PAY INEQUALITY AND THE DETERIORATING LABOUR … · This study furnishes proof in support of the...

I. RUBINIĆ, Pay inequality and the deteriorating labour...Zbornik Pravnog fakulteta Sveučilišta u Rijeci, vol. 40, br. 2, 799-822 (2019) 799

* IvanRubinić,mag.oec.,UniversityofRijeka,FacultyofLaw,[email protected].

PAY INEQUALITY AND THE DETERIORATING LABOUR STANDARDS IN CROATIA

Ivan Rubinić, mag. oec.* UDK:330.564(497.5) https://doi.org/10.30925/zpfsr.40.2.6 Ur.:1.ožujka2019. Pr.:7.svibnja2019. Izvorniznanstvenirad

Summary

This study furnishes proof in support of the hypothesis that Croatian employees are experiencing persistent worsening of the labour standard alongside the rising divergence in their earnings distribution. The research disclosed five mutually reinforcing tendencies investigated through a widely used Theil index and functional income distribution. The empirical analysis demonstrated the deterioration of the labour standard apparent through the continuous decline in the labour share of income concurrent with productivity growth. The net pay inequality reported a radical increase and stabilization on a higher plane with a nominal improvement brought about as a result of the layoffs predominantly affecting the lower tail of the distribution. Consequently, the lesser earning dispersion came at the expense of the overall rise in inequality. The gross inequality indicated an increasing pattern highly and positively correlated with the movement of the highest earners experiencing a triple-digit population surge. The rising between-county pay inequality throughout the period suggested a strong bias toward excessive centralization, evident with the capital city being the exclusive county consistently reporting above-average earning levels. Lastly, the between-sector pay inequality exhibited an overall decline. This isolated case, however, remains a dominant driver of inequality, given that the lowest-highest earning sector range is approximately double that of the between-county range. These findings are detrimental to the Croatian worker’s wellbeing and they pose a challenge to the national policymakers who must counter adverse tendencies in order to circumvent the current exodus of skilled workers, and restore long-term macroeconomic stability.

Keywords: inequality; pay inequality; Theil’s T statistic.

1. INTRODUCTION

The present-day deluge of academic writings addressing the subject ofinequalities emerges as a consequence of hazards generated by acute economic

I. RUBINIĆ, Pay inequality and the deteriorating labour...Zbornik Pravnog fakulteta Sveučilišta u Rijeci, vol. 40, br. 2, 799-822 (2019)800

polarization.Thefield’s leadingexpertsargue that theexcessive inequality isboththecauseandtheconsequenceofthesystem’sfailure,contributingtotheinstabilityandendangeringthefuture,1thatcapitalismgeneratesunsustainableinequalitiesvialimitlesswealthincreasethatunderminesmeritocraticvaluesandresultsinawasteofhumanresources,2andthatrisinginequalityisasignofatroubletocome.3Others4 holdinequalityasanaturaloutcomeofthemarketeconomy,distributingtherewardsin accordance with contributions and prescribing the inequality to a skill-basedtechnologicalchange.Conrad5asserts that thesuccessof the toponepercent isanassetratherthanaliability,whileWatkinsandBrook6claimthatthepurposeoftheinequality apologists is to create a land inhospitable to opportunity.These authorsadvocateforasmallergovernmentandopposetheredistributionbyappropriatingthelogicofMiltonandRoseFriedman7statingthatsocietymustputfreedomaheadofequality,orwillendupwithouteither.

While a certain degree of the inequality can be tolerated based on incentivegrounds, the author of this paper considers the arguments of the latter group asnot compelling and lacking adequate empirical grounds. Their reasoning is, inter alia, debunked byGalbraith8 who has shown that the extreme inequalities cannotbe legitimizedandarean indisputablesign that there issomethingwrongwith theunobstructed competitive model.Accordingly, the author considers it self-evidentthatthedrasticwideningoftheinequalitygap,ifleftuncontrolled,willresultintheplutocracyandtheoppressionoftheweak.

The multidimensional phenomena of economic inequality should to beinvestigated through the connectedness of its components amongst which theparamountonesincludewealth,income,andpayinequalities.Duetothehighcapitalcentralization, the wealth inequality is greater than the income inequality,9 whilethe income inequality isgreater than the inequalityofpay.Given that, the incomeinequality, in addition to earnings, is comprised of capital gains, dividends, rent,and other incomes. The full complexity surfaces when the matter is investigatedholistically.When it is proven that the individuals earning high capital gains arethe same ones receiving the highest labour incomes,10 and keeping the growth ofthepoorestasahostageoftherich.11Whenitisproventhatthisdynamicisfurther

1 Stiglitz,J.E.,ThePriceofInequality,NewYork,W.W.Norton&Company,2013.2 SeePiketty,T.,CapitalintheTwenty-FirstCentury,London,HarvardUniversityPress,2014

andPiketty,T.,TheEconomicsofInequality,London,HarvardUniversityPress,2015.3 Galbraith,J.K.,Inequality,NewYork,OxfordUniversityPress,2016.4 e.g.Mankiw,G.N.,DefendingtheOnePercent,JournalofEconomicPerspectives,vol.27,

3/2013,p.27.5 Conrad,E.,TheUpsideofInequality,NewYork,PenguinRandomHouse,2016.6 Watkins,D.,Brook,Y.,EqualisUnfair,NewYork,St.Martin’sPress,2016.7 Friedman,M.,Friedman,R.,FreetoChoose,NewYork,Harcourt,1980.8 Galbraith,J.K.,CreatedUnequal,Chicago,ChicagoUniversityPress,2000.9 Milanović,B.,GlobalInequality,London,HarvardUniversityPress,2016.10 Lakner,C.,Atkinson,A.,Wages,CapitalandTopIncomes:TheFactorIncomeCompositionof

TopIncomesintheUSA,1960–2005,2014.Availableat:www.ecinq.org.11 vanderWeide,R.,Milanović,B.InequalityIsBadfortheGrowthofthePoor,PolicyResearch

WorkingPaper,No.6963,WorldBank,2014.


reinforcedbytheinequalitiesofopportunitiesandprolongedthroughtheinequalityspiral permanently capturing theworkers’wellbeing through the decline of labourstandards,earnings,andprospects.Accordingly, theprincipalfocusofthisstudyisplacedon theearnings inequalitywhichreflects thepositionof themajorityof thepopulationwhosedependenceonwagesrepresentsamatterofexistence.

Ontheaforementionedfoundations,thispaperisaddressingthecentralissueofCroatianpayinequalitiesandlabourforcestandardswiththehypothesisstatingthattheCroatianworkersuffersboth,fromtheworseningoftheirlabourstandardsandfromthehighlevelofearninginequalities.Theformerisput toatestviaresearchquestionsdealingwith the labour shareof incomeand labourproductivity,overallnetandgrosspayinequality,between-countypayinequality,andbetween-sectorpayinequality.

The secondarymotivation for the study is todisclose that the inequality riseand the deterioration of the labour force position is at the root cause ofCroatia’sdisastrousdemographictrends.12Giventhattheinternationalmigrationisthesymbolofinequality,13itisnosurprisethatCroatiaisfacingahighrateofemigrationofskilledworkers trying to captureMilanović’s citizenship rent, trying to avoidGalbraith’snationaleconomicdestiny,andseekinganeconomicrefugeinacountrywithahigherlevelofsociallabourrecognition.14

This research is structured in six parts. After the introduction, the authorpresentstheliteratureoverviewwithinthesecondsection.Sectionthreeelaboratesonthemethodologyusedanddatainducedlimitations.Sectionfourdisplaystheresultsofthelabourforcepositionviafunctionalincomedistributionandlabourproductivity.Thefifthsectionpresentsthedimensionsandtrendsoftheoverall,county-based,andsector-basedpayinequities.Sectionsixconcludes.

2. THE OVERVIEW OF THE CROATIAN ECONOMIC INEQUALITY

Permeated with the momentous history ranging from Yugoslavia with acommandeconomyand social ownership, through the independent countrywith amarketeconomyandprivateproperty,totheEuropeanUnion’ssinglemarket,Croatiacanserveasanidealtestingfieldfortheinvestigationoftheeconomicinequalities.TheformerisnotablydocumentedwithintheUTIPdatabase,whichislargelyneglectedwithintheexistingresearch.

