Earnings Distribution Research Articles

Report of the Editor for 2021 and Announcements of the President

Report of the Editor for 2021 and Announcements of the President

Were wages converging during the 2010s expansion?

This article uses multiple surveys and data sourced from administrative records to examine trends in wage inequality from 2003 to 2019. Survey evidence shows that wages were growing more unequal from 2003 to 2013 as wages grew faster among high-wage workers than among low-wage workers. However, from 2013 to 2019, the same surveys show substantial wage gains for workers in the second and third deciles of the wage distribution, particularly among material moving workers and health aides. Administrative tax data also show substantial gains in annual wage and salary earnings income for earners in the lower portion of the earnings distribution in the same years. Wage growth among lower wage workers was large enough to reduce overall wage inequality from 2013 to 2019 in Occupational Employment and Wages Survey data. In tax data, wage growth among lower earning workers was large enough to reduce overall earnings inequality from 2010 to 2018. In data from the Current Population Survey, a plateau was found in overall wage inequality—rather than the clear decline found in the other two data sources—in the later years of the economic expansion.

Who Bears the Brunt of Lockdown Policies? Evidence from Tele-workability Measures Across Countries

Lockdowns imposed around the world to contain the spread of the COVID-19 virus and its variants had a differential impact on economic activity and jobs owing to differences in the ability to work remotely. This paper presents a new index of the feasibility to work from home to investigate which types of jobs are most at risk for 35 advanced and emerging market economies. Cross-country heterogeneity in the ability to work remotely reflects differential access to and use of technology, sectoral mix, and occupational selection. Workers least likely to work remotely tend to be young, without a college education, working for non-standard contracts, employed in smaller firms, and those at the bottom of the earnings distribution, suggesting that the pandemic has exacerbated inequality. Policies should account for demographic and distributional considerations both during the crisis and in its aftermath.

A Decentralized Asset Tokenization System using Ethereum

Abstract: Real estate is one of the most trusted investments that people have preferred. It provides a steady source of income which can be in the form of rent as well as lease. There are a number of advantages, but one of the key disadvantages of real estate investments is illiquidity. Although the global real estate investments are twice the size of investments in the equity markets, the number of investors in the real estate market is remarkably lower. Blockchain technology has real potential to solve the issues of illiquidity and transparency, and most importantly, it opens this very market to the retail investors as well. By creating Security Tokens, which are backed by real-world assets, real estate can be made more liquid with the help of Special Purpose Vehicles. These security tokens, which represent fractional ownership of the real estate can be traded by a trader / investor and these tokens can be listed on legitimate secondary exchanges. The robustness of Smart Contracts can be very efficient in transferring of tokens and also provide a seamless distribution of earnings amongst the investors / traders. This work describes Ethereum blockchain based solutions has the potential to make the existing Real Estate investment system much more efficient and reliable. Keywords: Tokenization , Blockchain , Fungible Assets, Tokens, Special Purpose Vehicle, Smart Contracts, Liquidity, Security Tokens,

Dark Money Darker? IRS Shutters Collection of Donor Data

The IRS recently rescinded a longstanding rule that required certain nonprofits to disclose substantial donor names and addresses on the nonprofit annual information return. This was a mistake. Though the rule remains for charities and political organizations, the collection of this information non-publicly by the IRS is needed to enforce tax-exempt requirements and the tax law generally for social welfare organizations and business leagues. It serves both as a roadmap for audits and as a hindrance to improper transactions. It also is reasonable for the IRS to collect this information to support legal regimes ancillary to the tax law such as state nonprofit law and campaign finance. Tax law prohibits the distribution of earnings from a nonprofit to those who control the organization. Like officers and directors, substantial donors are classic suspects of those who might seek improper private benefits through their control of a nonprofit. But substantial donors, unlike officers and directors, are not public facing. Without substantial donor information, an IRS auditor has no reason to begin to question certain transactions and operations of the nonprofit that accrue to the benefit of a substantial donor that could potentially lead to modification of a claimed tax result. The Supreme Court recently found a similar requirement of the state of California to impose a burden on First Amendment free association rights, and furthermore found that the state failed to show the requirement was narrowly tailored to the governmental interest of protecting citizens from fraud on charity. The Court’s ruling calls into question the constitutionality of the IRS requirement too. However, the Court accepted that the governmental interest associated with tax law might be different from the case made by the California attorney general. This Article does not significantly engage with the question of the constitutionality of this IRS requirement but does suggest the important governmental interest involved. There are important governmental and democratic interests involved beyond the free association rights of substantial donors, namely that the tax, campaign finance and nonprofit law be enforced equally upon all and appear to be enforced equally. The importance of the ability of the government to collect the revenue is significant as well.

