Growth In Earnings Inequality Research Articles

Revealing the Concealed Effect of Top Earnings on the Gender Gap in the Economic Value of Higher Education in the United States, 1980-2017.

The expansion of women's educational attainment may seem to be a promising path toward achieving economic equality between men and women, given the consistent rise in the economic value of higher education. Using yearly data from 1980 to 2017, we provide an updated and comprehensive examination of the gender gap in education premiums, showing that it is not as promising as it could and should be. Women receive lower rewards to their higher education across the entire wage distribution, and this gender gap increases at the very top education premiums-the top quarter and, even more so, the top decile. Moreover, insufficient theoretical and methodological attention to this top premium effect has left gender inequality concealed in the extensive empirical studies on the topic. Specifically, when we artificially censor the top at the 80th wage percentile, the gender gaps in education premium reverse. Lastly, the growth in earnings inequality in the United States, which is greatly affected by the expansion of top earnings, is associated with the growing gender gap in education premiums over time. We discuss the meaning and implications of this structural disadvantage at a time when women's educational advantage keeps growing and higher education remains the most important factor for economic attainment.

Gender, Price, and Quantity Effects in U.S. Earnings Inequality: Revisiting Counterfactual Density Estimates

I decompose changes in the U.S. household earnings distribution from 1975 to 2018 to examine the labor market processes underlying its evolution over time. I model the distri- bution of earnings as a function of price effects (wages) and quantity effects (work hours and household employment), each of which are specified separately for men and women, and apply a semi-parametric density estimation technique to infer their contributions to in- equality measures over time. Results indicate that changes to the male wage distribution explain much of the growth in earnings inequality, but that its contribution varied greatly over time, with peak contributions in the mid 1990s; while changes in female work hours have actually mitigated inequality growth, particularly by raising earnings in the lower and mid portions of the distribution, with very consistent effects over time. These results demonstrate the relevance of work hours in addition to wage rates in explaining earnings inequality, and the importance of gender differences therein.

Increasing Returns to Education, Changing Labor Force Structure, and the Rise of Earnings Inequality in Urban China, 1996–2010

Earnings inequality in urban China has grown rapidly the past two decades. During the same period, the composition of the urban labor force has been dramatically altered by three large-scale structural changes: (1) the expansion of tertiary education; (2) the decline of state sector employment; and (3) a surge in rural-to-urban migration. In this article, I examine how these institutional and demographic shifts have shaped the recent upswing in earnings inequality. Based on data from two nationally representative surveys, I use variance function regressions to decompose the growth in earnings inequality from 1996 to 2010 into four components: changes in between-group earnings gaps, changes in within-group earnings variation, and two types of composition effects (distribution effect and allocation effect). I also employ counterfactual simulations to evaluate the utility of different explanations. Results show that nearly half of the growth in earnings inequality during this period is due to increases in returns to education, and that the other half can be attributed to compositional changes in the labor force. The composition effects stem chiefly from the expansion of tertiary education and the shrinkage of state sector employment.

Male Earnings Inequality, Women's Employment and Family Income Inequality in Australia, 1982-2007

This paper uses cross-sectional data to examine the relationship between the growth in earnings inequality among men, changes in women’s earnings and changes in family income inequality in Australia between 1982 and 2007-08. Male earnings inequality increased substantially across this period, as did women’s participation in paid work. Our analysis shows that both impacted on family income inequality, which rose by a relatively small amount. We also show that the impact of changes in women’s employment and earnings on family income inequality changed over the study period. During the years associated with the Hawke-Keating Labor government (1982 to 1995-96), growth in women’s earnings pushed family income inequality higher. However, during the tenure of the Howard government (1995-96 to 2007-08) the pattern reversed, with continued growth in women’s earnings contributing a moderating influence on family income inequality. These findings deliver new evidence on the importance of trends in family formation and the correlation of husbands’ and wives’ earnings to the evolution of family income inequality. They also show the potential effects of a range of policy initiatives on this evolution.

Educational Assortative Mating and Earnings Inequality in the United States

This article investigates how changes in educational assortative mating affected the growth in earnings inequality among households in the United States between the late 1970s and early 2000s. The authors find that these changes had a small, negative effect on inequality: there would have been more inequality in earnings in the early 2000s if educational assortative mating patterns had remained as they were in the 1970s. Given the educational distribution of men and women in the United States, educational assortative mating can have only a weak impact on inequality, and educational sorting among partners is a poor proxy for sorting on earnings.

Investigating the organizational sources of high-wage earnings growth and rising inequality

Recent studies indicate that the growth of earnings inequality in the United States since the late 1970s reflects organizational changes in the process of earnings determination. Existing research primarily focuses on workplace changes that reduce earnings levels for middle- and low-wage workers despite the importance of high-wage gains for rising inequality. This paper investigates how organizational context affects the relationship between occupation and earnings, with a focus on high-wage occupations. The earnings associated with low-wage occupations do not vary across industry groups. By contrast, the earnings advantages associated with high-wage occupations vary across industry groups in relation to the industry’s prevalence of performance pay practices. Pay initiatives that reward individuals for company performance explain much of the inter-industry variance in managerial and professional earnings slopes. The growth of performance-based pay represents an organizational change in earnings determination that may serve as a mechanism of high-wage earnings growth and rising inequality.

