Occupational origin effects on wage and market income (inequality): the cases of Spain and Germany

Abstract

Most of the economic and sociological literature focuses on the role of social origin background on class, or wage outcomes. Yet, two individuals may have similar wages, but very different market incomes, so that the role of social origin may differ between these two individuals. This paper aims to explore the social origin associations – net of individual occupation – on two types of monetary outcomes: standard annual salaries and market income. The study compares Spain and Germany to analyse variations in social origin associations within their distinct labour market structures and institutional frameworks. Using unconditional quantile regressions, the findings reveal that Spain exhibits a significant “residual effect of social origins” on both wage and market income. Spain also demonstrates significant class-ceiling effects, signalling barriers to upward mobility. Conversely, Germany shows a limited residual origin correlation and no significant class barriers, aligning well with the human capital theory. Additionally, Spain experiences a significant increase in inequality between 2002 and 2017, primarily attributed to changes in the characteristics of the labour market structure. On the other hand, Germany is again found to be a more mobile country with no significant dynamic changes in inequalities.