12 Akrap,A.,DemografskislomHrvatske:Hrvatskado2051.,Zagreb,Bogoslovnasmotra,vol.85,3/2015,p.855.

13 Black,R.,Natali,C., Skinner, J.,Migration and Inequality, background paper for the 2006WorldDevelopmentReport,Sussex,2004.Availableat:www.worldbank.org.

14 Rubinić,I.,Tajnikar,M.,LabourForceExploitationandUnequalLabourExchangeastheRootCauseoftheEurozone’sInequality,Zagreb,DruštvenaIstraživanja,vol.28,2/2019,p.207.


Figure 1.CroatianEstimatedHouseholdIncomeandPayInequality(1986-2015).

TheUTIP15databaseprovidestheUTIP-UNIDOindustrialpayinequalitydataused for thecalculationof theestimatedhousehold income inequality (EHII).Thedisplayedpatterns indisputablyconfirmtheoverall inequalityriseandcomplementan existing explanation. In hiswork based on the household consumption survey,Nestić16 concludes that the income inequality was declining from 1973-83, afterwhichitstartedtoriseuntil1998.Nestićisrightfullysurprisedwhenwritingthattheinequalityalterationswerenothighwhencomparingthesocialistsettingof1988tothemarketeconomyadecadelater.Theapplicationofthementioneddynamicstothepresentedfigurebuildsuponthefindingthat thetransitionplayedakeyroleintheoverallriseininequality17andindicateasignificantinequalityincreasefrom1988-98,suggestingthattheconsumptionsurveydataareaninadequateestimatoroftheinequalityduringwartime.

Oncethispeculiarhistoricaldevelopmentisrecognized,itbecomesenigmaticthattheCroatiancasedidnotattractappropriateattention.Fromthemodestbodyofcomparativeliterature, thefollowingworksmustbementioned.TheWorldBank,18 in 2001, confirmed that the increasing inequality poses a severe challenge to theCroatian economywhich suffers from awide gap between the rich and the poor,high informal economy, inadequate safety nets, poor comparative performance,low competitiveness, and generally speaking, an unfavourable position.With theincomeinequalityinquestion,Novokmet19concludesthatthetransitiontothemarketeconomyhasraisedtheinequalitymeasuredthroughtheusageofincometaxdata.The inequality stabilized in1990andwasprimarilydrivenby the rising sharesoftopearners.Novokmetproves thatoverone thirdof the incomesof thewealthiest

15 UTIP,InequalityProjectData-Set,Austin,UniversityofTexas,2018.16 SeeNestić,D.,EkonomskenejednakostiuHrvatskoj1973-1998,Zagreb,FinancialTheoryand

Practice,vol.26,3/2002a,p.595,andNestić,D.,EkonomskanejadnakostuHrvatskoj1998.manjaodočekivanja,Zagreb,EconomicReview,vol.53,11-12/2002b,p.27.

17 SeeMilanović,B.,TheHavesandtheHave-nots,NewYork,BasicBooks,2012.18 Croatia: EconomicVulnerability andWelfare Study,Washington,World Bank (Report No.

2079-HR),2001.19 Novokmet,F.,Betweencommunismandcapitalism:essayson theevolutionof incomeand

wealthinequalityinEasternEurope1890-2015,PhDThesis,ParisSchoolofEconomics,2017.


Croatianscomesfromemploymentearnings.Thus,confirmingtheclaimofLaknerandAtkinsonand,assubsequentsectionsempiricallyshow,confirmingavitalrolethat top earners exercise in governing pay as well as overall inequality. In 1999,Milanović20findsthatthecrucialfactorbehindtheupwardtrendduringthetransitionisincreasedinequalityofwagedistribution,whileNestić21confirmsthattheunequalwagesarethebiggestcontributortotheoverallinequalityinCroatia.

Fromthepayinequalitypointofview,severalauthors22haveproventhat theinequalityishigherintheprivatesectorthanwithinthesectorswiththeprevailingcountryownership.SectoralandregionaldisparitieswereinvestigatedbyNestićetal.,23 who have shown that the employment loss from 2009-13 disproportionatelyaffected low-wage sectors. They have, via the heterogenous counties’ reliance onthe minimumwage effects, effectively proven the between-county inequality anddependence.Additionally,thebetween-countypayinequalityisconfirmedbyKaramanAksentijević and Denona Bogović,24 while the growing tendency arising fromdiverging cross-county development levels is confirmed byKaramanAksentijevićandJežić.25

An additional contribution came from Hofman et al.26 who, by examiningCroatianwageinequalityanddifferentials,provedthegeneralinequalityincreaseinthenetearningsdistribution.Bybuildinguponthisresearch,BićanićandTuđa27reportedthe continuation of the rising trend through 2013, and showed that the inequalitywas increasingwithin theexpansionphase.The impactof thecrisis2007/2008onthewageand income inequalitieswas investigatedbyFraničević,28whodisplayedfindingsconsistentwiththeonespresentedinthispaper.Franičevićconcludedthattheinequalitieshavedecreasedfrom2007-09becausethelowerearnerssufferedhighemploymentlossesandthetopearnersexperiencedadecreaseinwages.Atthesame

20 Milanović,B.,Explainingtheincreaseininequalityduringtransition,EconomicsofTransition,vol.7,2/1999,p.299.

21 Nestić,D.,TheDeterminants ofWages inCroatia, in: Proceedings of the 65thAnniversaryConferenceoftheInstituteofEconomics,Zagreb,Economicinstitute,2005,p.131.

22 e.g.Rubil, I.,TheGreatRecessionandPublic-PrivateWageGapMPRApaper,No.46798,Munich,2013,andNestić,D.,Rubil,I.,Tomić,I.,AnalysisoftheDifferenceinWagesbetweenthePublicSector,State-OwnedEnterprisesandthePrivateSectorinCroatiainthePeriod2000-2012,Zagreb,EconomicTrendsandEconomicPolicy,vol.24,1/2015,p.7.

23 Nestić, D., Babić, Z., Blažević Burić, S., Minimum age in Croatia: sectoral and regionalperspectives,EconomicResearch,vol.31,1/2018,p.1981.

24 KaramanAksentijević,N.,DenonaBogović,N., Economic Inequality and the Influence ofSalarieson Income Inequality in theRepublicofCroatia,ProceedingsofRijekaFacultyofEconomics,vol.21,1/2003,p.37.

25 Karaman Aksentijević, N., Ježić, Z., Tendencies of development inequalities of Croatiancounties,ProceedingsofRijekaFacultyofEconomics,vol.29,2/2011,p.269.

26 Hofman,S.,Bićanić,I.,Vukoja,O.,Wageinequalityandlabourmarketimpactofeconomictransformation:Croatia1970-2008,EconomicSystems,vol.36,2/2012,p.206.

27 Bićanić, I., Tuđa, D.,Wage inequality in Croatia during boom and bust (2000-2014), In:Challenges of Europe: Growth, Competitiveness and Inequality, Hvar, University of Split,2015.

28 Franičević,V.,Croatia:Prolongedcrisiswithanuncertainending,in:Vaughan-Whitehead,D.(ed.),WorkInequalitiesintheCrisis,Cheltenham,EdwardElgarPublishingLimited,2011.


time,thewagesoftheemployedlowearnersexhibitedrigidityduetotheminimumwageimpact,whilethehighcrisis-ledemploymentlosshasincreasedthecountries’povertyrisk.

Lastly, the considerable advancement in the investigation of pay inequalitieswasdonebyBićanićetal.29Theseauthorshavesetafoundationonwhichallfutureresearchinthefieldwillbuildupon.Throughacomprehensiveapproach,theyhaveshownthattheCroatiangrossandnetpayinequalities,generatedbythehighinequalityinthedistributionoftheupper-tailearnings,areontherisefromthebeginningofthe21stcentury.Their studyconstitutes thebasisuponwhich theauthorof thispaperextendstheanalysis,providesacontribution,andsolidifiesthefindingsbyelaboratingthemthroughthein-depthexamination.

