TRENDS IN US WAGE INEQUALITY

Trends in US Wage Inequality

Abstract

Using internal and public use March Current Population Survey (CPS) data, we analyze trends in US income inequality (1973 to 1983). We find that the up tendency in income inequality prior to 1993 considerably slowed down down then one time we command for top coding in the public use facts and figures and censoring in the interior data. Because both sequence do not capture trends at the very peak of the earnings circulation, we use a multiple imputation approach in which standards for censored facts are imputed using draws from a Generalized Beta circulation of the Second Kind (GB2) fitted to interior data. Doing so, we find earnings inequality tendencies alike to those drawn from from unadjusted interior data. Our tendency outcomes are generally robust to the alternative of inequality catalogue, if Gini coefficient or other commonly-used indices. When we contrast our best approximates of the earnings shares held by the most wealthy tenth with those described by Piketty and Saez (2003), our trends equitably nearly agree their trends, except for the peak 1 per hundred of the distribution. Thus, we argue that if joined States earnings inequality has been substantially increasing since 1993, such increases are confined to this very high income group.

Trends in US Wage Inequality

Introduction

The public use type of the March present community Survey (CPS) is the prime data source utilised by public policy investigators and managers to investigate trends in mean earnings and its circulation in the United States as well as in cross-national assessments of earnings inequality with other countries. (For systematic reviews of the cross-national income inequality literature, see Atkinson, Rainwater and Smeeding, 1995, Gottschalk and Smeeding, 1997, Atkinson and Brandolini, 2001. For more recent examples of the use of the public use CPS in measuring income inequality trends in the United States see: Burkhauser, Couch, Houtenville and Rovba 2003-2004, Gottschalk and Danziger, 2005 and Kruger and Perri, 2006). The agreement of this study, founded on public use CPS facts and figures is that earnings inequality in the joined States increased considerably in the 1970s and 1980s and furthermore advanced relative to other OECD countries. Despite the broadly held outlook that earnings inequality has increased considerably since the 1980s, most of the clues of a large increase in earnings inequality since 1993 has come from interior Revenue Service (IRS) administrative record facts and figures founded on personal modified whole earnings that the IRS has made accessible to the study community in tabular form (Piketty and Saez, 2003). In compare, we contend that annual earnings inequality rises are little, and significantly lesser than the rises over the nearly two decades of CPS data accessible to us former to 1993. We contrast our CPS-based approximates of inequality trends with those of Piketty and Saez (2003) based on IRS data. When, like Piketty and Saez, we focus on the share of reported income held by subgroups within the richest tenth of the distribution, our trends fairly closely match their trends, ...