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An improved measure of inter-industry pay differentials

Author

Listed:
  • Gittleman, Maury

    (U.S. Bureau of Labor Statistics, Washington, DC, USA)

  • Pierce, Brooks Pierce

    (U.S. Bureau of Labor Statistics, Washington, DC, USA)

Abstract

The measurement of inter-industry pay differentials and the resulting use of this information to assess the empirical relevance of different labor market theories have been hampered by the fact that measures of total compensation – as opposed to just wages and salaries – are not available in the datasets traditionally used. We improve upon past measures of inter-industry pay differentials by being the first, to our knowledge, to incorporate microdata on nonwage compensation. Such compensation can easily exceed 40 to 50 percent of wages and thus its inclusion may either diminish or amplify measured industry pay differences. Using the Employer Costs for Employee Compensation (ECEC) data produced by the U.S. Bureau of Labor Statistics, we find that the inclusion of benefits increases industry dispersion by 16 percent when no controls are included and by an even greater 30 percent when controls are included.

Suggested Citation

  • Gittleman, Maury & Pierce, Brooks Pierce, 2013. "An improved measure of inter-industry pay differentials," Journal of Economic and Social Measurement, IOS Press, issue 3, pages 229-242.
  • Handle: RePEc:ris:iosjes:0002
    as

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    References listed on IDEAS

    as
    1. Philip Du Caju & Gábor Kátay & Ana Lamo & Daphne Nicolitsas & Steven Poelhekke, 2010. "Inter-Industry Wage Differentials In EU Countries: What Do Cross-Country Time Varying Data Add to the Picture?," Journal of the European Economic Association, MIT Press, vol. 8(2-3), pages 478-486, 04-05.
    2. Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, vol. 56(2), pages 259-293, March.
    3. William T. Dickens & Lawrence F. Katz, 1987. "Inter-Industry Wage Differences and Theories of Wage Determination," NBER Working Papers 2271, National Bureau of Economic Research, Inc.
    4. Robert Gibbons & Lawrence F. Katz & Thomas Lemieux & Daniel Parent, 2005. "Comparative Advantage, Learning, and Sectoral Wage Determination," Journal of Labor Economics, University of Chicago Press, vol. 23(4), pages 681-724, October.
    5. Brooks Pierce, 2001. "Compensation Inequality," The Quarterly Journal of Economics, Oxford University Press, vol. 116(4), pages 1493-1525.
    6. Woodbury, Stephen A, 1983. "Substitution between Wage and Nonwage Benefits," American Economic Review, American Economic Association, vol. 73(1), pages 166-182, March.
    7. Maury Gittleman & Brooks Pierce, 2011. "Inter-Industry Wage Differentials Job Content and Unobserved Ability," ILR Review, Cornell University, ILR School, vol. 64(2), pages 356-374, January.
    8. Brooks Pierce, 2010. "Recent Trends in Compensation Inequality," NBER Chapters,in: Labor in the New Economy, pages 63-98 National Bureau of Economic Research, Inc.
    9. Abowd, John M. & Kramarz, Francis, 1999. "The analysis of labor markets using matched employer-employee data," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 40, pages 2629-2710 Elsevier.
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    More about this item

    Keywords

    Inter-industry wage structure; compensation;

    JEL classification:

    • A00 - General Economics and Teaching - - General - - - General

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