Copyright © 2009 Pearson Education, Inc Topic 9 (Chapter 15) Inequality in Earnings
Copyright © 2009 Pearson Education, Inc Figure 15.1: Earning Distribution with Perfect Equality
Copyright © 2009 Pearson Education, Inc Figure 15.2: Distributions of Earnings with Difference Degrees of Dispersion
Copyright © 2009 Pearson Education, Inc Table 15.1: The Dispersion of Earnings by Gender, Ages 25-64, (expressed in 2005 dollars)
Copyright © 2009 Pearson Education, Inc Table 15.2: Earnings Ratios at Various Percentiles of the Earnings Distribution, 1980, 1990, 2005
Copyright © 2009 Pearson Education, Inc Table 15.3: Mean Earnings and the Returns to Education among Full-Time, Year-Round Workers Between the Ages of 35 and 44 (expressed in 2005 dollars)
Copyright © 2009 Pearson Education, Inc Wage Differential between College/High School Graduates
Copyright © 2009 Pearson Education, Inc Table 15.4: Ratio of Earnings at the 80th to 20th Percentiles for Males, by Age and Education,
Copyright © 2009 Pearson Education, Inc Table 15.5: Employment Shares (within Gender) of Educational Groups, Workers 25 and Older: 1980, 1990, 2005
Copyright © 2009 Pearson Education, Inc Stylized fact Wage dispersion increased substantially in l980s and 90s Gender differential declined, but by education and occupation (between group variation), it increased. Within group variation increased too Individual earnings inequality leads to family income inequality
Copyright © 2009 Pearson Education, Inc The Transmission of Inequality Across Generations
Copyright © 2009 Pearson Education, Inc Causes of growing inequality 1) Changes in supply: slowdown in the rate of growth of relative skill + increase in unskilled immigration 2) Institutional factors: decline in unionization, erosion of real value of minimum wage 3) Changes in demand: skill biased technological change 4) Role of globalization pressures: demand for less educated decreased
Copyright © 2009 Pearson Education, Inc Figure 15.3: Changes in Supply as the Dominant Cause of Wage Changes
Copyright © 2009 Pearson Education, Inc Table 15.6: Changes in the Share of Employment for Four Major Occupational Groups,
Copyright © 2009 Pearson Education, Inc Changes in demand Product demand for skilled / unskilled workers Changing the mix of productive factors: innovation increase / decrease the demand for labor (gross complement / gross substitute with capital?) New technology increase within group dispersion as well: In an environment in which changes in technology create a great expansion of revenues of some firms, we experience the most immediate change in earnings.
Copyright © 2009 Pearson Education, Inc Framework: Change in wage structure Introduction of new technologies Skill upgradin g Employer characteristics Change in wage structure Union
Copyright © 2009 Pearson Education, Inc Measuring inequality Variance = Relative interquartile range = Lorenz curve: cumulative fraction of income earned by each fraction of population. Gini Coefficient = (Shaded area Y) / (Triangle AOB) in the Lorenz curve
Copyright © 2009 Pearson Education, Inc Figure 15A.1: Lorenz Curves for 1980 and 2002 Distributions of Income in the United States
Copyright © 2009 Pearson Education, Inc Figure 15A.2: Lorenz Curves That Cross
Copyright © 2009 Pearson Education, Inc Figure 15A.3: Calculating the Gini Coefficient for the 2002 Distribution of Household Income