The Evolution of Wage Formation and Inequality in Jordan in 2010-2016

Rami Galal and Mona Said

No 1209, Working Papers from Economic Research Forum

Abstract: This paper investigates wage formation and inequality in Jordan over the period 2010 to 2016 using the Jordan Labor Market Panel Surveys. We take stock of the main distributional features of Jordanian wage structure in 2016 compared to 2010 focusing on population subgroups including by gender, sector, occupational skill-level, industry, geographic location, and level of education as well as low-wage earners. We utilize the panel aspects of the data to shed light on mobility within the distribution. To provide some explanation for the evolution of inequality, we estimate the returns to education, as well as sector-based and gender-based wage differentials that correct for differences in worker characteristics. The results show a rise in real wages and a decline in inequality over the period from 2010 to 2016. Wages across different subgroups display compression from both ends of the distribution, with fewer Jordanians falling below the low-wage earnings line, and wages for the highest-paid groups declining. Rises in median wages hold across the population, even among more disadvantaged groups, for example the illiterate. Declining incremental returns to education and narrowing sector-based and gender-based wage differentials are consistent with the overall decline in wage inequality.

Pages: 23 pages
Date: 2018-06-12, Revised 2018-06-12
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Published by The Economic Research Forum (ERF)

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