Centre party, district magnitude, and wage inequality in service economy

Abstract This paper aims to elucidate the variations in wage inequality within the service industry across different nations. Scholars have emphasised the pivotal role of policies designed to balance flexibility and job security in the service sector, crucial for fostering its growth while mitigating wage disparities. We argue that the balance between flexibility and security of service sector employment is most likely to emerge under centre party governments in high-magnitude electoral systems. Centre parties, owing to their political detachment from organised labour and industry, encounter fewer obstacles in representing the unorganised interests of service sector workers. Furthermore, high-district magnitude systems incentivise centre parties to build comprehensive coalitions that address the diverse concerns of service sector workers. Our empirical analysis, spanning 14 OECD countries from 1995 to 2007, demonstrates that service sector wage inequality diminishes as district magnitude and the cabinet share of centre parties increase.