Is Rising Earnings Inequality Associated with Increased Exploitation? Evidence for U.S. Manufacturing Industries, 1971–1996

Abstract

Is the trend towards rising earnings inequality associated with increased exploitation? The authors investigate exploitation among workers using data for manufacturing industries. Defined as the underpayment of earnings relative to productivity as evaluated in the market, exploitation is measured for various groups of employees. The results indicate significant levels of exploitation among women, Hispanics, African Americans, and blue-collar workers. By contrast, employees who are overpaid relative to their productivities include middle-aged workers, older workers, and managers. Additional findings suggest that the increase in inequality in recent years has been associated with heightened exploitation due to the underpayment of workers in the lowest two quintiles of the earnings distribution, while workers in the upper two quintiles have become increasingly overpaid. Rising earnings inequality in the manufacturing sector thus appears to be associated with increased exploitation when the latter is measured as the underpayment of market value to workers. A related analysis by Liu, Sakamoto, and Su also investigates patterns of economic underpayment and overpayment but does not link them explicitly to inequality in the distribution of earnings and how the level of inequality has been increasing in recent years.