The Rise in Lifetime Earnings Inequality Among Men
Board of Governors of the Federal Reserve System - Macroeconomic Analysis Section
FEDS Discussion Paper No. 2002-21
Recent trends in lifetime earnings inequality in the United States have been barely explored, despite the fact that lifetime earnings are a better measure of access to resources than the more widely studied annual earnings. This paper demonstrates that lifetime earnings inequality has increased over the past 30 years. We first explore how starting wages and wage growth have changed over time and link the changes to trends in lifetime earnings and the lifetime skill-premium. We then calculated a broader measure of lifetime earnings inequality and show that since the late 1960s, lifetime earnings inequality has increased by a third. Between the late 1960s and mid-1970s a rise in within-education-group inequality more than accounts for the increase; since then the growth in between-education-group inequality accounted for a majority of the rise. These results are consonant with the data on starting wages and wage growth. Finally, we show that the increase in inequality has been largely driven by greater dispersion in hourly wages, although declining hours of work among low-education young men did play a role. The analysis uses data from the March Current Population Survey as well as matched CPS data. Thus we demonstrate how repeated cross-sections and short panels of data can be used to examine issues usually reserved for long panels.
Number of Pages in PDF File: 47
Keywords: Earnings, inequality, lifecycle, wage growth
JEL Classification: D31, J31
Date posted: May 27, 2002
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