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The History of Wage Inequality in America, 1820 to 1970

  • Robert A. Margo

In recent decades the United States has experienced a pronounced widening of its wage structure. For the most part, analysis of the recent rise in wage inequality has taken place with the benefits of hindsight--that is, without placing recent changes in the wage structure in historical context. This paper presents such an historical context, by summarizing what is currently known about the evolution of the wage structure from 1820 to 1970. I argue that this evolution was characterized by both episodic change and secular trends. Perhaps the most important secular trend is a long-term rise in the returns to educated labor beginning before the Civil War and continuing until the turn of the 20th century, followed by a decline over the 1900 to 1940 period. In the 1940s substantial further erosion in wage differentials took place, primarily as a consequence of various government policies and increases in the relative demand for less-skilled labor associated with World War II. Although wage inequality today is high by post-World War II standards, it is not particularly high when measured against the pre-World War II experience. As far as government policy is concerned, there is compelling historical evidence that long-term expansion of educational opportunity has been a potent force in narrowing wage differentials.

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Paper provided by Levy Economics Institute in its series Economics Working Paper Archive with number wp_286.

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Date of creation: Nov 1999
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Handle: RePEc:lev:wrkpap:wp_286
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  1. Blanchflower, David G & Oswald, Andrew J, 1990. " The Wage Curve," Scandinavian Journal of Economics, Wiley Blackwell, vol. 92(2), pages 215-35.
    • David G. Blanchflower & Andrew J. Oswald, 1995. "The Wage Curve," MIT Press Books, The MIT Press, edition 1, volume 1, number 026202375x, June.
  2. Dora L. Costa, 1998. "The Unequal Work Day: A Long-Term View," NBER Working Papers 6419, National Bureau of Economic Research, Inc.
  3. Claudia Goldin & Robert A. Margo, 1992. "Wages, Prices, and Labor Markets before the Civil War," NBER Chapters, in: Strategic Factors in Nineteenth Century American Economic History: A Volume to Honor Robert W. Fogel, pages 67-104 National Bureau of Economic Research, Inc.
  4. Margo, Robert A. & Villaflor, Georgia C., 1987. "The Growth of Wages in Antebellum America: New Evidence," The Journal of Economic History, Cambridge University Press, vol. 47(04), pages 873-895, December.
  5. Thomas J. Weiss, 1992. "U. S. Labor Force Estimates and Economic Growth, 1800-1860," NBER Chapters, in: American Economic Growth and Standards of Living before the Civil War, pages 19-78 National Bureau of Economic Research, Inc.
  6. James, John A. & Skinner, Jonathan S., 1985. "The Resolution of the Labor-Scarcity Paradox," The Journal of Economic History, Cambridge University Press, vol. 45(03), pages 513-540, September.
  7. John J. Donohue III & James Heckman, 1991. "Continuous Versus Episodic Change: The Impact of Civil Rights Policy on the Economic Status of Blacks," NBER Working Papers 3894, National Bureau of Economic Research, Inc.
  8. Claudia Goldin & Hugh Rockoff, 1992. "Strategic Factors in Nineteenth Century American Economic History: A Volume to Honor Robert W. Fogel," NBER Books, National Bureau of Economic Research, Inc, number gold92-1, October.
  9. Claudia Goldin & Lawrence F. Katz, 1995. "The Decline of Non-Competing Groups: Changes in the Premium to Education, 1890 to 1940," NBER Working Papers 5202, National Bureau of Economic Research, Inc.
  10. Claudia Goldin & Lawrence F. Katz, 1999. "The Returns to Skill in the United States across the Twentieth Century," NBER Working Papers 7126, National Bureau of Economic Research, Inc.
  11. Atack, Jeremy, 1985. "Industrial structure and the emergence of the modern industrial corporation," Explorations in Economic History, Elsevier, vol. 22(1), pages 29-52, January.
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