The decline in long-term earnings mobility in the U.S.: Evidence from survey-linked administrative data

The growth in cross-sectional inequality has sparked concern about its consequences for long-run economic outcomes. We use survey-linked administrative data to estimate trends in long-term earnings mobility in the U.S. since 1980 focusing on differential trends by gender, education, and race-ethnicity. We find that long-term earnings mobility has declined since the 1980s. Declines in upward mobility have occurred for both men and women, reversing a trend prior to 1980 of increasing long-run mobility for women. The largest declines in mobility are for women and college-educated workers, which is driven both by increases in the rank of earnings early in prime earning years and growing persistence in ranks across the earnings distribution.

Spouses’ earnings association and inequality: A non-linear perspective

We analyze the association between spouses’ earnings taking account of non-linearities along both spouses’ distribution of earnings. We also document the non-linearity of the relationships between earnings and labor force participation, earnings and couple formation, and earnings and number of children. Using simulations, we then analyze how changes in spouses’ rank-dependence structure, labor force participation and couple formation contribute to the upsurge in inequality in the U.S between 1967 and 2018. We find that an increased tendency towards positive sorting contributed substantially to the rise in inequality only among dual-earner couples, while it contributed little to overall inequality across households. Temporal and distributional heterogeneity are important, as earnings association had a more substantial role in the bottom of the earnings distribution and in recent years. The decline in couple formation contributed substantially to the rise in inequality, while the increase in female labor force participation and the fertility decline had equalizing effects.

The game of popularity: The earnings system and labor control in the live streaming industry

The case study in this paper concerns a street performance band in Wuhan, each of whose members is under contract as a live streamer. Borrowing from Michael Burawoy's concept of “the game of making out”, this study describes the labor control mechanism in the live streaming industry as a “game of popularity”. Popularity is a pivotal indicator of labor price, determining the compensation of contracted live streamers. However, this seemingly objective popularity indicator can in fact be manipulated. Both live streamers and platform providers can benefit from purchasing “fake popularity”. In the game of popularity manipulation, the interests of capital and labor are conjoined, and consensus reached. In collaboration, live streamers become co-conspirators of capital and thus lose control over their own labor output, and the relation between labor input and compensation is distorted. By participating in this manipulation, live streamers help affirm the ideological dominance of the platform economy. The neoliberal work ethic that emphasizes individual responsibility conceals the power relationship behind unstable employment modes like live streaming. Despite being horrendously exploited, live streamers still think of themselves as someone with an “independent destiny”. The online platform economy has transformed the labor–capital relationship. The earnings distribution system, in combination with other social factors, often plays a vital role in labor control. Therefore, understanding this system and its influence on labor processes and ideology is the correct way to start for any exploration of concepts such as the “industry regime” or “sector regime”.

Rent Sharing within Firms

This study investigates the extent to which economic rents are shared among different types of workers within firms. We utilize administrative payroll records in order to estimate the elasticity of employee compensation with respect to the price of crude oil at petroleum extraction companies. We find that the elasticity of rent sharing is heterogeneous within firms and significantly higher for workers at the top of the earnings distribution. These results can be rationalized by a bargaining model in which insiders within a firm possess greater power to negotiate over wages.

Imports, Exports, and Earnings Inequality: Measures of Exposure and Estimates of Incidence

Abstract The earnings of individuals depend on the demand for the factor services they supply. International trade may therefore affect earnings inequality because either (i) foreign consumers and firms demand domestic factor services in different proportions than domestic consumers and firms do, an export channel; or (ii) domestic consumers and firms change their demand for domestic factor services in response to the availability of foreign goods, an import channel. Building on this idea, we develop new measures of export and import exposure at the individual level and provide estimates of their incidence across the earnings distribution. The key input fed into our empirical analysis is a unique administrative data set from Ecuador that merges firm-to-firm transaction data, employer-employee matched data, owner-firm matched data, and firm-level customs transaction records. We find that export exposure is pro-middle class, import exposure is pro-rich, and in terms of overall incidence, the import channel is the dominant force. As a result, earnings inequality in Ecuador is higher than it would be in the absence of trade.

