New measures of wage adequacy

Despite the fact that labour income inequalities have been documented extensively, there is no widely accepted definition of what constitutes an adequate wage measure. This study aims at constructing new indicators of relative wage adequacy across the EU. It should be noted that the indicators developed here do not provide a classification of wages as adequate or inadequate, and do not specify income thresholds for adequacy. Instead, they aim to provide insights into the multiple dimensions of wage adequacy. Building on an extensive review of the literature on wage inequality, we identify and estimate new indicators related to different dimensions of wage adequacy. We start by presenting estimates of common indicators of wage inequality, including the labour income share, decile ratios, the Palma index, the share of low-paid workers. Next, we provide estimates on new measures of wages inequalities related to workers’ socio-economic characteristics including gender, migrant status, educational attainment and labour market status including industries and occupations. Additionally, we introduce two new measures investigating the adequacy of wages in relation to housing costs and the degree of persistence in low-paid jobs. The main data source used for the study is the EU-SILC. Additionally, we provide guidelines on the way in which the SES and the EU-LFS could be used by future researchers to provide complementary estimates of the metrics.