Skip to main content

Advertisement

SpringerLink
Log in

Earnings inequality and skill mismatch in the U.S.: 1973–2002

  • Published:
The Journal of Economic Inequality Aims and scope Submit manuscript

Abstract

This paper shows that skill mismatch is a significant source of inequality in real earnings in the U.S. and that a substantial fraction of the increase in wage dispersion during the period 1973–2002 was due to the increase in mismatch rates and mismatch premia. In 2000–2002, surplus and deficit qualifications taken together accounted for 4.3 and 4.6% of the variance of log earnings, or around 15% of the total explained variance. The dramatic increase in over-education rates and premia accounts for around 20 and 48% of the increase in the Gini coefficient during the 30 years under analysis for males and females respectively. The surplus qualification factor is important in understanding why earnings inequality polarized in the last decades.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  1. Acemoglu, D.: Technical change, inequality, and the labor market. J. Econ. Lit. 40, 7–72 (2002)

    Article  Google Scholar 

  2. Acemoglu, D., Autor, D.: Skills, tasks and technologies: implications for employment and earnings. In: Ashenfelter, O., Card, D.E. (eds.) Handbook of Labor Economics, vol. 4B, chapter 12, pp. 1043–1171. Elsevier Science B.V., Amsterdam (2011)

    Google Scholar 

  3. Albrecht, J., Vroman, S.: A matching model with endogenous skill requirements. Int. Econ. Rev. 43(1), 283–305 (2002)

    Article  Google Scholar 

  4. Autor, D., Katz, L., Kearney, M.: Trends in U.S. wage inequality: revising the revisionists. Rev. Econ. Stat. 90(2), 300–323 (2008)

    Article  Google Scholar 

  5. Autor, D.H., Levy, F., Murnane, R.J.: The skill content of recent technological change: an empirical exploration. Q. J. Econ. 118, 1279–334 (2003)

    Article  Google Scholar 

  6. Bauer, T.K.: Educational mismatch and wages: a panel analysis. Econ. Educ. Rev. 21(3), 221–229 (2002)

    Article  Google Scholar 

  7. Blau, F.D., Kahn, L.M.: The U.S. gender pay gap in the 1990s: slowing convergence. Ind. Labor Relat. Rev. 60(1), 45–66 (2006)

    Google Scholar 

  8. Bound, J., Johnson, G.: Changes in the structure of wages in the 1980’s: an evaluation of alternative explanations. Am. Econ. Rev. 82(3), 371–392 (1992)

    Google Scholar 

  9. Bowles, S., Gintis, H., Osborne, M.: The determinants of earnings: a behavioral approach. J. Econ. Lit. 39(4), 1137–1176 (2001)

    Article  Google Scholar 

  10. Card, D., DiNardo, J.: Skill-biased technological change and rising wage inequality: some problems and puzzles. J. Labor Econ. 20(4), 733–783 (2002)

    Article  Google Scholar 

  11. Chevalier, A.: Measuring over-education. Economica 70, 509–531 (2003)

    Article  Google Scholar 

  12. Cohn, E.: The impact of surplus schooling on earnings: comment. J. Hum. Resour. 27(4), 679–682 (1992)

    Article  Google Scholar 

  13. Devicienti, F.: Shapley-value decompositions of changes in wage distributions: a note. J. Econ. Inequality 8(1), 35–45 (2010)

    Article  Google Scholar 

  14. DiNardo, J., Fortin, N., Lemieux, T.: Labor market institutions and the distribution of wages, 1973–1992: a semiparametric approach. Econometrica 64(5), 1001–1044 (1995)

    Article  Google Scholar 

  15. Duncan, G.J., Hoffman, S.D.: The incidence and wage effects of overeducation. Econ. Educ. Rev. 1(1), 75–86, 0 (1981)

    Article  Google Scholar 

  16. Fields, G.: Accounting for income inequality and its change: a new method, with application to the distribution of earnings in the United States. Res. Labor Econ. 22, 1–38 (2003)

    Article  Google Scholar 

  17. Freeman, R.B.: The Over-educated American. Academic Press, New York (1976)

    Google Scholar 

  18. Goos, M., Manning, A.: Lousy and lovely jobs: the rising polarization of work in Britain. Rev. Econ. Stat. 89(1), 118–133 (2007)

