job-education mismatched.

Language skills affect salaries and may contribute to inequality in the labor market. The study has shown that better educated individuals enjoy higher wage premium compared to less educated. Moreover, for high-skilled white-collars occupations language skills are highly rewarded, in contrast to blue-collars jobs. We found that language skills do not decrease inequality in the labor market and the highest returns to language skills are common for jobs which require higher education.

Training in the labor market can be carried out through accumulation of knowledge and work experience in the workplace. Entrepreneurship experience accumulated by employees is a good example of the on-the-job training. The study has shown that the returns to entrepreneurial experience are negative and lead to the decrease of salaries. At the same time, the longer the experience of entrepreneurship, the higher the wage penalty for workers with entrepreneurial experience compared to workers without such experience. The negative effects on wages from the experience of entrepreneurship are reduced, if the return to the employees’ sector after entrepreneurship is not accompanied by a change of profession. The change of the occupation while transition, increases the penalty for the entrepreneurial experience. Change the occupation and mobility is more beneficial for employee in terms of salaries that leave in the entrepreneurship.

Accumulation of the human capital by migrants in the market of recipient countries affects their labor income. We found that duration of work in the Russian labor market positively affect migrants’ earnings. The labor income of employed migrants, who moved to Russia during 1990-s is higher than that of 2000-s. However, migrants’ earnings are lower than earnings of local population.  Socio-demographic characteristics of population significantly affect inequality in the labor market. We found a considerable gender wage gap in the Russian academic labor market, which is 18.3%. These findings are consistent with results for developed countries and their academic labor markets. Gender wage gap for university graduates is 20.5%.

Employment conditions and wages which are set by enterprises characterize another aspect of inequality in the labor market. The share of variable part in salaries is one of the determinants of wage inequality in the enterprise level. Enterprises adjust to changes in economy and labor market by increase of variable part of salaries. Average share of variable part in salaries is 20-30% of overall remuneration of workers. The share of variable part is higher for larger enterprises, enterprises with high level of salaries, enterprises with stable financial results and those who implement innovations. Moreover, if enterprises treat labor legislation as being strict, they increase the size of variable part of remuneration. Inequality in work conditions between public and private enterprises affect job satisfaction. Job satisfaction in public sector is considerably higher than in private sector. However, satisfaction with salaries is higher for private sector.

Level of implementation, recommendations on implementation or outcomes of the implementation of the results

The results of the project were published in different academic journals and preprint series (2 articles, 2 preprints), were discussed at seminars and conferences in Russia and foreign countries. The results of the project are also used in educational process in the preparation of teaching aids, manuals and lectures on labor and personnel economics.

The results of the research can be applicable for advancement of economic and social policy devoted to the decrease of inequality in the labor market. These results are relevant for the Ministry of Labor and Social Protection of the Russian Federation for the evaluation of determinants of inequality in the labor market and its contribution to economic growth as well as to decrease of inequality between different socio-economic groups of population. The results of the study can be used by the Ministry of Education of the Russian Federation to develop measures for the development of vocational education and training, as well as measures to reduce wage inequality in academic sector.

Research results, obtained from enterprise data, can be demanded by the Ministry of Industry and Trade of the Russian Federation and the Ministry of Economic Development of the Russian Federation for the development of economic policy for real sector of economy. On the basis of the conducted research, there might be developed different measures aimed to increase of competitivity of Russian enterprises by efficient use of human resources and immigrant labor.

Publications:


Солнцев С. А., Рощин С. Ю., Сидорова А. С. Структура заработной платы и кадровая политика российских компаний // Российский журнал менеджмента. 2018. Т. 16. № 4. С. 481-498. doi
Солнцев С. А., Рощин С. Ю., Сидорова А. С. Структура зарплат в российской экономике: что говорят данные предприятий / НИУ ВШЭ. Серия WP15 "Научные труды Лаборатории исследований рынка труда". 2018. № 1.
Solntsev S., Roshchin S., Ksenia Rozhkova. Wage Adjustment Policies In Russian Firms / NRU Higher School of Economics. Series WP BRP "Economics/EC". 2018. No. 205.