Effect of Increasing Import Competition from China on the Local Labor Market: Evidence from Sweden

Import competition from low-wage countries can worsen labor market conditions in high-income countries and undermine the sustainability of free international trade. We examine the effect of increasing manufacturing imports from China on manufacturing employment and wage earnings distribution in Sweden by employing a two-stage least squares estimation method. The empirical results indicate that, except for the transportation sector, the effect of increasing import exposure to China on manufacturing and non-manufacturing employment growth is statistically insignificant. Regarding earnings distribution, we find that the earnings growth of low-wage workers in the manufacturing sector is not significantly influenced by an increase in Chinese imports. However, wage earners at the median level or above are positively impacted by trade shocks from China. These findings have implications for seeking policy alternatives that can enhance the sustainability of the international trade order.

New Evidence on Teacher Pay

Prior research has shown that teachers receive lower pay compared to people with the same educational level who work in other occupations. This article challenges that literature and shows that by applying novel statistical approaches, the pay differentials are reduced, and even become pay premiums. In particular, these approaches provide unifying estimates that turn an earnings penalty between female teachers and non-teachers of approximately 10%—based on a standard approach in the literature—into an earnings premium of 5 to 10%. Likewise, estimates based on these approaches erase up to two-thirds of the earnings gap between male teachers and non-teachers. Moreover, going beyond the traditional focus on the mean, the author decomposes the pay gap across the entire earnings distribution. Estimates show that although teachers have a substantial earnings premium at the bottom of the distribution, they have a large earnings penalty at the top.

Brexit and labour market inequalities: potential spatial and occupational impacts

Abstract In this paper we examine the possible distributional impacts of new trade barriers associated with the new Trade and Cooperation Agreement governing relations between the UK and EU after Brexit. We use a model of labour demand that incorporates input–output links across industries, and that allows for demand substitution by firms and consumers and worker reallocation across industries. We find that workers’ exposure is moderately increasing across the earnings distribution. Exposure is greater for men than for women as they are more likely to work in manufacturing industries that are relatively harder hit by new trade barriers. Looking across areas, we find that exposure to new Brexit trade barriers is uncorrelated with measures of local deprivation and the impacts of the recent Covid-19 pandemic.

The Gender Wage Gap in Peru: Drivers, Evolution, and Heterogeneities

Despite the recent economic growth and gender equality improvement in educational attainment, important gender disparities remain in the Peruvian labour market. This article provides a comprehensive overview of the Peruvian gender wage gap evolution during 2007–2018 and identifies key elements that explain its patterns. First, the article shows that the raw wage gap showed an upward trend between 2007–2011, ranging from 6% to 12%, and remaining around that top bound ever since. Second, using Oaxaca‐Blinder decomposition we find that the unexplained wage gap has remained virtually unchanged at around 17% during the study period. Reductions in endowment differences between men and women coupled with a stagnant unexplained gap led to slightly larger raw wage gaps over time. Moreover, the stagnant unexplained gap suggests the presence of structural problems regarding social norms, gender stereotyping and potential discrimination that affects the wage gap. Third, we show that both at a national and regional level, gender wage gaps are larger within the lowest percentiles, and they mostly have a downward slope across the earnings distribution. Finally, after computing the raw and unexplained gap at the region‐year level, we show that smaller regional gender gaps are associated with (a) higher GDP, (b) lower levels of domestic physical violence against women, and (c) lower percentages of women as household heads.

Mind the Gap: An Analysis of Physical Therapist Earnings in the United States by Male/Female Sex.

Earnings discrepancies between male and female health and medical professionals are well documented. The purpose of this study was to examine the distribution of physical therapist earnings using a quartile regression approach to determine the nature of the gender-based differences in earnings between male and female physical therapists in the United States, with "gender" as defined by the dataset as being male or female. This observational study used data from the 2014 to 2018 American Community Survey 5-year public use microdata file. The file contained 12,123 physical therapist cases weighted to an estimate of the physical therapist active workforce of 238,221 (95% CI = 232,587 to 243,855). To analyze the influence of gender on earnings, a multivariable quantile regression approach was used in which physical therapist earnings were the dependent variable and the variables representing the geographic distribution, social characteristics, and employment characteristics were the independent variables. In 2018 dollars, the average annual earnings of a physical therapist were $73,444.98 (95% CI = $72,498.19 to $74,391.11), with a median value of $71,735.09. Differences in male and female earnings were evident in both the unadjusted bivariable and in the adjusted values produced by the quartile regression. The ratios of female-to-male earnings at each quartile were 0.89, 0.90, and 0.89. When age of the earner is accounted for, male physical therapists earned more than female therapists in both the 30-to-54-year age group and the ≥55-year age group. In the youngest age group of earners under 30years of age, the differences were substantially smaller. Gender differences in income persist across the distribution of earnings, resulting in female physical therapists earning approximately 10% less than their male counterparts. The differences are most distinct as physical therapists advance in their careers. The etiology of the earnings gap is unknown, but gender equity has not been achieved yet for physical therapy.

