The Generation Gap: A Cohort Analysis of Earnings Levels, Dispersion and Initial Labor Market Conditions in Italy, 1974-2014

Abstract

We discuss entry wages, career patterns and inequality developments of successive cohorts who have entered the Italian labour market between 1974 and 2014. We find that entry wages started to decline around the mid-1990s; the drop continued at least until the onset of the global financial crisis, seemingly slowing down thereafter. This pattern cannot be explained by changes in observable job characteristics. Falling entry wages have not been accompanied by faster subsequent career paths; rather, subsequent career paths have increasingly featured rising earnings dispersion due to both increased workers heterogeneity and greater temporary earnings instability. We relate such developments to the changes in labour market institutions that took place between the early 1990s and the mid-2000s.

Keywords: earnings distribution, cohort effects, labor market reforms, earnings dispersion

JEL Classification: J31