Earnings inequality and subnational political economy in the United States, 1970–2000

Previous studies of rising inequality in the United States have overlooked the potential role of subnational political economic variation as an institution that shapes earnings restructuring. This paper uses hierarchical linear models to examine how state right-to-work laws contribute to growth in inequality in 80 metropolitan labor markets from 1970 to 2000. Contrary to conventional expectations, labor markets in states with right-to-work laws experience relatively mild growth in earnings inequality, and are less unequal by 2000 than non-RTW labor markets. The trend cannot be fully explained by union density, job growth, uneven development or variation in racial inequality. The findings contribute to a distinctly sociological perspective on rising inequality that considers how social, institutional and economic factors interact at the local and state levels to shape earnings.

Two Sides of the Same Coin: U.S. "Residual" Inequality and the Gender Gap

Abstract:We show that the narrowing gender gap and the growth in earnings inequality are consistent with a simple model in which skills are heterogeneous, and the growth in skill prices has been particularly strong for skills with which women are well endowed. Empirical analysis of DOT, CPS, and NLSY79 data finds evidence to support this model. A large increase in the prices of cognitive and people skills—skills with which women are well endowed—and a decline in the price of motor skills account for up to 40 percent of the rising inequality and 20 percent of the narrowing gender gap.

Has Increased Women's Educational Attainment Led to Greater Earnings Inequality in the United Kingdom? A Multivariate Decomposition Analysis

It is widely believed that the growth in women's educational attainment and their increasing labour force participation, together with educational homogamy, will lead to greater inequality between households in their earnings. In this article, we use data from the United Kingdom to test that assertion. We use a new method of decomposing the change in household earnings inequality, and this allows us to identify effects associated with women's increasing educational attainment and consequential changes in their propensity to marry, in educational assortative mating and in labour-force participation. We find that changes in women's education and their behavioural consequences account for little if any of the growth in earnings inequality between households in the United Kingdom during the closing decades of the 20th century.

Social Class and Earnings Inequality

The authors examine whether growth in earnings inequality has played out in ways that are class strengthening or class weakening. Using the Current Population Survey, they show that the absolute amount of inequality is increasing (a) between big classes, (b) between the occupations constituting big classes, and (c) within occupations. In relative terms, the share of total inequality occurring within occupations has declined, whereas the share of total inequality occurring between classes and between the occupations constituting big classes has tended to increase, most clearly for men. Although the majority of earnings inequality is still generated within occupations, especially rapid growth of the between-class and between-occupation components implies that the well-known takeoff in inequality has generated a “lumpier” earnings distribution with relatively stronger class and occupational distinctions.

Discrimination, inequality and the competitive model of US education

US public education is dominated by a win‐lose competitive model. While this model has been relatively successful in educating and training most Americans to function in the type of economic environment that has prevailed since the Second World War, it has almost completely failed to develop a citizenry that can participate fully in the political and social spheres of a capitalist democracy. The relative success in training workers may be on the wane as the US economy evolves toward more knowledge‐intensive work, requiring more critical thinking and worker autonomy. Even worse, the competitive model in US public education is a powerful promoter of the growth of earnings inequality and racial discrimination. Examines the current educational system, the role of standardized testing, and proposes a model of cooperative learning to develop a better‐educated citizenry and workforce.

Income Inequality in Early Transition: The Case of Hungary 1987–1996

We analyze household budget survey data to examine income inequality in Hungary between 1987 and 1996. Inequality did not increase significantly between 1987 and 1991. However, after 1991, the increase was substantial. Falling real incomes and taxes and state transfers may have held back inequality in the early transition. However, growth in earnings inequality, and increasing diversity in sources of household incomes, interacted to increase inequality between 1991 and 1996. This was exacerbated by an emerging polarization in state transfers, i.e., between earnings-related pensions and other benefits. In the context of sustained economic growth, the increase in inequality could accelerate. J. Comp. Econ., March 2001 29(1), pp. 40–65. Department of Applied Economics and Corpus Christi College, University of Cambridge, Cambridge CB3 9DE, United Kingdom; Social Policy Research Center, The University of New South Wales, Kensington 2052, New South Wales, Australia. Copyright 2001 Academic Press.Journal of Economic Literature Classification Numbers: D31, P21.

The Anatomy of Rising Earnings Inequality in Urban China

A labor market is beginning to emerge in urban China during a period of rapid growth and changed labor supply. In this paper, we investigate how earnings inequality and relative earnings have changed between 1988 and 1995 using two large samples covering 10 provinces. The results verify that, as expected, earnings inequality has increased rapidly. The expansion can be traced to two components, the basic wage and subsidies. The analysis shows that the growth in earnings inequality is not limited to certain segments of the labor force but affects all categories as defined by ownership sector, region, and education. J. Comp. Econ., March 2001 29(1), pp. 118–135. Department of Social Work, University of Göteborg, P.O. Box 720, SE 405 30 Göteborg, Sweden; and Institute for the Study of Labor (IZA), Bonn, Germany; and Institute of Economics, Chinese Academy of Social Sciences, 2 Yuetan Beixiaojie, Beijing, People's Republic of China. Copyright 2001 Academic Press.Journal of Economic Literature Classification Numbers: J31, O18, O53, P23.