    Article  Google Scholar 

  19. Green, F., McIntosh, S., Vignoles, A.: ‘Overeducation’ and Skills—Clarifying the Concepts. CEP Discussion Paper, 435 (1999)

  20. Groot, W., van den Brink, H.M.: Overeducation in the labor market: a meta-analysis. Econ. Educ. Rev. 19(2), 149–158 (2000)

    Article  Google Scholar 

  21. Handel, M.J.: Trends in direct measures of job skill requirements. Levy Institute Working Paper 301 (2000)

  22. Hartog, J.: Over-education and earnings: where are we, where should we go? Econ. Educ. Rev. 19(2), 131–147 (2000)

    Article  Google Scholar 

  23. Hecker, D.E.: Reconciling conflicting data on jobs for college graduates. Mon. Labor Rev. 115, 3–12 (1992)

    Google Scholar 

  24. Howell, D.R., Wolff, E.N.: Trends in the growth and distribution of skills in the U.S. workplace, 1960–1985. Ind. Labor Relat. Rev. 44(3), 486–502 (1991)

    Article  Google Scholar 

  25. Israeli, O.: A Shapley-based decomposition of the R-square of a linear regression. J. Econ. Inequality 5(2), 199–212 (2007)

    Article  Google Scholar 

  26. Jaeger, D.A.: Reconciling the old and new Census Bureau Education questions: recommendations for researchers. J. Bus. Econ. Stat. 15(4), 300–309 (1997)

    Google Scholar 

  27. Jaeger, D.A.: Estimating the returns to education using the newest current population survey education questions. Econ. Lett. 78, 385–394 (2003)

    Article  Google Scholar 

  28. Juhn, C., Murphy, K.M., Pierce, B.: Wage inequality and the rise in returns to skill. J. Polit. Econ. 101(3), 410–442 (1993)

    Article  Google Scholar 

  29. Katz, L., Autor, D.: Changes in the wage structure and earnings inequality. In: Ashenfelter, O., Card, D. (eds.) Handbook of Labor Economics, vol. 3A, pp. 1463–1555. Elsevier Science B.V., Amsterdam (1999)

    Chapter  Google Scholar 

  30. Katz, L., Murphy, K.: Changes in relative wages, 1963–87: supply and demand factors. Q. J. Econ. 107(1), 35–78 (1992)

    Article  Google Scholar 

  31. Korpi, T., Tåhlin, M.: Educational mismatch, wages, and wage growth: overeducation in Sweden, 1974–2000. Labour Econ. 16(2), 183–193 (2009)

    Article  Google Scholar 

  32. Lee, D.: Wage inequality in the US during the 1980s: rising dispersion or falling minimum wage? Q. J. Econ. 114(3), 941–1024 (1999)

    Article  Google Scholar 

  33. Lemieux, T.: Increasing residual wage inequality: composition effects, noisy data, or rising demand for skill? Am. Econ. Rev. 96(3), 461–498 (2006)

    Article  Google Scholar 

  34. Lemieux, T.: The Mincer equation thirty years after schooling, experience, and earnings. In: Grossbard-Shechtman, S. (ed.) Jacob Mincer, A Pioneer of Modern Labor Economics, chapter 11. Springer Verlag (2006)

  35. Levy, F., Murnane, R.: U.S. earning levels and earnings inequality: a review of recent trends and proposed explanations. J. Econ. Lit. 30(3), 1333–1381 (1992)

    Google Scholar 

  36. McGuinness, S.: Overeducation in the labour market. J. Econ. Surv. 20(3), 387–418 (2006)

    Article  Google Scholar 

  37. Murphy, K., Welch, F.: The structure of wages. Q. J. Econ. 107(1), 285–326 (1992)

    Article  Google Scholar 

  38. Peterson, N., Mumford, M., Borman, W., Jeanneret, R., Fleishman, E., Levin, K., Campion, M., Mayfield, M., Morgeson, F., Pearlman, K., Gowing, M., Lancaster, A., Silver, M., Dye, D.: Understanding work using the occupational information network (O*Net): implications for practice and research. Pers. Psychol. 54(2), 451–492 (2001)

