in the use of labor (manufacturing and services). Likewise, the rate of decline in the experience premium has been larger at the high end of years of experience relative to the low end (0–5 years of experience). Finally, the gender earnings gap showed the largest decline in the earlier period, 1993–2003, but this was partially reverted in 2010–13. More research is definitely needed in this area.

Table 1. Average changes, measures of the earnings gaps, Latin America, 1993–2013

|Relative returns||Average<br>|growth rate<br>|by year(pe<br>|rcentage)<br>||
|---|---|---|---|---|---|---|
||1993–99|1999–03|2003–10|2010–13|1993–03|2003–13|
|**Education**|||||||
|High school|−0.5|−0.7|−2.9|−2.1|−0.6|−2.5|
|Tertiary|0.3|1.4|−2.8|−2.1|0.8|−2.7|
|**Potential experience**|||||||
|6–10 YoE|−0.8|−1.3|−1.9|−3.4|−1.0|−2.4|
|11–20 YoE|−1.6|0.3|−2.8|−3.7|−0.9|−3.1|
|21–30 YoE|−2.1|−0.3|−2.9|−4.9|−1.4|−3.4|
|31+ YoE|−2.1|−0.8|−3.6|−4.9|−1.5|−3.9|
|**Gender and area of residence**|||||||
|Male/Female|−1.4|−4.2|−1.1|−0.2|−2.3|−0.9|
|Urban/Rural|2.8|−3.8|−3.9|−0.5|−0.1|−3.2|

_Source:_ Calculations based on the SEDLAC database. See annexes A.1 and A.2 for details.

_Note:_ The underlying data represent the differences in the trends plotted in figures 9, 11, and 13. The bases for each category are primary or less in education, between 0 and 5 years of age for the potential experience, females for gender, and rural areas for area of residence. YoE = years of experience.

# 5. Conclusions

In this paper, we examine trends in labor income inequality in Latin America during the last 20 years. To estimate the inequality derived from the way the labor market values the different skills and demographic characteristics, we focus on the hourly earnings inequality of the main occupation of full-time workers between 15 and 65 years of age.

We identify a trend reversal in labor income inequality beginning in the early 2000s that followed a slight increase during the early 1990s. The increase of labor income inequality during the 1990s was associated with a reduction in real wages, most severe for the workers on less well paid jobs, particularly for those in the left half of the earnings distribution. On the other hand, we find evidence that this decline in labor income inequality in the 2000s was associated with more rapid growth rates in the earnings of less well paid jobs relative to labor incomes among the more well-paid earners. This expansion at the bottom of the wage distribution that narrowed the inequality in the lower tail of the earnings distribution was accompanied by a smaller, but still significant expansion in the middle part of the wage distribution that also helped narrow the inequality at the upper tail of the labor income distribution. In contrast to the increase in labor income inequality in the 1990s, the trend reversal in labor income inequality observed during the 2000s is robust to the selection of inequality measure, the aggregation method of country indicators (population weighted or unweighted), the countries selected to define the regional trend, and the definition of the time interval.

We also find that the trend reversal in labor income inequality is correlated with a steady compositional change in labor force attributes along the two decades of analysis: workers are becoming generally more educated, more highly experienced, and more urbanized, and more women are participating in the workforce. Because this compositional change has been fairly constant during the two decades, it does not explain alone the trend reversal in earnings inequality, suggesting that the influence of demand and institutional factors are among the forces behind the regional trend.

23