Earnings, employment and income inequality

This chapter demonstrates the importance of labour earnings for income and income inequality -also among top incomes. With a focus on employees and Europe, the chapter elaborates on the relationship between the household income distribution and the individual earnings distribution. On the one hand, households flatten individual inequalities of earnings, by combining employees from different levels of the earnings distribution, and of employment, by bringing people together with diverging working hours - part-time employment appears to be surprisingly evenly spread over the household earnings distribution. On the other hand, the combination of earnings and hours within the household augments household inequality of earnings and employment. The chapter scrutinises the role of dual-earner and multiple-earner households, demonstrating its importance at the top of the distribution. Multiple earning is very important in countries of Central and Eastern Europe and the chapter speculates that it may be part of household formation aimed at reducing poverty.