Ireland vies with the US for having the highest growth in inequality of earnings, according to research carried out by economists with the Economic and Social Research Institute (ESRI). The researchers compared data on the wages of the top 10 per cent and bottom 10 per cent of weekly earners in Europe, the US, Canada, Australia, New Zealand and Japan. Ireland and the US top the table, with the Irish experience largely explained by "increased returns to higher levels of education, especially university education" reflecting a strong demand for skilled labour.

The research document, The Earnings Distribution and Returns to Education in Ireland 1987-'94, also shows that Ireland has one of the highest levels of low pay of the OECD countries, "defining low-paid workers as full-time workers who earn less than two-thirds of the median weekly earnings.

"Applying this criterion to the Irish data, 21 per cent of employees were low-paid in 1987 and by 1994 this had risen to 24 per cent," the study says.

Only the US had a higher proportion of its workforce (25 per cent) in the low-paid category. The data are derived from household surveys carried out on about 3,000 respondents in 1987 and 1994, and compared with data reported by the OECD. Germany, Belgium, Finland, Japan and Canada showed decreasing rates of earnings inequality.

In the Irish surveys, respondents were asked about the gross pay they received in their last pay period, how long this covered (week, month), and the number of hours they worked. According to the three economists, Mr Alan Barrett, Mr Tim Callan and Mr Brian Nolan, low growth in Ireland's earnings dispersion would have been expected because "Ireland's supply of skilled labour has increased sharply in recent years and it has had a highly centralised wage bargaining structure".

But "a surprisingly large growth in earnings dispersion" is found, in spite of the system of centralised wage bargaining being in place since 1987.

"We find that the more educated are earning more. That is one of the things that is making the picture look more unequal," Mr Barrett said.

Over the seven-year period, the State has seen a drop from 18 per cent to 8 per cent of employees who have had primary education only.

This was accompanied by a rise in the percentage with post-secondary school attainment levels from 18 per cent to 28 per cent, the study says. Mr Barrett said the phenomenon of widening inequalities was originally observed in Britain and the US, seen as being a result of the Thatcher/Reagan era. But information skills were becoming more important in the workplace. "There has been an international phenomenon that if you have skills, these skills are becoming more valuable," he said. He added that jobs for the unskilled were drying up to a certain extent.

The survey results have been reported in discussion papers for the Centre for Economic Policy Research, a London-based organisation of European economists.