Inter- and intra-industry wage inequality and potential impact of automation in the economy

Wage inequality exists widely in the economy, which cannot always be explained by the marginal revenue products of labor. This study examines the inter- and intra-industry wage differences and their causes, and investigates whether and how the development of automation and robotics in the economy might influence those differences. Employees in some industries or sectors have persistently earned higher incomes than those of other industries or sectors and such wage differences should not exist in long term in a competitive market. Within one industry, gender inequality in wages still exists and wage distribution is more polarized with increasing gaps between senior managers' and average employees' wages. The main causes of inter-industry wage inequality are the barriers to entry; however, those barriers are often reputational than institutional, and the business processes tend to have economies of scale and relative fewer transactions of substantial values. The main causes of intra-industry wage inequality are more institutional, but reputational causes also play a role in inflating senior managers' remuneration. The widespread application in future of automation and robotic technology in the economy will greatly enhance (human) labor productivity and might replace a large proportion of human workers in the economy, which is likely to have an impact on the wage inequality. On one hand, with fewer employees in a particular firm or industry and high revenue per head, the wage inequality might be mitigated. On the other hand, reputational factors may become more influential as robotics can facilitate human workers in more technical dexterity and make human expertise more dispensable, which could increase wage inequality.