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December 1990, Vol. 113, No. 12
Earnings inequality accelerates in the 1980's
Paul Ryscavage and Peter Henle
In the early 1980's, many researchers analyzing earnings distributions found that earnings inequality-the gap between the pay of higher and lower paid workers-had been rising for a number of years, and perhaps even decades, particularly among men. Finding in a 1980 study by the authors, for example, revealed that the trend in earnings inequality for men was upwards between 1958 and 1977.1 Similarly, Robert Plotnick in 1982, and Martin Dooley and Peter Gottschalk in 1984 also found evidence of rising earnings inequality among men.2 The evidence in what follows strongly suggests that earnings inequality accelerated during the 1980's not only for men, but for women and as well, and that increases also took place for other demographic, occupational, and industrial groups.
The obvious question, of course, is, Why such an acceleration? What occurred in the 1980's that was so different than in earlier decades? The explanation for rising earnings inequality, as well as issues related to it, such as the "declining middle class" and the "quality of jobs," has been the focus of much research and analysis.3
As regards rising earnings inequality, Barry Bluestone and Bennett Harrison have argued that is has been a result of demand-side factors such as industrial restructuring (moving from a goods-producing to a service-producing economy).4 Marvin Kosters and Murray Ross, on the other hand have pointed to the supply-side factors such as the maturing of the baby boom generation and the rise in women's labor force participation.5 Most recently, researchers such as Chinui Juhn, Kevin Murphy, and Brooks Pierce have directed their attention to the widening gap in the returns to education that apparently took place in the 1980's.6 But despite these explanations, the mechanism by which the Nation's earnings distribution has become more equal is still not well understood.
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1 See Peter Henle and Paul Ryscavage, "The distribution of earned income among men and women, 1958-77," Monthly Labor Review, April 1980, pp. 3-10. For an even earlier analysis by one of the authors, see Peter Henle, "Exploring the distribution of income," Monthly Labor Review, December 1972, pp. 16-27.
2 See Robert D. Plotnick, "Trends in Male Earnings Inequality," Southern Economic Journal, vol. 48, no. 3, 1982, pp. 724-32; and Martin Dooley and Peter Gottschalk, "Earnings Inequality Among Males in the United States: Trends and the Effects of Labor Force Growth," Journal of Political Economy, vol. 92, no. 1, 1984, pp. 59-89.
3 For example, see Kathryn L. Bradbury, "The Shrinking Middle Class," New England Economic Review, September-October, 1986, pp. 41-55; Gary Burtless, "Earnings Inequality Over the Business and Demographic Cycle," in Gary Burtless, ed., A Future of Lousy Jobs? (Washington, the Brookings Institution, 1990); Frank Levy, Dollars and Dreams: The Changing American Income Distribution (New York, Russel Sage Foundation, 1987).
4 See Barry Bluestone and Bennett Harrison, The Great American Job Machine: The Proliferation of Low Wage Employment in the U.S. Economy, Report to the Joint Economic Committee of the U. S. Congress, December 1986.
5 See Marvin Kosters and Murray N. Ross, "The Influence of Employment Shifts and New Job Opportunities on the Growth and Distribution of Real Wages," in Phillip Cagan, ed., Deficits, Taxes, and Economic Adjustments (Washington, The American Enterprise Institute, 1987).
6 See Chinui Juhn, Kevin M. Murphy, and Brooks Pierce, "Wage Inequality and the Rise in the Returns to Skill," version of a paper presented at a meeting of the Allied Social Science Association, December 1989.
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