Low-skilled workers at risk due to growing wage gap

A recent report by the Austrian Court of Audit on income levels in 2011 highlights the steadily widening gap between the wages of the highest and lowest categories of workers, affecting in particular the low-skilled. This is a major problem, as low-skilled workers have suffered a considerable loss in real wages in recent years when inflation is taken into account. The report also found that low-skilled workers in the private sector earned less than low-skilled workers in the public sector.

Introduction

The General Income Report 2010 and 2011 (in German, 1.63MB PDF), published by the Austrian Court of Audit (Rechnungshof) in December 2012, provides a detailed overview of the distribution of income in Austria by gender, sectors, occupational/hierarchical status and educational level for 2011 based on pay, tax and social security data. It also gives a considerable amount of information about the development of wages in Austria between 1998 and 2011.

One aspect of the report that deserves special attention is the development of wages among Austria’s most socially vulnerable groups, especially low-skilled workers, as wage levels have a greater impact on the social situation of those who earn less. Of particular interest is the difference in wages between low-skilled workers working in public services and those employed by private companies. Also of interest is employment stability, which plays a decisive role in determining the annual wage levels of socially vulnerable groups.

The report’s findings highlight the importance of the public sector for the social inclusion of socially vulnerable groups in providing stable and secure jobs that offer adequate wages.

A growing wage gap

In general, the development of wages in Austria shows that the net inflation-adjusted median annual income of the employed population in 2011 (€18,529) was 2.8% below that of 1998. The loss in real income is even higher among low-wage earners.

In line with this overall trend, the wages of blue-collar workers only rose above inflation in three years during the period between 1998 and 2011. As a consequence, their median gross annual income in 2011 was only 88% and their median annual net income was only 92% of the blue-collar wage level of 1998 – a real loss of 8%. During the same period, white-collar workers managed to retain the value of their wages (+1%) while civil servants achieved an increase of 18%.

Low-wage earners suffered the most dramatic wage loss in this period. The lowest 25% of wage-earners in 2011 only earned 83% of their 1998 inflation-adjusted annual net income, and the lowest 10% as little as 71%. But whereas the lowest 10% of female wage earners in 2011 earned 87% of their 1998 net income, male workers earned 57%, suffering a loss in real income of nearly 50%.

The table below highlights the widening wage gap between high and low wage earners between 1998 and 2011.

Source: Statistik Austria, 2012, wage tax and social security data, consumer price index

Low-skilled workers’ pay is higher in the public sector

Another interesting difference highlighted by the report is the difference in the wages in 2011 of low-skilled workers working for private companies and those employed in the public sector. According to the report, which also presents income levels by gross hourly income, workers in unskilled and semi-skilled jobs in the private sector (blue-collar workers: €9.55 per hour; white-collar workers: €8.50 per hour) earned considerably less than workers in similar jobs in the public sector (public employees: €11.00 per hour; civil servants: €13.50 per hour).

Thus (white-collar) workers in the private sector earned only 63% of the gross wage per hour of civil servants in comparable jobs in 2011. This difference is all the more striking if gross annual incomes are taken into consideration – and thus the aspect of employment continuity – which is of particular importance in low-skilled jobs.

In terms of annual income, public employees (€24,121) and civil servants (€35,321) earned around twice and three times as much as low-skilled blue-collar (€11,444) and substantially more than low-skilled white-collar (€6,703) workers in the private sector in 2011. These huge differences are due to the high share of part-time and seasonal employment in low-wage private sector jobs: 48% of low-skilled blue-collar workers and 61% of low-skilled white-collar workers in the private sector work part-time compared with just 32% of public employees and 12% of civil servants.

Of even greater importance is whether a worker is in employment all year round or intermittently. Whereas large numbers of low-skilled blue-collar workers (47%) and low-skilled white-collar workers (54%) did not have year-round employment in 2011, this was only true for 12% of public employees and 9% of civil servants.

The substantial differences in annual wage levels give us a very clear idea of the crucial nature of employment stability and continuity for the social participation opportunities of low-skilled workers (one of the most socially vulnerable groups) and the particular importance of the public sector in this respect.

Commentary

The fact that the wage gap between high and low wages is still growing is a clear indicator of an ongoing social polarisation process within Austrian society beneath the surface of excellent overall labour market data. Low-skilled jobs are most affected by the ongoing overall process of the recommodification of the workforce (that is, treating the labour force as a commodity only governed by market influences, a process which can include the withdrawal of non-market protection mechanisms such as income support payments), which produces higher social vulnerability. This is indicated by the findings of the General Income Report. Public sector employment, especially for low-skilled workers, can play an important role in diminishing these effects.

Manfred Krenn, FORBA