Evolution of Work Segregation in Firms and Its Consequence on Wage Inequality

According to the neoclassic model of labor market, little room exists for the local level in the production of wage inequality. In this simple model, wage is the single market price for a certain quantity and quality of human capital. Hence, work inequality mainly derives from human capital inequality. Labor markets are nonetheless the markets that probably resemble the least the ones described in neoclassical economic theory, due to many imperfections that mitigate market forces. Among the latter, high transaction costs and asset specificity give birth to quasi-rents that employers and employees have to share. Recently Avent-Holt and Tomaskovic-Devey (2014) offered to reverse our traditional view of labor market. They consider the local balance of power to be the primary determinant of wage formation and not a secondary element mitigating market forces. The market still plays a role as an outside option fueling among many other elements the locale balance of power. The composition of the labor force and its categorization considerably contribute to the local balance of power. Women, immigrants, ethnic minorities, blue collars, managers are probably not paid the same in workplaces and in areas where they are in small numbers or in large numbers, recognized or ignored, organized or disorganized. This communication proposes to test such ideas by focusing at the local interactions between managers and professionals (cadres) and blue-collar workers on pay. When they are frequent, one might expect the comparisons with low paid jobs to refrain managers from asking high pay. It could therefore attenuate both the level of mangers pay and its dispersion.  For that aim, thanks to French employee-employer exhaustive data (1993-2009) and to Eurostat Structure of Earnings Survey (2002, 2006 & 2012), the communication studies the evolution of occupational segregation in establishments and firms, especially the exposure of high skilled workers (managers & professionals) to low skilled workers (blue collar and clerks) and its consequence on wage inequality among the former group. The communication presents the first results and evaluates the value added of extending the comparison to other countries holding similar data. If successful, this perspective would therefore reintroduce in a novel manner the traditional questions of class composition and norms of pay. How people cope with inequality impacts inequality.