3. MEASURING INEQUALITY FROM EARNINGS DATA

Forthepayinequalitymeasurement,theauthorusedTheil’sTstatisticfoundedontheworksofTheil30andwidelyusedinthefieldofeconomicinequality.31Theil’sTstatisticmeasuresthedegreeofdispersionabouttheaveragevalueforgroupsofobservations.Thus,forngroups,Theil’sTstatisticisexpressedas:

(1)

where is the number ofworkers in group i, is the totalworking population,denotes theaverage incomeingroup i, is thenatural logarithm,andrepresents theaverageincomeofthetotalworkingpopulationcalculatedasaweightedmeanwithweightsbeingthepopulationshares.TheexpressionwithinthesummationiscalledtheTheilelement.Theyare,asaconsequenceofthelogarithmicterm,positiveforgroups with above-average income and negative for groups with below-averageincome.However,theTheil’sTstatisticasthesumofelementsisalwayspositive.Thepracticalfeatureofthismeasureisthatitrequiresonlyinformationondistributionofworkersandtheirearningsdividedintomutuallyexclusiveandcompletelyexhaustiveclasses.32

29 Bićanić, I., Ivanković, Ž.,Kroflin,M.,Nejednakost plaća uHrvatskoj 2003.-2016, Zagreb,Političkamisao,vol.55,3/2017,p.43.

30 TheTheil index isamemberof thefamilyof inequalitymeasuresentitled“generalentropymeasures”where the highly organized system is connected to the low-entropy,while high-entropy isa signofadisorderedsystem.SeeTheil,H.,StatisticalDecompositionAnalysis:WithApplications in the Social andAdministrative Sciences, Amsterdam, North-Holland,1972.

31 SeeConceição,P.,Bradford,P.,Galbraith, J.,TheTheil Index inSequencesofNested andHierarchicalGroupingStructures,EasternEconomicJournal,vol.27,4/2001,p.491;Sbardella,A.,Pugliese,E.,Pietronero,L.,Economicdevelopmentandwageinequality,PLOSOne,vol.12,9/2017.

32 Conceição,P.,Ferreira,P.,TheYoungPerson’sGuidetotheTheilIndex,UTIPWorkingPaper,14/2000.Availableat:http://utip.gov.utexas.edu.


TheempiricalinequalitymeasurementisundergoneusingtheCBSdatacollectedforthepurposeofinvestigatingCroatianpayinequalitiesbyBićanićetal.

Thestudyofoverallnetpayinequalityusesthedataonnetearningsincludingthepersonsinemploymentinlegalentitiesofalltypesofownershipworking160-200monthlyhours.ThesedataaregatheredbytheCBSthroughtheAnnualSurveyonPersonsinEmploymentandPaid-offEarningsfromMarch(RAD-1Gform).Dataarecollectedonreportsfilledinbylegalentitiesaccordingtotherecordsofpersonsinemployment.ThedataarereportingtheannualearningbasedontheinformationforMarchofeachyearandaredistributedovertwentyearningclassesfortheperiodof2000-15.Duringtheselectedperiodthereweresomeminorconceptualinconsistencieswith regard to including/excluding the military and police within the analysis,alterations innational classificationof economicactivities in2009, andalterationsintheclasssizefortheyears2014-15.TheanalysisofoverallgrosspayinequalityusesdataongrossearningsgatheredbytheCBSthroughtheofficialformsR-smfortheyears2003-13(collectedbyCentralRegistryforInsuredPersons“Regos”)andJOPPDformfor2014-15(collectedbyTaxAdministration).Thegrossearningsareincludingpersonsemployedbylegalentitiesforadefiniteorindefiniteperiodoftime,regardlessofthedurationofworkinghours.If thepersonemployedreceivesgrossearningsfrommultiplesources,theyaretreatedasonebygroupingtheindividualintheappropriateearningsclass.Thedataongrossearningsarereportedmonthlyfrom2003-15andarelimitedbyfollowingmethodologicalissues:theJOPPDformgathersdatamore accurately than its preceding source, in certain years the data includesindividualsininternshipwithspeciallegalstatus,thedatasetexperiencedclasssizealterationsafter2007(from83classesin2007to164classesfrom2008onwards),thedatasethasonemisreportedperiod(December,2013)omittedwithinthisanalysis.

Since these sources report a categorical earning measurement, by groupingindividualsintoearningclasses,alltheobservationswithinanintervalareassignedthesamevalue.Theconversionofgroupdatatopointdataisperformedviamidpointmethodimputingthemidpointintervalvaluetoeachobservationwithintheclass.Theearningsofthehighest,open-endedcategory,arereceivedbyfollowingthecommonlyusedapproach,33whichassumes that themidpointexceeds theopen interval lowerboundby10%.

TheCroatianbetween-countypayinequalityisbasedontheannualaveragedataonmonthlynetandgrossearningsandthenumberofpersonsinemployment,whicharepubliclyavailableandpublishedbyCBS.34Thepersonsinemploymentarethoseemployedforafixedorspecifiedperiodoftime,irrespectiveofwhethertheyworkfulltimeorless.Thedataarereportingtheaverageearningsfortwenty-onecountiesgatheredfromtheannualsurveyfrom1998-15withareportingdateof31March.

33 SeeFields,G.S.,ACompendiumofDataonInequalityandPovertyfortheDevelopingWorld,NewYork,CornellUniversity,1989,VonFintel,D.,Earningsbracketobstaclesinhouseholdsurveys–Howsharparethetoolsintheshed?,StellenboschEconomicWorkingPaper,08/2006;Yu,D.,Somefactorsinfluencingthecomparabilityandreliabilityofpovertyestimatesacrosshouseholdsurveys,StellenboschEconomicWorkingPaper,03/2013.

34 CBS, Employments andWages Review by Counties.Available at: www.dsz.hr (AccessedNovember7,2018).


Between-sectorpayinequalityismeasuredthroughthedispersionovernineteennational-levelactivitiesbyaccountingforannualaveragenetandgrossmonthlypaidoffearninginadditiontothenumberandcompositionofpersonsinpaidemploymentinlegalentities.Thedataaregatheredfromthesurveyincludinglegalentitiesofalltypesofownershipandcovering70%ofthepersonsinemployment,andarecollectedonreportsfilled-inbylegalentitiesaccordingtotherecordsofpersonsinemployment.AllthedataarepubliclyavailableandretrievedfromCBS35fortheperiodof2000-15.

When empirically employed, specifiedmethodological restrictions combinedwithdata limitationsgenerateconstraints thatonemustbeawareofwhenmakingfinaljudgments.Theirreversibledatadefectsaretheunfortunaterealityaffectingamajorityof theworks in thefield,orasGalbraithputs it:“If science consists in a search for patterns in data, then the study of economic inequality suffers from an original sin”36.Onthebrightside,theconcernsraisedbythedataimperfectionswillbe countervailablewhen a higher number of high-qualitymicro data observations(JOPPDform)willenhancetheeconomicinequalityanalysis.

4. LABOUR SHARE OF OUTPUT AND PRODUCTIVITY

The functional income distribution and accompanying, regulating laws havelongbeenrecognizedastheprincipalproblemsinpoliticaleconomy.37AccordingtoAtkinson,38theincomebreakdownbyitssourcesprovidesavaluablestartingpointinunderstandingthedistributionofincomeinequalityandaddressingtheconcernwithregardstosocialjustificationofdistinctincomesources.Itisonthesegroundsthattheindispensableinquiryintothelabourforcepositionmustcommencebyinvestigatingthe dynamics of the labour share of income. In order to capture and analyse thewellbeingoftheCroatianlabourforce,thepointofdeparturelaysinthedisintegrationofthenationalincome.Forthispurpose,theauthorcalculatedthelaboursharethroughthemethodtreatingthelabourshareofincome()astheratioofthetotalemployees’remunerationtothevalueadded.39Formally,

(2)

35 CBS,MSIEmploymentandWages.Availableat:www.dsz.hr[AccessedNovember7,2018].36 Galbraith,J.K.,Inequality,unemploymentandgrowth:Newmeasuresforoldcontroversies”,

JournalofEconomicInequality,vol.7,2/2009,p.190.37 SeeRicardo,D.,PrinciplesofPoliticalEconomyandTaxation,London,Dent,1911.38 Atkinson,A.B.,Factorshares:theprincipalproblemofpoliticaleconomy?,OxfordReviewof

EconomicPolicy,vol.25,1/2009,p.3.39 SeeJayadev,A.,Capitalaccountopennessandthelabourshareofincome,CambridgeJournal

of Economics, vol. 31, 3/2007, p. 423;Daudey, E.,Garcia-Penalosa,C.,The Personal andtheFactorDistributionsofIncomeinaCross-SectionofCountries,JournalofDevelopmentStudies,vol.43,5/2007,p.812.


whereCOEisthecompensationforemployees,GDPisthegrossdomesticproductorthevalueadded,Tinddenotesindirecttaxeslesssubsidies,andCFCistheconsumptionoffixedcapital.

