Increased Earning Dispersions and Labor Market Productivity

University Of Texas At Austin, Austin TX

Investigators

Abstract

SES-0961565 Arthur Sakamoto University of Texas, Austin ChangHwan Kim University of Kansas This research will provide insight into the nature of rising inequality in the American labor force by investigating patterns of labor market productivity and earnings differentials during the past several decades. Using official data on employment, earnings, and productivity in manufacturing industries, this investigation will study the extent to which increased earnings inequalities are associated with improved productivity or, conversely, may be simply aggrandizing the higher salaries of already privileged employees with greater bargaining power which thereby depletes revenues for pay raises among less advantaged workers. The findings will thus shed light on the critical issue of whether rising inequality is necessary to avoid economic stagnation or whether the decline of the middle-class is simply the result of exacerbating salary differentials that do not commensurately promote economic growth. Understanding the extent and sources of underpayment and overpayment in the labor market will inform and advance public policy debates about the efficacies of current programs and laws relating to the regulation of the labor force. By identifying which specific groups of workers are not fully compensated for their productivity (and which groups may be significantly overpaid), the results will have important implications for such issues as the minimum wage, the Earned Income Tax Credit, federal income tax rates, industrial and trade policies, family-leave regulations, welfare reform, affirmative action, civil rights law, and immigration legislation.