    Article  Google Scholar 

  39. Rubb, S.: Overeducation in the labor market: a comment and re-analysis of a meta-analysis. Econ. Educ. Rev. 22(6), 621–629 (2003)

    Article  Google Scholar 

  40. Sastre, M., Trannoy, A.: Shapley inequality decomposition by factor components: some methodological issues. J. Econ. 9, 51–89 (2002)

    Article  Google Scholar 

  41. Sattinger, M.: Assignment models of the distribution of earnings. J. Econ. Lit. 31(2), 831–880 (1993)

    Google Scholar 

  42. Schmitt, J.: Creating a consistent hourly wage series from the current population survey’s outgoing rotation group, 1979–2002. CEPR Working Paper (2003)

  43. Shorrocks, A.F.: Inequality decomposition by factor components. Econometrica 50(1), 193–211 (1982)

    Article  Google Scholar 

  44. Shorrocks, A.F.: Decomposition procedures for distributional analysis: a unified framework based on the Shapley value. Mimeo, University of Essex (1999)

  45. Sicherman, N.: “Overeducation” in the labor market. J. Labor Econ. 9(2), 101–122 (1991)

    Article  Google Scholar 

  46. Simón, H.: International differences in wage inequality: a new glance with European matched employer–employee data. Br. J. Ind. Relat. 48(2), 310–346 (2010)

    Article  Google Scholar 

  47. Skott, P.: Wage inequality and overeducation in a model with efficiency wages. Can. J. Econ. 39(1), 94–123 (2006)

    Article  Google Scholar 

  48. Sloane, P.J.: Much ado about nothing? What does the overeducation literature really tell us? In: Büchel, F., de Grip, A., Mertens, A. (eds.) Overeducation in Europe, chapter 2, pp. 11–48. Edwad Elgar, Northampton, MA (2003)

    Google Scholar 

  49. Slonimczyk, F., Skott, P.: Employment and Distribution Effects of the Minimum Wage. Working Paper 3. University of Massachusetts (2010)

  50. Spenner, K.I.: The upgrading and downgrading of occupations: issues, evidence, and implications for education. Rev. Educ. Res. 55(2), 125–154 (1985)

    Google Scholar 

  51. Thurow, L.: Generating Inequality. Basic Books, New York (1975)

    Google Scholar 

  52. Tsai, Y.: Returns to overeducation: a longitudinal analysis in the U.S. labor market. Econ. Educ. Rev. 29(4), 606–617 (2010)

    Article  Google Scholar 

  53. U.S. Department of Labor: Dictionary of Occupational Titles, 4th edn. Government Printing Office (1977)

  54. U.S. Department of Labor: Dictionary of Occupational Titles, revised 4th edn. Government Printing Office (1991)

  55. Vaisey, S.: Education and its discontents: overqualification in America, 1972–2002. Soc. Forces 85(2), 835–864 (2006)

    Article  Google Scholar 

  56. Verdugo, R.R., Verdugo, N.T.: The impact of surplus schooling on earnings: some additional findings. J. Hum. Resour. 24(4), 629–643 (1989)

    Article  Google Scholar 

  57. Wolff, E.: Technology and demand for skills. In: Borghans, L., de Grip, A. (eds.) The Overeducated Worker? The Economics of Skill Utilization, chapter 2, pp. 27–56. Edward Elgar, Northampton, MA (2000)

    Google Scholar 

  58. Yun, M.S.: Earnings inequality in USA, 1969–99: comparing inequality using earnings equations. Rev. Income Wealth 52(1), 127–144 (2006)

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. International College of Economics and Finance, Higher School of Economics, 11 Pokrovsky Bulvar, Moscow, Russian Federation

    Fabián Slonimczyk

Authors
  1. Fabián Slonimczyk
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Fabián Slonimczyk.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Slonimczyk, F. Earnings inequality and skill mismatch in the U.S.: 1973–2002. J Econ Inequal 11, 163–194 (2013). https://doi.org/10.1007/s10888-011-9212-1

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10888-011-9212-1

Keywords

JEL Classification

Search

Navigation