Not a Hollowing Out, a Stretching: Trends in U.S. Nonmetro Wage Income Distribution, 1961-2003

Much of the U.S. labor economics literature asserts that U.S. wage income inequality increased in the last half of the 20th century. These papers point to two trends: 1) the increasing dispersion in U.S. wage incomes, and 2) the rapid growth in the relative frequency of large wage incomes of fixed size in constant dollar terms. A subset of the labor economics literature interprets these trends as a hollowing out of the wage income distribution. A hollowing out would yield fewer middling wage incomes. Since nonmetro wage incomes have, historically, been smaller than metro wage incomes, a hollowing out might disproportionately displace nonmetro wage incomes into the left mode of the hollowed out distribution, that of small wage incomes. However, there was no hollowing out of the nonmetro wage income distribution between 1961 and 2003. While trends #1 and #2 exist in U.S. nonmetro wage income data, they are aspects of the stretching of the distribution of nonmetro wage incomes to the right over larger wage incomes as all its percentiles increased between 1961 and 2003. This stretching means that all nonmetro wage income percentiles increase simultaneously with greater proportional growth in the smaller percentiles. The literature focused on the greater absolute gains of the larger percentiles and took them as evidence of growing inequality. This paper shows for nonmetro wage incomes in the U.S. that those gains are but one aspect of the stretching of the distribution and that other aspects of this transformation might as easily be taken as evidence of growing equality.