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Abstract:
This paper revisits the old question of whether wage growth differs by education level. Do more educated workers invest more than less educated workers in firm specific, sector specific or general human capital? Do they gain more from improved job match? The paper makes both a methodological and a substantive contribution by offering an alternative strategy for separately identifying returns to general experience, sector specific experience, firm tenure, and job match. Our empirical results, based on the Survey of Income and Program Participation, show that overall wage growth is higher for more-educated workers. This reflects higher returns to general experience for college graduates and higher returns to sector experience for high school graduates. Improvements in job match grow monotonically with education.

low wage workers, returns to tenure, sector experience, general experience, job match

Abstract:
This paper presents a new method to correct for measurement error in wage data and applies this method to address an old question. How much downward wage flexibility is there in the U.S? We apply standard methods developed by Bai and Perron (1998b) to identify structural breaks in time series data. Applying these methods to wage histories allows us to identify when each person experienced a change in nominal wages. The length of the period of constant nominal wages is left unrestricted and is allowed to differ across individuals, as is the size and direction of the nominal wage change. We apply these methods to data from the Survey of Income and Program Participation. The evidence we provide indicates that the probability of a cut in nominal wages is substantially overstated in data that is not corrected for measurement error.

nominal wage rigidity, measurement error

Abstract:
Measures of inequality and mobility based on self-reported earnings reflect attributes of both the joint distribution of earnings across time and the joint distribution of measurement error and earnings. While classical measurement error would increase measures of inequality and mobility there is substantial evidence that measurement error in earnings is not classical. In this paper we present the analytical links between non-classical measurement error and measures of inequality and mobility. The empirical importance of non-classical measurement error is explored using the Survey of Income and Program Participation matched to tax records. We find that the effects of non-classical measurement error are large. However, these non-classical effects are largely offsetting when estimating mobility. As a result SIPP estimates of mobility are similar to estimates based on tax records, though SIPP estimates of inequality are smaller than estimates based on tax records.

measurement error, earnings mobility and inequality

Abstract:
In the past twenty years, the labor force participation and earnings of women, especially married women, have risen dramatically. Over the same period, men's earnings have increased only modestly, and the distribution of family income has grown less equal. In this paper, we analyze the impact of changes in the level and distribution of earnings of men and women in the distribution of family income. We emphasize the contributions due to the increased work effort and real earnings of wives, as they account for a major portion of growth in family income over these two decades. Working wives have taken the place of economic growth as the factor that raises the standard of living of families across the entire income distribution.

We analyze Current Population Survey data for white, black and Hispanic families in 1968, 1978, and 1988. Our results show that the primary factor contributing to rising income inequality was the increased inequality in the distribution of husbands' earnings. Wives' earnings both raised family income and lowered inequality.

Abstract:
It is widely acknowledged that earnings subsidies promote employment by increasing rewards to labor market activity. This paper asks whether subsidies also affect job duration and wage growth. We provide an analytical framework that identifies causal links between earnings subsidies, job turnover, and wage growth. This framework highlights the importance of the form of the subsidy on the decision about the type of job to accept and, hence, its potential effect on within-job wage growth. The subsidy is predicted to increase job turnover and to affect between-job wage growth by affecting reservation wages. We use this framework to analyze the effects of the Canadian Self-Sufficiency Project (SSP). Consistent with the theory, we find that experimentals have shorter job duration and experience faster within-job and between-job wage growth than experimentals who continued to be eligible only for Income Assistance.

wage subsidy, job choice

Abstract:
By 1989 the Michigan Panel Study on Income Dynamics (PSID) had experienced approximately 50 percent sample loss from cumulative attrition from its initial 1968 membership. We study the effect of this attrition on the unconditional distributions of several socioeconomic variables and on the estimates of several sets of regression coefficients. We provide a statistical framework for conducting tests for attrition bias that draws a sharp distinction between selection on unobservables and on observables and that shows that weighted least squares can generate consistent parameter estimates when selection is based on observables, even when they are endogenous. Our empirical analysis shows that attrition is highly selective and is concentrated among lower socioeconomic status individuals. We also show that attrition is concentrated among those with more unstable earnings, marriage, and migration histories. Nevertheless, we find that these variables explain very little of the attrition in the sample, and that the selection that occurs is moderated by regression-to-the-mean effects from selection on transitory components that fade over time. Consequently, despite the large amount of attrition, we find no strong evidence that attrition has seriously distorted the representativeness of the PSID through 1989, and considerable evidence that its cross-sectional representativeness has remained roughly intact.