Itmustbenotedthatthe,inlinewithGuerriero40andBernanke&Gurkaynak,41 LSwascalculatedbyusingGDP.Thatbeingsaid,itshouldbeemphasisedthatthemoderneconomicrelationshipsposeachallengeindifferentiatingbetweenincomesourcesresultinginaninadequatelabourshareestimation.ThelatterisexplainedbyGuerrieroand,assuch,isbeyondthescopeofthispaper.However,byacknowledgingall computationalmethods, the choice to use the presented one is the outcome ofthefactthattheusageoftheCOEismostconvenientforthecomparisonswiththesubsequentsections,aswellasthefactthatothermethods,withanalogouspatterns,overestimatedthelaboursharebysometimesreportingthevaluegreaterthan1.

Inorder to investigate the full extentof the labour forcepositionandgainabroaderunderstandingofthematter,asidefromthelabourshare,theresearchmustencompassthelabourforceproductivity.Suchanupgradeisusefulforquestioningwhether theproductivitymovement is commensuratewith the income receivedbythe respective production factor.Amongst a variety of productivity quantificationapproaches,theauthorappliedthefrequentlyused,nominallabourproductivityperperson employed, expressing the productivity as the ratio of labour inputs to thevalue of production. Quantifying the productivity as the GDP per employed waspreferredbecauseitpointsoutthegeneralproductivityimpressionandenablesforthecalculationofthelongestperiodattainable.

Onthisbasis,thetwoabovementionedcomponentswerecalculatedforCroatia.The data for the COE,GDP andTind is retrieved from Eurostat.

42 The number ofemployed is taken from ILO,43 and theCFCOdata is obtained fromEurostat44 byestimatingthemissingvaluesthroughtheusageofCBS’s45informationontheshareofCFCinGDP.

40 Guerriero,M.,TheLabourShareofIncomearoundtheWorld,DevelopmentEconomicsandPublicPolicyWorkingPaper,32/2012.

41 Bernanke,B.S.,Gurkaynak,R.S.,IsGrowthExogenous?TakingMankiw,Romer,andWeilSeriously,in:Bernanke,B.S.,Rogoff,K.(ed.),NBERMacroeconomicsAnnual16,Cambridge,MITPress,2002.

42 Eurostat,GDPandmaincomponents.Availableat:http://ec.europa.eu[AccessedOctober8,2018].

43 ILO, Status in employment – ILO modelled estimates. Available at: http://www.ilo.org [AccessedOctober8,2018].

44 Eurostat, GDP andmain aggregates.Available at: http://ec.europa.eu [AccessedOctober 8,2018].

45 CBS,AnnualGrossDomesticProduct,1995-2005,Zagreb,CBS(FirstReleaseNo.12.1.3.),2009.


Figure 2.LabourshareofGDPandlabourproductivity(1999-2015).

Asdemonstrated,foundedontheauthor’scalculationsbasedonthedatafromEurostat,CBS,andILO,withintheanalysedperiod,thepositionoftheCroatianlabourforcesubstantiallydeterioratedasaresultoftworeinforcingtendencies.Firstly,theshareofthenationalincomegoingtothelabourforcereporteda10%dropin2015incomparisontothebeginningoftheperiod.Secondly,thefallinglabourstandardwasfurtherintensifiedwith95%increaseinthelabourproductivityin2015comparedto2000.

This necessitates a digression.Considering that the factor shares are relativevalues,what appears to be a 2008 labour position improvement is a consequenceof the crisis-led decline in the profit income share.This brings to the surface theultimatedegreeofthelabourpositionworsening,becomingapparentassoonastheanalysis isbroadenedtoincludeprofits.Theprofitshare,calculatedfromthesamesourceandencompassingthegrosssumofoperatingsurplusandmixedincome,netoffixedcapitalconsumption,reporteda28%risewithinthesameperiod.Paradoxically,thisinequalityisfurtherenhancedbytheCroatiantaxsystem,throughtheviolationoftheequityprinciplesandunfairtaxationthatdisproportionallyaffectsthelabourearnings.46Effectively,theCroatianworkerthatbearsahighertaxburdenexperienceda relativedecline in theirgross,pre-taxearnings (COE)alongside the riseof theirproductivity and simultaneously with the growth of the share of national incomeconstitutingprofits.

5. DIMENSIONS AND DYNAMICS OF CROATIAN PAY INEQUALITY

The scrutinization of the pay inequality phenomena is carried out throughtwomajorsegmentsdistinguishedbythenatureof inquiryanddataused.Thefirstsegmentdealswiththedynamicsandimplicationsofoverallpayinequality,analysedviamicrodataonearningsdistribution.Thesecondsegmentdealswiththespecific

46 SeeŠkalamera-Alilović,D.,Rubinić,I.,TheTaxSystemasaGeneratorofEconomicInequalityinCroatia.In:BookofProceedings:16thInternationalScientificConferenceonEconomicandSocialDevelopment,Varaždin,DevelopmentandEntrepreneurshipAgency,2016;p.459.


pay inequality dimensions accomplished through the annual average data. Theinterconnectednessofpresentedcomponentswillbroaden theunderstandingof theresearchedtopicanddemonstratenewfindingswithrespecttoCroatianinequality.

Theoverallinequalityanalysis,constitutingthefirstsegment,issubdividedintotwopartsdifferentiatingamongstpayinequalitiesbasedontheearningstatus.Thefirstcomponentinvestigatesthenetinequality,whilethesecondonedealswiththegrossinequality.Duetotheusageofvariousdataandgroupingsizes,theaforementionedcomponentsarenotcomparableandmustbeinvestigatedindependently.

Figure 3.Overallnetpayinequality(2000-2015)

WithinFigure3,overallpayinequalityisretrievedfromBićanićetal.,whereasadjustedoverallpayinequalityistheauthor’scalculationbasedonCBSdata(RAD-1Gform).Overallnetpayinequalityoccursintwoformsbasedonthedistinctapproachtakenbytheauthors.Themaindifferencearisesasaconsequenceofmethodologicalchangesintherawdataconnectedprimarilywiththeseriesbreakinthesize/spanoftheearningclasses.WhileBićanićetal.presentedtheoverallinequalitytrendderivedfromtwentyclasseswithoutclassalteration,theauthorofthispaperdemonstratedtheadjustedversioncomprisedofclasssynchronizationandexhibitingthetrendwithareducednumberofclasses(sixteen).Duetotheunequalclasscomposition,theresultsobtainedarenotdirectlycomparable.Regardlessoftechnicaldisparities,itisevidentthatbothmethodsindicateatrendmarkedbyaradicalriseduring2003,afterwhichtheinequalitywasmaintainedonahighlevel.Toputtrendsintoperspective,duringthe referenceperiod, thenumberof representativeswithin the class earningabove21,000HRKincreasedby1278%from2000-15,whilethedramaticrisein2003cameasaconsequenceofa69%riseinrepresentativesearninglessthan2200HRK,witha17%riseofthehighestearningrepresentatives.

Theadjustedtrendseemstobemoreconsistentwiththeunderlyingtheoreticalinterpretation suggesting the influence of economic cycles within the inequalitypatterns.Thiscyclicalinfluenceiscapturedwithintheinequalitydeclineinitiatedbytheeconomicdownturnof2008lastinguntil2014.Atthispoint,itbearsmentioningthat theanalysis is limited to thepay inequality structure,and thatwithout furtherinvestigation, generating conclusions about seemingly positive trends can be


misleading.Therefore, it isofparamountimportancetoexplainthat thisinequalitydecline is not a consequence of benevolent economic forces as indicated in thesubsequentfigure.

Figure 4. Employment structure for selected classes expressed in thousands ofemployed(2000-2015).

Figure4displaysauthor’scalculationbasedonCBSdata(RAD-1Gform)thatshowsthetotalnumberemployed,employedinthelowestclass(earningupto4,000HRK), employed in the middle class (earning between 4,001-21,000 HRK), andemployedinthehighestearningclass(earningabove21,001HRK).Accordingly,itbecomesevidentthatthedeclineinthepayinequalitycomesasaresultofthedynamicsoccurringwithinthelowertailoftheearningdistribution.Inflictedbythecrisis,thedropinthetotalnumberemployedoccurredthroughthedeclineofemploymentinthelowestearningclasswhilethetrendsformiddleandhighearnersexperiencedahighlevelof stabilisation.This implies that the surge inunemployment inducedby thecrisiswastheoutcomeoflayingoffofthelowearningworkers.Therefore,thedeclineoftheadjustedoverallnetpayinequalityfromFigure3didnotimprovethewellbeingoftheaverageworkersinceithappenedasthemanifestationofthemassivelayoffswhichincreasedoverallCroatianeconomicinequality.