Misallocation and Inequality

For a large set of countries with different GDP per capita levels, we document how the distribution of labour earnings varies by development. Data reveals that the distribution of earnings changes with development in a particular way: while there is a larger mass at the left-tail, the right-tails shrinks, and moves towards the center. As a result, while the standard deviation of log earnings increases with development, the mean-to-median ratio declines. We interpret this fact within a model economy with heterogeneous workers and firms, which features industry dynamics, labor market frictions captured by a matching function, skill accumulation of workers with learning-by-doing and on-the-job training, and earnings inequality both across firms and workers. The benchmark economy is calibrated to the UK. We study how the earnings distribution changes as we increase two distortions in the benchmark economy: wedges on firms' output correlated with firm productivity and reductions in the labor market's ability to match unemployed workers and open vacancies. These distortions lead to the misallocation of resources and reduce employment and the GDP per capita. But they also affect how much firms are willing to pay to workers, how well higher skilled workers are matched with firms with higher productivity, and how much training workers receive. The model is consistent with a host of factors on how firm size distribution, firms' training decisions, and workers' life-cycle earnings profiles change with development and generates the observed patterns of changes in earnings distribution with development.

Inequality, income dynamics, and worker transitions: The case of Mexico

We characterize the salient features of the distribution of (log) earnings of formal workers in Mexico using social security records for the period 2005–2019. The analysis is based on a nonparametric approach and is focused primarily on the properties of the distribution of earnings changes. We find strong evidence of deviations from normality of this distribution in terms of negative skewness and high kurtosis, with these deviations varying with income and along the worker's life cycle. A comparison between results obtained with administrative data and household survey data suggests that this latter source of information is inadequate to fully capture the evolution of inequality and the properties of earnings changes as nonresponse is nonrandom and concentrated among formal and highly educated workers—likely the highest earners. Due to the relative size of the informal sector in the Mexican economy, which results in a large number of workers maintaining a weak attachment to formal employment, we also study the impact of transitions out of and back into formal employment on wages earned in the formal sector. We document that workers who exit formal employment experience a significant wage penalty upon reentry taking, on average, 3 or more years to achieve comparable preexit wage levels.

U.S. long‐term earnings outcomes by sex, race, ethnicity, and place of birth

This paper is part of the Global Repository of Income Dynamics (GRID) project cross‐country comparison of earnings inequality, volatility, and mobility. Using data from the U.S. Census Bureau's Longitudinal Employer‐Household Dynamics (LEHD) infrastructure files, we produce a uniform set of earnings statistics for the U.S. From 1998 to 2019, we find U.S. earnings inequality has increased and volatility has decreased. The combination of increased inequality and reduced volatility suggest earnings growth differs substantially across different demographic groups. We explore this further by estimating 12‐year average earnings for a single cohort of age 25–54 eligible workers. Overall, differences in labor supply (hours paid and quarters worked) are found to explain almost 90% of the variation in worker earnings at the mean, although substantial earnings differences across and within groups remain unexplained. Using a quantile regression approach, we estimate counterfactual earnings distributions for each demographic group. We find that at the bottom of the earnings distribution differences in characteristics such as hours paid, geographic division, industry, and education explain almost the entire earnings gap; however, above the median the contribution of the differences in the returns to characteristics is the dominant component.

Nonprofit Regulation and Earnings Distribution: Nonprofit Hospital

Nonprofit Regulation and Earnings Distribution: Nonprofit Hospital

Accounting for Firms in Ethnicity Wage Gaps Throughout the Earnings Distribution

Accounting for Firms in Ethnicity Wage Gaps Throughout the Earnings Distribution