This document summarizes findings from a large-scale OECD study on the role of firms in wage inequality. The key findings are: 1) Firm pay practices account for about one-third of overall wage inequality between workers. 2) There are widening productivity gaps between firms, with the most productive firms pulling away, contributing to rising wage dispersion. 3) Barriers to job mobility between firms further widens wage gaps between similar workers at different firms. The study provides evidence that both skills policies and policies targeting lagging firms and barriers to mobility are needed to strengthen inclusive productivity growth and reduce wage inequality.

1. THE ROLE OF FIRMS IN
WAGE INEQUALITY: POLICY
LESSONS FROM A LARGE-
SCALE STUDY
Laurence Boone
OECD Chief Economist
Launch, 9 December 2021

2. Productivity gaps between firms
are widening
Source: OECD calculations based on the OECD Orbis productivity
database, following Andrews, Criscuolo and Gal (2016)
Source: OECD calculations based Schwellnus, Pak and
Pionnier (2018)
-0.1
0
0.1
0.2
0.3
0.4
0.5
0.6
2001 2003 2005 2007 2009 2011 2013 2015 2017
Labour Productivity
Frontier firms - top 5%
Non-frontier firms
0
0.05
0.1
0.15
0.2
2001 2003 2005 2007 2009 2011 2013 2015
Real wages
90th percentile of workers
10th percentile of workers

3. 3
Market concentration is on the rise
Share of sales of 8 largest groups by intangible investment intensity
Source: Bajgar, Criscuolo and Timmis “Intangibles and Concentration: Supersize me”, (2021)
0
0.01
0.02
0.03
0.04
0.05
0.06
0.07
0.08
2002 2004 2006 2008 2010 2012 2014
Change
since
initial
year
Less intensive
More intensive

4. 4
Why do widening productivity gaps
matter for wage inequality?
Globalisation
Worker-centred
Race between
education and
technology
Wages are determined
exclusively by worker
skills
Large wage
differences between
similarly-skilled workers
in different firms
Firm-centred
Firms have some
wage-setting power
Wages also depend
on firm characteristics

5. • Mobilises linked employer-employee data for 20 OECD
countries with harmonised data treatment and methodology
• Documents key stylised facts about the role of firm pay
policies in wage inequality and the influence of structural and
public policy factors
• Draws broad policy conclusions from the empirical evidence
to strengthen broadly shared productivity growth
5
Contribution

6. DATA

7. 7
LinkEED data
• Linked employer-employee microdata from 20 OECD
countries, often on the universe of workers and firms
• Harmonised data treatment and methodology enable
cross-country comparisons
• Cross-country analysis made possible by a network of 19
external collaborators with direct microdata access

8. MAIN FINDINGS

9. 9
Finding #1: Firm pay practices account for
about one-third of overall wage inequality
Globalisation

10. 10
Finding #2: High productivity dispersion
contributes to high wage dispersion
Globalisation

11. 11
Finding #3: Barriers to job mobility widen firm
wage gaps
Globalisation

12. POLICY IMPLICATIONS

13. 13
A new perspective on policies to
address wage inequality
Globalisation
Traditional
policy
approach
Wage-setting
institutions
(mínimum wages,
collective
bargaining)
Skills policies
(education, adult
learning)
Complement
This report
Catch-up of lagging
firms
Integrate labour market
considerations into
competition policy
Reduce barriers to job
mobility, especially for
low-skilled

14. 14
Thank you!
Contacts
Chiara Criscuolo (Chiara.criscuolo@oecd.org, STI)
Alexander Hijzen (Alexander.hijzen@oecd.org, ELS)
Cyrille Schwellnus (Cyrille.schwellnus@oecd.org, ECO)
OECD team
Antton Haramboure
Michael Koelle
Nathalie Scholl
Wouter Zwysen (now ETUI)
LinkEED network
Wen-Hao Chen (Canada)
Valerie Lankester, Catalina Sandoval,
Jonathan Garita (Costa Rica)
Antoine Bertheau (Denmark)
Satu Nurmi (Finland)
Duncan Roth, Alfred Garloff (Germany)
Balazs Murakozy (Hungary)
Ryo Kambayashi (Japan)
Katarzyna Grabska-Romagosa (Netherlands)
Richard Fabling (New Zealand)
Erling Barth (Norway)
Priscilla Fialho (Portugal)
Vladimir Peciar (Slovak Republic)
Andrei Gorshkov, Oskar Nordstrom Skans (Sweden)
Richard Upward (United Kingdom)
Kevin Rinz (United States)