Acknowledgingthesefindingsbringsaboutuncertaintyandnegativeperspectiveswhen contemplating on the future of Croatian pay inequality. Derived from thenotionthattheEuropeandoublediprecessionendedin2013,thechallengethatthepolicymakersshouldbeincreasinglyfocusedonishowtopreventthecorrespondingre-appearanceoftheinequalityincreasethatoccurredwithinthelastexpansionperiod.

Alternatively,theresearchquestionisstudiedfromtheaspectofgrossearnings.


Figure 5.Overallgrosspayinequality(2003-2015).

In a manner similar to that of net inequality, Figure 4 presents two grossinequalitytrends.TheoverallpayinequalityisretrievedfromBićanićetal.,whereasadjustedoverallpay inequality is theauthor’scalculationbasedonRegosandTaxAdministrationdata(R-smandJOPPDforms).Again,thedifferencearisesfromthebreakintherawdatamethodologywhich,upto2007,reportsearningsgroupedinto83classes,whilefrom2008onwardsthatnumberrisesto164.Theoverallgrosspayinequality iscomputedwithoriginalclasscomposition,while theadjusted trend isauthor’scalculationthroughtheapplicationoftheuniformnumberofearningclassesthroughouttheperiod.Thecorrectedversionthussynchronizestheclassesbythetotaldistribution disaggregation over 83 classes.Additionally, in order tominimize theconsequentiallossofinformationinflictedbytheclassreduction,theaverageearningofthehighestclasswasestimatedasanaverageannualearningoftheupper84classes(earningmore than41,000HRK) reported for theperiodof2008-15.Asdepicted,theadjustedversionexhibitsasmoother trendandrepeatedlycaptures thecyclicalinfluenceknownfromtheeconomictheory.Thesemostlyoverlappingmethodsaredrawingcorrespondingconclusionsandunambiguouslyprovetheincreasingtendencyof Croatian gross pay inequality amounting to a 27% increase over the period oftwelveconsecutiveyears.

An attractive feature of investigating the gross inequality via monthly datasurfacesfromitsabilitytoberelatedtotheconventionalearningsdata.Thisallowsfor the straightforward investigation of the inequality drivers, a scenariowhich isparticularly interesting to associate with the ratio betweenminimum and averagegrosswage.


Figure 6.Theshareofminimumgrosswageintheaveragegrosswage(2003-15).

BasedonthedataretrievedfromZDOO,47ZMP,48andCBS,therecognitionofthecontinuouslyincreasingtrendoftheshareofminimumwageintheaveragegrosswagecomesasanunexpectedoutcome.Giventhegrosspayinequalitygrowth,itisreasonable to anticipate that the lower earning representativeswould experience aworseningratherthanimprovementoftheirrelativeposition.Theintuitiveresponsetosuchinsightistodirectthestudytotheuppertailoftheearningsdistribution.

Figure 7.Percentageshareofthenumberofemployedintotalnumberemployedfortheselectedclasses(2003-2015).

SincethequantificationoftheCroatiangrosspayinequalityisundergoneusingtheTheil index, the influenceof certainclassescan simplybeviewed through thenumber of its representatives expressed as the share of total employed.With thisinmind,basedon thedatafromRegosandTaxAdministration(R-smandJOPPDforms), all workers covered by the data are clustered into three earning brackets.The lower tail includes theworkers earningup to3,500HRK, themiddlebracket

47 ZDOO[StatutoryInsuranceContributionsAct],OfficialGazette,No.147/2002.48 ZMP[MinimumWageAct],OfficialGazette,No.39/2013.


includesemployeesearning3,500-41,000HRK,andtheuppertailiscomprisedofthewealthiestindividualswithmorethan41,000HRKingrossmonthlyearnings.Atthispoint,itbecomesindisputablenotonlythattheadjustedoverallgrosspayinequalityishighlyandpositivelycorrelatedwiththenumberofuppertailindividuals(.798),butalsothattheinequalitygrowthispredominantlydrivenbytheriseofhighearners.ThisnotionbecomesespeciallyalarmingwhenitisconsideredthattheabsolutenumberofhighearnersinDecember2015increasedby543%sincethebeginningoftheperiod.Moreover,whilethelowestandmiddleclassesreportedmostlybalancedtrends,themovement of the high earners suggests, in accordancewith previous findings, thepresenceofacyclicalinfluence.Thefullextentoftheissuebecomesstrikingwhenitisconfirmedthat,onaverage,in201520%ofthetotalCroatianworkforceearnedlessthan3,500HRK,5,211individualsearnedmorethan41,000HRK,660earnedmorethan100,000HRK,and28earnedmorethan500,000HRK,ingrossmonthlyearnings.Theacknowledgmentthattheindividualearningminimumwagemustworkatleast13.7yearstoearnasmuchasthehighestearnermakesinamonth,defiesthelogicofmarginalcontributionandthecommon-sensejustification.49

Uponexhibiting thefindings related to inequalitydynamics, the forthcomingsection is addressing the issue of dimensions in which existing pay inequalitiesmanifest. This is achieved by considering the matter from two distinct aspects,constitutingthesecondmajorsegment.

Figure 8.Between-countypayinequality(1998-2015).

Based on the author’s calculation derived from the CBS data, the analysishas reported a steadily increasingpay inequality trend.From thebeginningof theinvestigatedperiodin2015,thenetinequalityhasincreasedby146%whilethegrossinequalityhasrisenby31%.Regardlessoftheearningstatus,throughouttheperiod,receiving the highest average earningwas an exclusive privilege of the employedwithin the City of Zagreb. Contrarily, the lowest average earnings were reportedwithin Međimurje and Varaždin counties. If pay inequality is analyzed via Theilelements,thegroupwiththelowestearningsincludesOsijek-BaranjaandVaraždin

49 In thecaseofnetwagescalculated forDecember2015, for individualswithbasicpersonaldeductionsreportedinCityofZagreb,thisdifferenceisatleastnineyears.


counties. Conversely, the group with above-average earnings, after 2007 includestheCityofZagrebinadditiontoPrimorje-Gorskikotar(until2014)andDubrovnik-Neretva (2014-15),which reportedpositivenetvalues.When it comes to the ratiobetweenanaveragecounty’searningsandtheaveragecountry’searnings(weightedby thecounties’ respectivepopulationshares), thereexistsvariation in theearningstatus.Therefore, the above-averagegross earningsweremeasured in: theCity ofZagreb (2002-15), Primorje-Gorski kotar (2006-06; 2008), Istria (2002-06), andLika-Senj (2003).Whereas, above-averagenet earningswere reported in: theCityofZagreb (1998-15), Primorje-Gorski kotar (1998-14),Zadar (1998-99; 2003-05),Split-Dalmatia(1999-01),Sisak-Moslavina(2000),Istria(2001-07),andDubrovnik-Neretva(2014-15).GiventhattheaverageearningsofthoseemployedintheCroatiancapital,theCityofZagreb,onaverage,surpassednationallevelsby22%(gross)or16%(net), the resultsprovideaclear insight into theextent that thecentralizationprocesshasregardinggovernanceofCroatia’soveralleconomicinequality.

Compared to the gross, the lower net between-county pay inequality can belargely attributed to the national taxation policies. However, given the shrinkingnumberofcountieswithabove-averageearnings,theeffectivenessofthesepoliciesisundeniablydiminishing,irrespectiveoftheintroductionofalocalsurtaxonincometax in 2001.These striking patterns suggests that the geographical location of theemployment isbecomingadeterminantofworkers’wellbeing,perhaps toahigherdegree than the skills that workers have to offer. Accordingly, it is no surprise,especiallyinrecenttimes,thattheCroatianworkerstendtoidentifythemselvesandtheireconomicpositionbywheretheylive.

What is particularly interesting, in this hitherto analysis, is that theCroatianpay inequality is negatively correlated with the unemployment rate published byEurostat.50 Such a dynamic opposes Galbraith51 and reveals the unconventionalcyclicalinfluenceoninequality.Itremainsapuzzlewhythepayinequalityincreasedintheexpansionphaseanddecreasedinthecontractionphaseoftheeconomiccycle.Atthetimeofwritingthispaper,basedonthedataavailability,thepartialintuitiveinterpretation is that the inequalities in thepaystructuresareextremelydependentontheprocyclical,uppertailmovements.Thisinsinuatesthatthetopearnershaveamuchhighereffectontheentirepayinequalitythanthelowerandmiddlepartofthedistributioncombined.Regardlessof thegravityof the remark, this issuedeservesspecialattentionandmustbeexaminedintheforthcomingresearch.

