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July 1994, Vol. 117, No. 7

Earnings in the late 1980's: an occupational perspective

Maury Gittleman

The 1980's were a decade of dramatic change for the earnings structure in the United States. Differentials in earnings by education widened considerably, the average pay of older workers increased relative to that of younger workers, and the earnings gap between men and women narrowed markedly. By some measures, these and other changes in the wage structure caused overall levels of earnings inequality to rise heights not previously seen in the post-World War II period.1

Much research conducted in an attempt to document and explain the recent changes had focused almost exclusively on the demographic characteristics of workers.2 A great deal has thus been learned about which group have made relative gains, and which have lost, in the labor market. Unfortunately. much less is known about what kinds of jobs these different workers hold, how their distribution among jobs has changed over time, and what the trends imply about the match between skills being demanded by employers and those available in the work force.3

Explanations for the changes in the earnings structure can be classified into three categories: changes in the supply of labor of different types, changes in demand for this labor, and changes in wage-setting institutions. The analysis set forth in this article article fits best under the second category, as it assesses changes in the demand for skills in the workplace.

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1 See Claudia Goldin and Robert A. Margo, "The Great Compression: The Wage Structure in the United Stated at Mid-Century," Quarterly Journal of Economics, February 1992, pp. 1-34, for a long-term view of U.S. earnings inequality trends.

2 For a survey of this literature, see Frank Levey and Richard J. Murnane, "U.S. Earnings Levels and Earnings Inequality: A Review of Recent Trends and Proposed Explanations," Journal of Economic Literature, September 1992, pp. 1333-81.

3 One reason for the lack of focus on actual jobs in the economy is that changes in the occupation classification scheme by the Census Bureau have made it difficult to compare the occupations structure of the economy before and after 1983. To circumvent this problem, occupation data taken from the CPS before 1983 were recoded in post-1983 terms. ( See the appendix at the end of this article.)

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