Accounting for Education in Earnings Inequality: New Evidence From Survey-Linked Administrative Data

Michael Carr, University of Massachusetts Boston
Emily Wiemers , University of Massachusetts Boston

This paper uses survey-linked administrative earnings data to document trends since 1980 in short-run and long-run earnings inequality and intragenerational earnings mobility. Consistent with other work, we find large increases in top-end residual inequality in both short- and long-run earnings. However, while there is a small decline in short-run residual inequality at the bottom of the distribution, consistent with polarizing earnings, there is a substantial increase in bottom-end residual inequality in long-run earnings. However, given that the educational and gender composition of the labor force has changed considerably, we follow the wage inequality literature and employ a kernel reweighting method to assess the impact of the education by gender composition on this trend. Preliminary results from this counterfactual exercise demonstrate that the bulk of the rise in cross-sectional earnings inequality is due to a changing distribution of within group prices, not changes in the characteristics of the labor force.

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 Presented in Session 251. Population Structure and the Labor Market