The closing typeof pay inequalitywithin the realmof this paper dealswithsectoral pay differentials. Albeit less polarized than in the between-county, thebetween-sectorcomponentplaysaparamountroleincreatingpayinequality.

50 Eurostat,Unemployment by sex and age – annual average, available at: http://ec.europa.eu[AccessedJanuary9,2019].

51 Galbraith,J.K.,InequalityandInstability,NewYork,OxfordUniversityPress,2012.


Figure 9.Between-sectorpayinequality(2000-2015).

Based on the author’s calculation derived from the CBS data, the deviationbetweenhighergrossandlowernetlevels,observablewithinFigure6,isequivalentlypresent in the current instance. In the case of between-county inequality, somecountiesreportedbelow-averagegrossearningsandabove-averagenetearnings.Thiswasnottheoccurrencewiththecomponentsofthesectoranalysis.Inthelattercaseallactivitiespredominantlyretainedtheirpositionregardlessoftheearningstatus.52Thelackofactivityredistributionisastraightforwardconsequenceofnon-existingtaxationpolicies targeting the individual activities in the sameway as the local surtax onincometax(toanextent),remedyingthegeographicalpayinequalities.Theauthorwillelaboratethebetween-sectorpayinequalitiesbyfocusingonthefinalyearcoveredbytheresearch.In2015,therewerenineactivitieswithabove-averageearninglevelsthatcontributedtotheinequality.Startingwiththesectorhavingthehighestcontribution,these activities are: professional, scientific and technical, financial and insurance,information and communication, human health and social work, transportationand storage, public administration and defence, mining and quarrying, and otheractivities.Ontheothersideofthespectrum,tenactivitiesremained,amongstwhichtheworstoutcomewasmeasuredinmanufacturing,wholesale,andretailactivities.Onelastnotionbearsmentioning.Fromthepresentedtrend,onemightconcludethatthebetween-sectorpay inequality isof lesser significance to theoverall inequalitythan the between-county inequality, however this is not the case.The latter claimcanbejustifiedbydeeperinsightintoaveragegrossearningsfortheperiodbetween2002-15.Thelowestcounty’searningis5,511HRKwhilethehighestis8,682HRK,resultinginarangeof3,171HRK.Inthesectoralcase, theresultsare4,782HRKforthelowestearning,10,961HRKforthehighestearning,and6,178HRKfortheirrespectiverange.Giventhatthesectoralrangeexceedsthatofcountiesalmosttwiceover,thisextremedifferenceisconfirmationoftheimportancethatthebetween-sectorpayinequalityplaysintermsof,notsolelyoverallpayinequality,buttotalCroatianeconomicinequalityaswell.

52 Aminor deviation occurred between 2008-10when education activity changed the below-averagegrossvaluesforabove-averagenetvalues.In2003,anequivalentpracticetookplacewithregardstowatersupply,sewerage,wastemanagement,andremediationactivities.


Duetothehighandrisinglevelsofoverallpayinequalities,anincreasingnumberof individuals in the highest earning tier, continuously growing between-countyinequality, and high levels of between-sector pay inequality, it is safe to concludethateconomicinequalityisaviablethreatdeterioratingthewellbeingofthemajorityofCroatianworkersattheexpenseofthoseatthetop.Theformerholdsespeciallyiftheanalysisisextendedtoincludecategoricalinequalitiesremainingoutsideofthecontextofthispaper,aswellasincomeandwealthinequalitywhicharehistoricallyproventobefargreatergeneratorsofeconomicinequalitywhencomparingthemtothepayinequalities.

6. CONCLUSION AND DISCUSSION

Inthispaper,theauthorarguedthattheprincipalproblemconfrontingtheCroatianworker’swellbeingisacumulativeconsequenceoftwodetrimentaltendenciesthatworsenthelabourstandardsandincreaseinequalities.TheempiricalanalysisconfirmedthattheCroatianworkerexperiencedarelativedeclineoftheirgrosspre-taxearningswhile substantially increasing productivity. This occurred alongside the growingprofitshareofincome,simultaneouslywiththeunequaltaxationdisproportionatelyaffecting the labour, and concurrentlywith the unfavourable pay inequalities.Thestudy has shown that net pay inequality is high and likely to rise. Furthermore,when thenet inequalitydeclined, it did soby laying-off the representativesof thelowestearningclasses,i.e.byincreasingtheoveralleconomicinequality.Thegrossinequalityexhibitedcontinuousrisehighlyandpositivelycorrelatedwiththeearningsdistribution’suppertailbeingincreasinglyconcentratedwithinthewealthiestfractionofsociety.Theupwardbetween-countypay inequality,asanoutcomeof the long-lastingcentralizationprocess,dividedtheworkersbasedongeographicalgroundsbyfavouringtheCityofZagrebas theexclusivecountyconsistentlyreportingabove-averagevalues.Finally,thebetween-sectorpayinequalityindicatedahighandstabletrendwitharangebetweenthehighest-lowestpayingsectorsurpassingitsbetween-countycounterpartapproximatelytwiceover.

Onceconfirmed,thisstateofaffairsbecomesmoreperplexingwhencombinedwith interdependent inequalitysources.Therefore, the formationof theconcludingjudgementsmustaccountforhighlyconcentratedinequalitiesofwealthandincome,aswellascategoricalinequalitiesandinequalitiesofopportunity.Consequently,itisevidentthattheseinequalitiesaretheleadingcauseofCroatia’shumancapitaloutflowandtherefore,mustbemitigated.

Withthisinmind,itisunquestionablewhetherthecentralplaceshouldbereservedfortherelativeenhancementofthedistribution’slowertail.Amongavarietyofpolicyrecommendations,thefollowingmustbesingledout.Theminimumwageshouldbeincreased tocommensuratewith risingpricesandapartof the risingproductivity.Indexing theminimumwage to themedianwage isworthyofattentionbecause itwouldincentivizeemployerstoinvestintheirworkers’productivitysimultaneouslywhile lifting the standards of the poorest.The tax codemust bemore progressiveto account for a country’s role as a protector of the private property.Last but not


the least, thenationalpolicymakersneed to implementaperiodical taxationof thehighestearningsandwealth.Thelatterisaprerequisiteformaintainingtheminimumwellbeingofthoseinneedduringtherecessionwherethecollectedrevenueswouldserveasasafetynetthroughtheincreaseintransfersandsocialsecurityspending.Thiswouldpreventtheominouseffects,asseenduringthelastcrisiswherethedecreaseinpayinequalityoccurredthroughthefiringoftheexpendable(lowearning)workers.

Given that until 2019, policymakers failed to implement a positive set ofmeasures and even decreased the tax code’s progressiveness, the future is notpromising. In their defence, itmust benoted that the adjustments proposed in theTheory of the Second Best imply government intervention. Therefore, attainingtheoptimalperformancevia remedying for the inequalities asmarket failures is adelicatemattersinceitencompassesthetrade-offsbetweentheeconomicincentivesandredistribution.Consequently,thenationalpolicymakers,conditionedbythefreemarket,lowcompetitiveness,andcapitalscarcity,arelimitedinattemptstorespondtothenegativepressuresintensifiedbytheglobalisation.

Thefindingspresentedwithinthisstudycanserveasaplatformfortheinquirydirectedtowardincludingfortheoverlookedinequalitysources.ThisresearchmustbeutilizedasthefoundationforthefutureinvestigationsintotheCroatianinequalityphenomena,wheretheultimatechallengeisbeingposedbytheantagonismbetweenthe low-competitive national social state and globalization. Special attentionshould be placed on the investigation ofCroatian fiscal policywith regards to itscontributionintheformationofpersistinginequalities.Thesphereoftaxationwherethe policymakersmust innovate and implement adequate solutions to increase theaverage citizens’welfare remains to be investigated.The establishment of controlupontheabovementionedadversetrends,viaredefinitionofthecurrent,sub-optimalpolicies,mustbecomeasocietalimperativethatwillovercomeominousdemographictrendsandcreatethefoundationforeconomicprosperity.

BIBLIOGRAPHY

1. Akrap,Anđelko,DemografskislomHrvatske:Hrvatskado2051.,Zagreb,Bogoslovnasmotra,vol.85,3/2015,pp.855-868.

2. Atkinson,AnthonyBarnes,Factorshares:theprincipalproblemofpoliticaleconomy?,OxfordReviewofEconomicPolicy,vol.25,1/2009,pp.3-16.

