Occupational autonomy and wage divergence: Evidence from European survey data

Wages in Western Europe have diverged across occupations, contributing to rising wage inequality. We propose occupational autonomy, a measure for the ease of monitoring workers, as a new predictor of differential wage growth across jobs. Using econometric analyses of individual-level wage data from the EU Survey of Income and Living Conditions from 2003 to 2018, we show that wages in high-autonomy jobs grew significantly faster than in low-autonomy jobs, leading to an increasing autonomy wage premium. Other explanations based on the idea that wages decline in occupations replaced by machines or offshored do not fit the data. Moreover, our results show that the autonomy premium increases faster in industries and countries with faster increases in computer adoption and investment in ICT technology. We also find that strong collective bargaining institutions reduce the autonomy premium but could not halt the recent increases in wage inequality. Lastly, we show that the increase in the autonomy premium contributes to wage inequality between men and women. Since higher autonomy is usually associated with higher bargaining power, our analysis is consistent with assertions that recent technological innovations are ‘power-biased’ and have worsened the bargaining power of low-autonomy workers.