Rapid wage growth at the bottom has offset rising US inequality

Abstract

US earnings inequality has not increased in the last decade. This marks the first sustained reversal of rising earnings inequality since 1980. We document this shift across eight data sources using worker surveys, employer-reported data, and administrative data. The reversal is due to a shrinking gap between low-wage and median-wage workers. In contrast, the gap between top and median workers has persisted. Rising pay for low-wage workers is not mainly due to the changing composition of workers or jobs, minimum wage increases, or workplace-specific sources of inequality. Instead, it is due to broadly rising pay in low-wage occupations, which has particularly benefited workers in tightening labor markets. Rebounding post–Great Recession labor demand at the bottom offset enduring drivers of inequality.

Introduction: The Socioeconomic Impacts of COVID-19

“…Changes have been dramatic in the labor-market conditions that workers (who generally have less education) face in retail sales, food service, hospitality, transportation, and health-care industries. These workers have seen pronounced wage growth over the course of the pandemic (Aeppli and Wilmers 2022) and evidence of their rising power is clear in the successful union vote at Amazon's JFK-8 warehouse and in the string of successful organizing campaigns in Starbucks stores across the country throughout 2022. These improvements in working conditions and successful organizing campaigns appear to be the product of tight labor markets, perhaps resulting from reduced immigration (Grittayaphong and Bandyopadhyay 2022), exit or nonrentry of older workers (Quinby, Rutledge, and Wettstein 2021), and the debilitating effects of COVID-19 (Bach 2022).…”

“…For example, although UPS has maintained a strong workforce with its higher-paid unionized drivers, FedEx's low-pay contract worker model has led the company to significant losses due to labor shortages (Black 2021). Third, wages at the bottom of the distribution appear to be rising (Aeppli and Wilmers 2022) and several prominent firms have publicly announced wage increases in response to perceived labor shortages to great fanfare (Rosenburg 2021). Fourth, although still rare given the overall size of the labor market, organizing campaigns have been prominent recently, including at Amazon, which has had mixed results, and at Starbucks, where workers held a series of successful votes through May 2022 (Scheiber and Marcos 2021).…”

Earnings inequality and the expansion of care services in the United States, 1985–2019

“…Since employment in both care and business services has expanded significantly in recent years, the differences between these two key components of the service sector bear on trends in wage inequality, which began rising in the United States since 1980. Disparities between workers at the middle and the top of the wage distribution have grown particularly sharply (Aeppli & Wilmers, 2022; Autor et al, 2008). Research points to the influence of job characteristics on wages, independent of shifting demands for human capital that might result from skill‐biased technical change (Acemoglu & Autor, 2011).…”

The Making of the “Good Bad” Job: How Algorithmic Management Manufactures Consent Through Constant and Confined Choices

“…Furthermore, because ondemand workers are classified as independent contractors, they are not covered by employment protections, such as workers' compensation, unemployment insurance, and health insurance, which are part and parcel of what is considered the quintessential high-quality ''good job'' (Kalleberg, 2011;Cappelli and Eldor, 2023). Yet, workers continue to opt for on-demand jobs despite the increasing availability of traditional jobs (Katz and Krueger, 2019;Kaplan et al, 2021;Garin et al, 2023) of high quality (Aeppli and Wilmers, 2022;Autor, Dube, and McGrew, 2023;Newman and Jacobs, 2023), with one-third of workers preferring algorithmic over human managers (O ¨stergaard, 2017). These findings suggest that these individuals may not experience the work to be as deleterious as many scholars have argued (Shapiro, 2018;Gandini, 2019;Ravenelle, 2019).…”