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Labor Markets and Economic Inequality in the United States Since the End of the 1970s

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  • John Schmitt

Abstract

By most measures, the United States is the most unequal of the world's advanced capitalist economies, and inequality has increased substantially over the past 30 years. This article documents trends in the inequality of three key economic distributions-- hourly earnings, annual incomes, and net wealth--and relates these developments to changes in economic and social policy over the past three decades. The primary cause of high and rising inequality is the systematic erosion of the bargaining power of lower- and middle-income workers relative to their employers, reflected in the erosion of the real value of the minimum wage, the decline in unions, widescale deregulation of industries such as airlines and trucking, the privatization and outsourcing of many state and local government activities, increasing international competition, and periods of restrictive macroeconomic policy.

Suggested Citation

  • John Schmitt, 2005. "Labor Markets and Economic Inequality in the United States Since the End of the 1970s," CEPR Reports and Issue Briefs 2005-14, Center for Economic and Policy Research (CEPR).
  • Handle: RePEc:epo:papers:2005-14
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    References listed on IDEAS

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    1. DiNardo, John & Fortin, Nicole M & Lemieux, Thomas, 1996. "Labor Market Institutions and the Distribution of Wages, 1973-1992: A Semiparametric Approach," Econometrica, Econometric Society, vol. 64(5), pages 1001-1044, September.
    2. Edward N. Wolff, 2004. "Changes in Household Wealth in the 1980s and 1990s in the U.S," Economics Working Paper Archive wp_407, Levy Economics Institute.
    3. John Schmitt, 2010. "The Unions of the States," CEPR Reports and Issue Briefs 2010-03, Center for Economic and Policy Research (CEPR).
    4. David Card & John E. DiNardo, 2002. "Skill-Biased Technological Change and Rising Wage Inequality: Some Problems and Puzzles," Journal of Labor Economics, University of Chicago Press, vol. 20(4), pages 733-783, October.
    5. James Peoples, 1998. "Deregulation and the Labor Market," Journal of Economic Perspectives, American Economic Association, vol. 12(3), pages 111-130, Summer.
    6. Glyn, Andrew, 2001. " Inequalities of Employment and Wages in OECD Countries," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 63(0), pages 697-713, Special I.
    7. Amanda Gosling & Thomas Lemieux, 2004. "Labor Market Reforms and Changes in Wage Inequality in the United Kingdom and the United States," NBER Chapters,in: Seeking a Premier Economy: The Economic Effects of British Economic Reforms, 1980-2000, pages 275-312 National Bureau of Economic Research, Inc.
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