Abstract:
This paper analyzes distributional changes over the last quarter of the twentieth century. We focus on four distinct distributions: the distribution of hourly wage rates, the distribution of annual earnings of individuals, the distribution of annual earnings of families, and the distribution of total family income adjusted for family size. Both male wage rate inequality and family income inequality accelerated during the early 1980s, increased at a slower rate through the early 1990s and then stabilized at a high level through the early 2000s. The similarity in the timing of changes in these two distributions has been used as evidence that increased family income inequality primarily reflects increased inequality of wage rates. We show that other important factors were also at work.

Abstract:
We decompose the rise in cross-sectional variance of male annual earnings in the United States from 1969 to 1996 into permanent and transitory components. We find that the variance of permanent earnings began rising in the the late 1970s and has continued to rise in the 1980s. The variance of transitory earnings also rose in the 1980s but declined in the 1990s. There are lags in the earnings process which require a structural model to pinpoint the exact calendar times at which the changes in trends occurred.

Abstract:
Wage cuts are often presumed to reflect an adverse change in economic constraints. However, several theoretical models have shown they can be a form of investment in future wage growth. This paper provides empirical evidence of the latter by explicitly modeling the worker's job choice when the job offer consists of both a starting wage and expected future wage growth. We use our analytical model to estimate the distribution of job offers faced by workers who are searching across jobs differing in both initial wage and expected wage growth. For females, roughly one-third of job changes that result in immediate wage cuts are transitions to jobs that have a higher value function than the existing job. For males, the corresponding value is one-fifth.

Abstract:
This study is motivated by the well-documented increase in wage inequality during the 1980s and the continued high levels of inequality during the 1990s. Specifically, we examine changes in the distribution of long-run earnings and changes in economic mobility for recent cohorts. These cohorts, who either entered retirement in the 1990s or are nearing retirement, experienced very different labor market conditions during their working lives than did earlier cohorts. Economic growth led to higher mean earnings for recent cohorts but the distribution of yearly earnings became less equal. As a result of these changes, the average worker nearing retirement had higher long-run earnings than members of previous cohorts. This, however, need not have translated into higher long-run earnings across the board. Those at the bottom of the distribution of long-run earnings might actually have had lower accumulated earnings than previous cohorts if the gains from growth were more than offset by the increase in inequality of earnings during the 1980s. If the accumulated earnings of those at the bottom of the distribution fell, then this could have had an impact both on decisions about whether to continue to work after the period of normal retirement and on Social Security benefits.

The second, and related, policy question is whether mobility has increased. If mobility has increased, then this may partially offset the impact of the increase in earnings inequality. Outcomes may be less equal, but there is less chance of being stuck with a bad outcome. Our ability to measure earnings mobility for five cohorts spanning a twenty-five-year period allows us to address this important question.

Abstract:
This paper explores the impact of earnings subsidies on job duration and wage growth. We develop an analytical framework that predicts that convex subsidies increase job turnover and affect within-job and between-job wage growth. This framework is used to analyze the effects of the Canadian Self-sufficiency Project earnings subsidy. We find that the treatment group had shorter job duration and experienced faster wage growth than controls, which is consistent with the analytical model. Results for between-job wage growth hold after we correct for compositional bias, but we cannot rule out that within-job wage growth was not affected by the program.

(Ce mémoire examine l'impact des subventions aux gains sur la durée de l'emploi et la croissance des salaires. On développe un cadre d'analyse qui prédit que des subventions convexes accroissent le roulement des emplois et affectent la croissance des salaires entre les emplois et à l'intérieur d'une période d'emploi. Ce cadre d'analyse est utilisé pour ausculter les effets des subventions du Projet de l'Autosuffisance au Canada. Il appert que le groupe subventionné a fait l'expérience de durées d'emploi plus courtes et de croissance de salaires plus rapide que le groupe de contrôle, ce qui s'arrime aux prévisions du cadre d'analyse. Les résultats pour la croissance des salaires entre emplois sont robustes même après correction pour le biais de composition, mais on ne peut pas rejeter l'hypothèse que la croissance de salaires dans un emploi n'a pas été affectée par le programme.)