Educational Standardization within Occupations: Explaining Inequality in Sweden

The role of educational attainment in labour market outcomes is a widely-reported phenomenon, though there remains a residual, unexplained part of this inequality. However, the interplay between micro and macro levels still lacks important investigations, since wage setting mechanisms at the individual level cannot be considered as independent from the context in which they arise. Therefore, we examine the role of heterogeneity in educational backgrounds within occupations as factor in explaining income inequality in the Swedish labour market. The Swedish registered microdata provides a unique opportunity to investigate the interrelation of heterogeneity in educational attainment and inequality. By building on theories of social closure, functionalism, and human capital; we can bridge the gap between the micro and macro analyses of inequality in the labour market.

We demonstrate patterns of standardization using the tSNE visualization algorithm, and subsequently, we apply the Theil index to estimate inequality and to calculate the effect of heterogeneity on inequality from 2002 to 2012. In particular, we distinguish between inequality within and between occupations by looking at the variance of wages within occupations and between them. The above noted heterogeneity of educational backgrounds is measured on the occupational level, whereas we calculate an entropy index on the basis of marginal attainment within educational categories to operationalize heterogeneity. Calculating descriptive correlations, we observe a positive correlation between the entropy index, which represents homogeneity of educational backgrounds within occupations, and occupational inequalities within as well as between occupations. The preliminary findings show that standardization expands over the study period. Furthermore, higher standardization leads to an increase in inequality between occupations, while inequality within occupations declines. A specific line of inquiry arising is the restriction of access to more standardized occupations for vulnerable population subgroups.