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The Structure of Wages

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  • Kevin M. Murphy
  • Finis Welch

Abstract

Although surveys show that traditional orderings of average wage—i.e., higher earnings with higher schooling and concave age-wage profiles—have not changed during the past three decades, the actual size of the wage differentials measured by education or by work experience has varied from peak to trough by a factor of two-to-one. The patterns are not monotone, but there is a trend toward increased skill premiums. We first examine the structure of wages among white men distinguished by age and schooling for the period from 1963 to 1989. We then compare shifts in the distribution of wages and employment among the age x schooling categories to show in reference to a stable demand structure that employment alone cannot account for observed changes in relative wages. Finally, we describe the characteristics required of candidate demand shifters and offer examples using linear trend, business cycle shocks, and recent patterns of deficits in international trade.

Suggested Citation

  • Kevin M. Murphy & Finis Welch, 1992. "The Structure of Wages," The Quarterly Journal of Economics, Oxford University Press, vol. 107(1), pages 285-326.
  • Handle: RePEc:oup:qjecon:v:107:y:1992:i:1:p:285-326.
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    File URL: http://hdl.handle.net/10.2307/2118330
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    References listed on IDEAS

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    1. David Card & Alan Krueger, 1990. "Does School Quality Matter? Returns to Education and the Characteristics of Public Schools in the United States," Working Papers 645, Princeton University, Department of Economics, Industrial Relations Section..
    2. Card, David & Krueger, Alan B, 1992. "Does School Quality Matter? Returns to Education and the Characteristics of Public Schools in the United States," Journal of Political Economy, University of Chicago Press, vol. 100(1), pages 1-40, February.
    3. Charles Brown, 1981. "The Federal Attack on Labor Market Discrimination: The Mouse that Roared?," NBER Working Papers 0669, National Bureau of Economic Research, Inc.
    4. Greg J. Duncan & Saul D. Hoffman, 1983. "A New Look at the Causes of the Improved Economic Status of Black Workers," Journal of Human Resources, University of Wisconsin Press, vol. 18(2), pages 268-282.
    5. Smith, James P, 1984. "Race and Human Capital," American Economic Review, American Economic Association, vol. 74(4), pages 685-698, September.
    6. repec:fth:prinin:265 is not listed on IDEAS
    7. Richard B. Freeman, 1973. "Changes in the Labor Market for Black Americans, 1948-72," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 4(1), pages 67-132.
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