3. Bernanke,BenShalom,Gurkaynak,RefetSoykan,IsGrowthExogenous?TakingMankiw,Romer,andWeilSeriously,in:Bernanke,B.S.,Rogoff,K.(eds),NBERMacroeconomicsAnnual16,Cambridge,MITPress,2002.

4. Bićanić, Ivo, Ivanković,Željko,Kroflin,Matija,NejednakostplaćauHrvatskoj2003.-2016,Zagreb,Političkamisao,vol.55,3/2017,pp.43-81.

5. Bićanić,Ivo,Tuđa,Dora,WageinequalityinCroatiaduringboomandbust(2000-2014),in:ChallengesofEurope:Growth,CompetitivenessandInequality,Hvar,UniversityofSplit,2015.

6. Black,Richard,Natali,Claudia,Skinner,Jessica,MigrationandInequality,backgroundpaper for the 2006 World Development Report, Sussex, 2004. Available at: www.worldbank.org.


7. CBS, Annual Gross Domestic Product,1995-2005, Zagreb, CBS (First Release No.12.1.3.),2009.

8. CBS,EmploymentsandWagesReviewbyCounties.Availableat:www.dsz.hr[AccessedNovember7,2018].

9. CBS,MSIEmploymentandWages.Availableat:www.dsz.hr [AccessedNovember7,2018].

10. Conceição, Pedro, Bradford, Peter, Galbraith, James Kenneth, The Theil Index inSequencesofNestedandHierarchicalGroupingStructures,EasternEconomicJournal,vol.27,4/2001,pp.491-514.

11. Conceição,Pedro,Ferreira,Pedro,TheYoungPerson’sGuidetotheTheilIndex,UTIPWorkingPaper,14/2000.Availableat:http://utip.gov.utexas.edu.

12. Conrad,Edward,TheUpsideofInequality,NewYork,PenguinRandomHouse,2016.13. Daudey,Emilie,Garcia-Penalosa,Cecilia,ThePersonalandtheFactorDistributionsof

IncomeinaCross-SectionofCountries,JournalofDevelopmentStudies,vol.43,5/2007,pp.812-829.

14. Eurostat,GDPandmainaggregates.Availableat:http://ec.europa.eu[AccessedOctober8,2018].

15. Eurostat,GDPandmaincomponents.Availableat:http://ec.europa.eu[AccessedOctober8,2018].

16. Eurostat,Unemploymentbysexandage–annualaverage.Availableat:http://ec.europa.eu[AccessedJanuary9,2019].

17. Fields, Gary Sheldon, A Compendium of Data on Inequality and Poverty for theDevelopingWorld,NewYork,CornellUniversity,1989.

18. Franičević, Vojmir, Croatia: Prolonged crisis with an uncertain ending, In Vaughan-Whitehead,D.(ed.),WorkInequalitiesintheCrisis,Cheltenham,EdwardElgarPublishingLimited,2011.

19. Friedman,Milton,Friedman,Rose,FreetoChoose,NewYork,Harcourt,1980.20. Galbraith,JamesKenneth,CreatedUnequal,Chicago,ChicagoUniversityPress,2000.21. Galbraith,JamesKenneth,InequalityandInstability,NewYork,OxfordUniversityPress,

2012.22. Galbraith,JamesKenneth,Inequality,NewYork,OxfordUniversityPress,2016.23. Galbraith,JamesKenneth,Inequality,unemploymentandgrowth:Newmeasuresforold

controversies”,JournalofEconomicInequality,vol.7,2/2009,pp.189-206.24. Guerriero,Marta,TheLabourShareofIncomearoundtheWorld,DevelopmentEconomics

andPublicPolicyWorkingPaper,32/2012.25. Hoffman,Saul,Bićanić,Ivo,Vukoja,Oriana,Wageinequalityandlabourmarketimpact

ofeconomictransformation:Croatia1970-2008,EconomicSystems,Vol.36,2/2012,pp.206-217.

26. ILO,Status inemployment–ILOmodelledestimates.Availableat:http://www.ilo.org[AccessedOctober8,2018].

27. Jayadev,Arjun,Capital account openness and the labour share of income,CambridgeJournalofEconomics,vol.31,3/2007,pp.423-443.

28. Karaman Aksentijević, Nada, Denona Bogović, Nada, Economic Inequality and theInfluenceofSalarieson Income Inequality in theRepublicofCroatia,ProceedingsofRijekaFacultyofEconomics,vol.21,1/2003,pp.37-51.

29. KaramanAksentijević,Nada, Ježić, Zoran,Tendencies of development inequalities ofCroatiancounties,ProceedingsofRijekaFacultyofEconomics,vol.29,2/2011,pp.269-290.

30. Lakner, Christoph,Atkinson,Anthony Barnes,Wages, Capital andTop Incomes: TheFactorIncomeCompositionofTopIncomesintheUSA,1960–2005,2014.Availableat:www.ecinq.org.


31. Mankiw,GregoryNicholas,DefendingtheOnePercent,JournalofEconomicPerspectives,vol.27,3/2013,pp.21-34.

32. Milanović,Branko,Explainingtheincreaseininequalityduringtransition,EconomicsofTransition,vol.7,2/1999,pp.299-341.

33. Milanović,Branko,GlobalInequality,London,HarvardUniversityPress,2016.34. Milanović,Branko,TheHavesandtheHave-nots,NewYork,BasicBooks,2012.35. Nestić,Danijel,Babić,Zdenko,BlaževićBurić,Sanja,MinimumageinCroatia:sectoral

andregionalperspectives,EconomicResearch,vol.31,1/2018,pp.1-30.36. Nestić,Danijel,EkonomskanejadnakostuHrvatskoj1998.manjaodočekivanja,Zagreb,

EconomicReview,vol.53,11-12/2002b,pp.1109-1150.37. Nestić, Danijel, Ekonomske nejednakosti u Hrvatskoj 1973-1998, Zagreb, Financial

TheoryandPractice,vol.26,3/2002a,pp.595-613.38. Nestić,Danijel,Rubil,Ivica,Tomić,Iva,Analysisof theDifferenceinWagesbetween

thePublicSector,State-OwnedEnterprisesandthePrivateSectorinCroatiainthePeriod2000-2012,Zagreb,EconomicTrendsandEconomicPolicy,vol.24,1/2015,pp.7-51.

39. Nestić, Danijel, The Determinants of Wages in Croatia, in: Proceedings of the 65th AnniversaryConferenceoftheInstituteofEconomics,Zagreb,Economicinstitute,2005,pp.131-162.

40. Novokmet, Filip, Between communism and capitalism: essays on the evolution ofincomeandwealthinequalityinEasternEurope1890-2015,PhDThesis,ParisSchoolofEconomics,2017.

41. Piketty,Thomas,CapitalintheTwenty-FirstCentury,London,HarvardUniversityPress,2014.

42. Piketty,Thomas,TheEconomicsofInequality,London,HarvardUniversityPress,2015.43. Ricardo,David,PrinciplesofPoliticalEconomyandTaxation,London,Dent,1911.44. Rubil,Ivica,TheGreatRecessionandPublic-PrivateWageGapMPRApaper,No.46798,

Munich,2013.45. Rubinić,Ivan,Tajnikar,Maks,LabourForceExploitationandUnequalLabourExchange

astheRootCauseoftheEurozone’sInequality,Zagreb,DruštvenaIstraživanja,vol.28,2/2019,pp.207-228.

46. Sbardella,Angelica, Pugliese, Emanuele, Pietronero, Luciano,Economic developmentandwageinequality,PLOSOne,vol.12,9/2017.

47. Škalamera-Alilović,Dunja,Rubinić,Ivan,TheTaxSystemasaGeneratorofEconomicInequalityinCroatia, in:BookofProceedings:16thInternationalScientificConferenceon Economic and Social Development, Varaždin, Development and EntrepreneurshipAgency,2016.,pp.459-477.

48. Stiglitz,JosephEugene,ThePriceofInequality,NewYork,W.W.Norton&Company,2013.

49. Theil,Henri, StatisticalDecompositionAnalysis:WithApplications in the Social andAdministrativeSciences,Amsterdam,North-Holland,1972.

