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The Paradox of Narrowing Wage Differentials and Widening Wage Inequality in Mexico
Author(s) -
González Diana Alarcón,
McKinley Terry
Publication year - 1997
Publication title -
development and change
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.267
H-Index - 93
eISSN - 1467-7660
pISSN - 0012-155X
DOI - 10.1111/1467-7660.00052
Subject(s) - wage , human capital , economics , wage inequality , labour economics , inequality , efficiency wage , liberalization , variance (accounting) , economic growth , market economy , mathematical analysis , mathematics , accounting
This article examines the parallel phenomena of narrowing wage differentials among major groups of workers and widening wage inequality in general in Mexico during the 1980s and 1990s. In trying to understand this paradox, it finds that a human‐capital model cannot explain wage determination in the 1990s. Although employees with higher skills and education have enjoyed increasingly higher relative returns to their human capital, much of the variance in wages is not attributable to differences in human capital or rates of return. Discriminatory wage policies have combined with policies of trade liberalization to markedly widen the wage gap between lower‐paid and higher‐paid workers.