Has wage inequality stopped growing? (EXCERPT), Monthly Labor Review Online, Dec. 1997

Has wage inequality stopped growing?

Jared Bernstein and Lawrence Mishel

It is by now almost a platitude of labor economics that wage inequality has increased quite sharply since the late 1970s, for both men and women.¹This article examines several questions regarding that generalization:

Did earnings inequality among all workers stop growing in the mid-1980s?

What data serve best to measure the trend in equality, and which metrics are the most revealing?

In examining trends in wage inequality, when should we look at the combined distribution of men’s and women’s earnings, rather than at their separate distributions?

In answer to the first question, we present extensive evidence that overall earnings inequality has consistently increased since 1979, although the rate of increase has not been constant. The sharpest increase was in the early 1980s, followed by a flattening in the second half of the 1980s and a reacceleration in the 1990s. With regard to the second question, we argue the relative virtues of the variety of data sets brought to bear on this issue, concluding that, of the three data sets we examine—the March Current Population Survey (CPS), the CPS Outgoing Rotation Group files, and the Survey of Income and Program Participation—the second is best for measuring earnings inequality. Nevertheless, to the extent that we can compare these data sets, they all show persistently growing inequality. Finally, addressing the third question, we argue that combining data on male and female earners provides some insights, but inappropriately ignores differences in men’s and women’s labor market dynamics.

This excerpt is from an article published in the December 1997 issue of the Monthly Labor Review. The full text of the article is available in Adobe Acrobat's Portable Document Format (PDF). See How to view a PDF file for more information.

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Footnotes
¹ See Frank Levy and Richard 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.

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