Parameters for convergence and divergence in wage distribution of professions 1970-2016 in Norway

Rising income inequality within countries is a concern that present a societal challenge. This thesis investigated whether wages between selected sectors in Norway in the time frame 1970-2016 has been subject for convergence or divergence. Thereafter the underlying factors causing this wage development was researched. We employed log-linear regression to test for beta convergence and sigma convergence in the wage data accounting for more than 20 sectors. Thereby convergence and divergence in the trend wages was identified, and the degree of convergence or divergence was extracted. Calculation of Gini coefficients was done for the nine sectors chosen to study in the thesis, in supplement to the discussion of wage development differences. Additionally, factors responsible for this development was examined by analyzing their relevance for the Norwegian wage formation. The Norwegian economy’s steady development was beneficial for all sectors and average real wages increased by 127% between 1970 and 2016. Wages between different professions notably converged between 1970-1983 and diverged significantly the remaining period until 2016. The financial, manufacturing and the public administration and defense sectors have all been subject to a relatively steep increase in wages in addition to having had high level of wages from the start. Whereas the hotel and food service, health and the agriculture sectors, that were among the lower paid jobs initially, have lost terrain. The two most important explanations for wage divergence are differences in productivity and the strong development of financial sector wages. The rise in inequality was found to be considerably less when excluding the financial sector. The purpose of this thesis was to detect the direction wages in sectors move altogether, and expose factors influencing this movement. By doing so, the thesis provides relevant focus areas when interacting with the challenge of income inequality. We conclude that particularly productivity and wages in the financial sector is worth remarking as highly affecting the divergence observed in the time frame.nhhma