Skill Mismatch, Bureaucratic Burden, and Rising Earnings Inequality in the U.S.: What Do Hours and Earnings Trends by Occupation Show?

Abstract

Since the late 1970s the US labor market has been characterized by sharply declining real wages for low-skilled workers, declining shares of middle income jobs, and a dramatic increase in earnings inequality for both men and women. While the skill mismatch account predicts that employment and earnings trends have most favored those commanding the skills necessary to perform in an information technology-intensive environment, the bureaucratic burden prediction is that supervisory standing will be decisive. Gordon's vision of the dynamics of wage inequality in the United States directly challenges the conventional skill mismatch explanation. The chapter examines patterns of hours and wage growth at varying levels of occupation and industry detail for 7-9 year periods between 1970 and 1997. The ambiguous nature of the evidence regarding skill-biased demand shifts at the detailed occupation level is underlined by examining the types of jobs located off the diagonal: those for which relative hours growth and relative wage growth were inversely related.