50. UTIP,InequalityProjectData-Set,Austin,UniversityofTexas,2018.51. vanderWeide,Roy,Milanović,Branko,InequalityIsBadfortheGrowthofthePoor,

PolicyResearchWorkingPaper,No.6963,WorldBank,2014.52. VonFintel,Dieter,Earningsbracketobstaclesinhouseholdsurveys–Howsharparethe

toolsintheshed?,StellenboschEconomicWorkingPaper,08/2006.53. Watkins,Don,Brook,Yaron,EqualisUnfair,NewYork,St.Martin’sPress,2016.54. WorldBank,Croatia:EconomicVulnerability andWelfareStudy,Washington (Report

No.2079-HR),2001.55. Yu,Derek,Somefactorsinfluencingthecomparabilityandreliabilityofpovertyestimates

acrosshouseholdsurveys,StellenboschEconomicWorkingPaper,03/2013.56. ZDOO[StatutoryInsuranceContributionsAct],OfficialGazette,No.147/2002.57. ZMP[MinimumWageAct],OfficialGazette,No.39/2013.


Ivan Rubinić*53

Sažetak

NEJEDNAKOST PLAĆA I PROPADANJE STANDARDA RADNIKA U HRVATSKOJ

Ovastudijapotvrđujehipotezudahrvatskizaposleniciprolazekrozkontinuiranudegradaciju radnih standardauz simultanudivergencijudistribucijenjihovihplaća.Korištenjem Theilovog indeksa i funkcionalne distribucije dohotka, istraživanjeukazujenapetmeđusobnopovezanihištetnihtendencija.Empirijskaanalizaupućujenapogoršanjestandardaradnesnagevidljivokrozkontinuiranipadudjeladohotkaradaunacionalnomdohotkukojiseodvijausporednosrastomproduktivnosti.Netonejednakostuplaćamaradikalnojepovećanaistabilizirananavišojrazini.Pričemujeperiodično,nominalno,poboljšanjebilovećinskirezultatotpuštanjapojedinacaizdonjegreparaspodjeleplaća.Posljedično,smanjivanjedisperzijaplaćapovećalojeukupnuekonomskunejednakost.Brutonejednakostplaćaukazujena rastući trend,snažno i pozitivno povezan s kretanjem pripadnika s najvišim primanjima, kojidoživljavaju trobrojčani porast svojih članova u analiziranom razdoblju. Rastućanejednakostplaćaizmeđužupanijaukazujenasnažnusklonostpremaprekomjernojcentralizaciji zabilježenu u činjenici da je glavni grad ekskluzivna i privilegiranažupanija koja dosljedno izvještava iznadprosječne razine plaća. Naposljetku,nejednakost u plaćama između sektora pokazala je opći pad. Međutim, ovajizoliranislučaj,uzimajućiuobzirdajerasponizmeđusektorasnajnižiminajvišimplaćama približno dvostruko veći od komparativnog raspona između županija, idaljeostajedominantankatalizatornejednakosti.Uskladusanavedenim,neupitnoje da trenutno stanje stvari narušava dobrobit hrvatskog radnika. Takav zaključakpred kreatore nacionalnih politika postavlja izazov suprotstavljanja s istaknutimnegativnimtendencijamauciljuprevencijetrenutnogegzodusakvalificiranihradnikaiuspostavljanjadugoročnemakroekonomskestabilnosti.

Ključne riječi: ekonomska nejednakost; nejednakost plaća; Theil’s T statistic.

Zusammenfassung

LOHNGEFÄLLE UND VERSCHLECHTERUNG DES ARBEITSSTANDARDS IN KROATIEN

Dieser Beitrag erbringt den Nachweis, dass kroatische Arbeiter ständige

* IvanRubinić,mag.oec.,SveučilišteuRijeci,Pravnifakultet,[email protected].


VerschlechterungdesArbeitsstandardsunderhöhteUngleichverteilungihrerEinkommenerleben. Die Forschung entdeckte funf sich wechselseitig stutzende Tendenzen,welche mithilfe des Theil-Indexes und der funktionalen Einkommensverteilunguntersucht wurden. Die empirischeAnalyse zeigt, dass die Verschlechterung desArbeitsstandards in der ständigen Abnahme des Anteils des Arbeitseinkommens,welcheparallelzurProduktivitätswachstumgeschieht,sichtbarist.DieUngleichheitderNettoeinkommenzeigteineradikaleZunahmeundStabilisierungaufeinemhohenNiveau, wo die nominale Einkommenssteigerung als Ergebnis der Entlassungen,welche in erster Linie den unteren Rand der Einkommensverteilung beeinflussen,verursachtwurde.InfolgedessentrugdiegeringeUngleichverteilungderEinkommenzumZuwachsanallgemeinerökonomischerUngleichheitbei.DieUngleichheitdesBruttoeinkommensnimmtauchzu,wasmitdemZuwachsanSpitzenverdienerwegendesdreistelligenAnstiegsindiesemBereichzutunhat.DerZuwachsanUngleichheitzwischenGespanschaftenindiesemZeitraumweistaufubermäßigeZentralisierunghin, was in der Tatsache, dass die Hauptstadt die einzige Gespanschaft mitständigenMeldungenzumuberdurchschnittlichenEinkommendarstellt,sichtbarist.AndererseitsnimmtdasEinkommensgefällezwischenSektorenab.Dieser isolierteFall ist aber die Hauptursache der Ungleichheit, denn die Spannweite zwischendemSektormitniedrigstenunddemSektormithöchstenEinkommenistzweiMalgrößeralsdievergleichendeSpannweitezwischenGespanschaften.DieseErgebnissesind fur dasWohl des kroatischenArbeiters schädlich. Ebenfalls stellen sie eineHerausforderung fur nationale Politiker dar, die nachteilige Tendenzen entgegnenmussen,umdenExodusvonqualifiziertenArbeiternvorzubeugenunddielangfristigemakroökonomischeStabilitätzuschaffen.

Schlüsselwörter: Ungleichheit; Einkommensgefälle; Theil’s T statistic.

Riassunto

DISEGUAGLIANZA DEI SALARI E CALO DELLO STANDARD DEI LAVORATORI IN CROAZIA

Lapresentericercaconfermal’ipotesicheilavoratoricroatiattraversinounafasedicontinuocalodellostandardunitamentealladivergenzadelladistribuzionedeilorosalari.Applicandol’indiceTheileladistribuzionefunzionaledeiredditi,l’indaginedimostral’esistenzadicinquetendenzetralorocollegateedannose.L’analisiempiricaindica un peggioramento dello standard della forza lavoro che si individua nelprogressivocalodeiredditidalavorosulpianonazionaleincorrelazioneallacrescitadellaproduttività.Ladivergenzaneisalarialnettoè inaumentoesièstabilizzataal livello più alto. Di qui il miglioramento periodico, nominale, è rappresentatoperlopiùdalrisultatodellicenziamentodisingolidallacodadelladistribuzionedeisalari.Conseguentemente,ladiminuzionedelladispersionedeisalarihaaccresciuto


la disparità economica. La diseguaglianza dei salari lordi evidenzia una crescentetendenzafortementeconnessaconlacircolazionedeisoggetticoniredditipiùelevati,iqualiregistranounacrescitaesponenzialedelloronumeronelperiodoanalizzato.Lacrescentedisparitàdisalaritraleconteeevidenziaunafortetendenzaadun’eccessivacentralizzazione,chesiindividuanelfattochelacapitaleèlaconteaprivilegiataedesclusiva,cheregistracontinuamentelivelliredditualialdisopradellamedia.Allafine,ladisparitàdeisalaritraidiversisettorihaevidenziatouncalogenerale.Tuttavia,talecasoisolato,considerandocheildivariotraisettoriasalaribassiequelliasalarialtièpiùdeldoppiorispettoaquellotracontee,permaneildominiodelcatalizzatoredelladisparità.Allalucedituttociò,èfuordidubbiochel’attualestatodellecosecompromette il benessere dei lavoratori croati. Tale conclusione pone dinnanzi aifautoridellepolitichenazionalilasfidavoltaafronteggiaretalitendenzenegativealfinediovviareall’attualeesododilavoratoriqualificati,tendendoalraggiungimentodiunaduraturastabilitàmacroeconomica.

Parole chiave: disparità economica; diseguaglianza dei salari; Theil’s T statistic.

PAY INEQUALITY AND THE DETERIORATING LABOUR … · This study furnishes proof in support of the...

Documents

Transcript of PAY INEQUALITY AND THE DETERIORATING LABOUR … · This study furnishes proof in support of the...