Trends in Direct Measures of Job Skill Requirements

It is commonly assumed that jobs in the United States require ever greater levels of skill and, more strongly, that this trend is accelerating as a result of the diffusion of information technology. This has led to substantial concern over the possibility of a growing mismatch between the skills workers possess and the skills employers demand, reflected in debates over the need for education reform and the causes of the growth in earnings inequality. However, efforts to measure trends have been hampered by the lack of direct measures of job skill requirements. This paper uses previously unexamined measures from the Quality of Employment Surveys and the Panel Study of Income Dynamics to examine trends in job education and training requirements and provide a validation tool for skill measures in the Dictionary of Occupational Titles, whose quality has long been subject to question. Results indicate that job skill requirements have increased steadily over the 1970s-1990s but that there has been no acceleration in recent years that might explain the growth in earnings inequality. There is also no dramatic change in the number of workers who are undereducated. These results reinforce the conclusions of earlier work that reports of a growing skills mismatch are likely overdrawn.

Continuing Education, Job Training, and the Growth of Earnings Inequality

Continuing Education, Job Training, and the Growth of Earnings Inequality

Continuing Education, Job Training, and the Growth of Earnings Inequality

Although it is well established that changes in the value of formal education can partly explain the increase in earnings inequality in the United States during the past three decades, less attention has been paid to the possible role of post-school training. Using data from cohorts of the National Longitudinal Surveys, the author finds that young men entering the labor market beginning in the late 1960s and those entering in the early 1980s differed little in the average incidence of training or earnings premiums associated with training, but further analysis shows that shifts in training favoring more educated workers can account for more than 40% of the observed increase in college-high school earnings differences among young men. Changing patterns of continuing learning do not, however, help explain the growth in earnings differences within equally educated groups.

Earnings Dynamics and Inequality among Canadian Men, 1976–1992: Evidence from Longitudinal Income Tax Records

Using an extraordinary database drawn from longitudinal income tax records, we decompose Canada’s growth in earnings inequality into its persistent and transitory components. We find that the growth in earnings inequality reflects both an increase in long‐run inequality and an increase in earnings instability. The Canadian data strongly reject several restrictions commonly imposed in the U.S. literature, and they also suggest that imposing these evidently false restrictions may lead to distorted inferences about earnings dynamics and inequality trends.

INEQUALITY IN EARNINGS AT THE CLOSE OF THE TWENTIETH CENTURY

▪ Abstract Median income in the United States has fallen and the distribution of income has grown markedly more unequal over the past three decades, reversing a general pattern of earnings growth and equalization dating back to 1929. Median trends were not the same for all groups—women's earnings generally increased—but the growth in earnings inequality has been experienced by all groups. Even white men employed full-time, year-round—traditionally the most privileged and secure group—could not escape wage stagnation and polarization. These patterns suggest research questions that go beyond conventional sociological interest in racial and gender wage gaps, refocusing attention on more general changes in labor market dynamics. The debates over the origins of the rise in US inequality cover a wide range of issues that can be roughly grouped into four categories: the changing demographics of the labor force, the impact of economic restructuring, the role of political context and institutions, and the dynamics of globalization. We review the empirical literature here, and challenge the field of sociology to reconstruct its research agenda on stratification and inequality.

Earnings Dynamics and Inequality among Canadian Men, 1976-1992: Evidence from Longitudinal Income Tax Records

Several recent studies have found that earnings inequality in Canada has grown considerably since the late 1970's. Using an extraordinary data base drawn from longitudinal income tax records, we decompose this growth in earnings inequality into its persistent and transitory components. We find that the growth in earnings inequality reflects both an increase in long-run inequality and an increase in earnings instability. The large size of our earnings panel allows us to estimate and test richer models of earnings dynamics than could be supported by the relatively small panel surveys used in U.S. research. The Canadian data strongly reject several restrictions commonly imposed in the U.S. literature, and they also suggest that imposing these evidently false restrictions may lead to distorted inferences about earnings dynamics and inequality trends.

Theory-Driven Facts and the Growth in Earnings Inequality

It is widely accepted that the rise in U.S. wage inequality can be explained by skill-biased technological change: workplace computerization produced demand shifts that worked with a simply supply and demand "vision" of the labor market than with direct statistical evidence, which is remarkably limited. Indeed, the dominance of this elementary textbook vision has led, I argue, to a conflation between statistical facts and "theory-driven" facts-those statements about reality that are selected, interpreted, or simply created to confirm a vision of the way things work. The paper concludes by outlining an alternative explanation of the growth in wage inequality based on a sharply different, Gordonian, vision of the labor market.