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June 1992, Vol. 115, No. 6
W. Norton Grubb and Robert H. Wilson
D uring the last several years, research on the distribution of income and earnings in the United States has expanded substantially.1 In part, this reflects the perception that inequality of earnings has been increasing, leading among other results to increases in poverty. The size and composition of the middle class, and fears of a "declining middle class," have prompted some of the analysis. Still other researchers have been concerned about the economic prospects for a new generation of young adults.
While there is now general agreement about the trend of increasing inequality, particularly during the 1980's, the causes of this increase are still unclear. Some argue that the effects of structural changes in the economy and heightened competition in the international marketplace have led to increasing inequality and diminished the prospects for greater prosperity in U.S. society. Others claim that changes in demographic characteristics of the labor force, some of which cannot be affected by public policy, are the sources of growing inequality.
The purpose of this study is to determine the relative influence of demographic characteristics and labor market factors on the patterns of national pay inequality, for the period 1967 through 1988. As in our previous work in this area,2 we focus on wages and earnings, rather than total income, and we use a measure of inequality developed by Henri Theil that is particularly appropriate for disentangling the contributions of different factors to pay inequality. We first review the recent literature on inequality to determine potential causes that are worth examining, and then present the methodology of the study. The following sections describe the results, first for demographic factors-age, gender, educational attainment, and race and ethnicity-and then for labor market factors, including industrial and occupational patterns of employment and work patterns (part-time, full-time, and overtime work).
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1 See, for example, Frank Levy and Richard Murnane, "Earnings Levels and Earnings Inequality: A Review of Recent Trends and Proposed Explanations," Journal of Economic Literature, forthcoming.
2 W. Norton Grubb and Robert Wilson, "sources of increasing inequality in wages and salaries, 1960-80," Monthly Labor Review, April 1989, pp. 3-13.
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