Skills and wage inequality

Inequality has been rising in a large majority of OECD countries and efforts to halt or reverse this rise rank very high on the policy agenda. This chapter assesses the potential role of skills in reducing wage inequality, a key driver of changes in household income inequality. New data on the information-processing skills of the workforce from the Survey of Adult Skills (PIAAC) are used to analyse the role of skills in explaining cross-country differences in wage inequality. This analysis helps to inform policy choices by disentangling the contributions of average skill levels, how skills are distributed across the workforce, the extent to which skills are used on the job, and the return they command on the labour market.