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The History of Wage Inequality in America, 1920 to 1970

Listed author(s):
  • Robert A. Margo

    (Vanderbilt Univ and NBER)

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 EconWPA in its series Macroeconomics with number 0004035.

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Length: 38 pages
Date of creation: 11 Oct 2000
Handle: RePEc:wpa:wuwpma:0004035
Note: Type of Document - Adobe Acrobat PDF; prepared on IBM PC; to print on PostScript; pages: 38; figures: included
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  1. Donohue, John J, III & Heckman, James, 1991. "Continuous versus Episodic Change: The Impact of Civil Rights Policy on the Economic Status of Blacks," Journal of Economic Literature, American Economic Association, vol. 29(4), pages 1603-1643, December.
  2. Robert A. Margo, 1990. "Wages and Prices During the Antebellum Period: A Survey and New Evidence," NBER Historical Working Papers 0019, National Bureau of Economic Research, Inc.
  3. Grosse, Scott D., 1982. "On the Alleged Antebellum Surge in Wage Differentials: A Critique of Williamson and Lindert," The Journal of Economic History, Cambridge University Press, vol. 42(02), pages 413-418, June.
  4. Acemoglu, D., 1997. "Why Do New Technologies Complement Skills? Directed Technical Change and Wage Inequality," Working papers 97-14, Massachusetts Institute of Technology (MIT), Department of Economics.
  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. 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.
  7. John A. James & Jonathan S. Skinner, 1984. "The Resolution of the Labor Scarcity Paradox," NBER Working Papers 1504, National Bureau of Economic Research, Inc.
  8. Claudia Goldin, 1990. "Understanding the Gender Gap: An Economic History of American Women," NBER Books, National Bureau of Economic Research, Inc, number gold90-1.
  9. Costa, Dora L, 1998. "The Unequal Work Day: A Long-Term View," American Economic Review, American Economic Association, vol. 88(2), pages 330-334, May.
  10. David H. Autor & Lawrence F. Katz & Alan B. Krueger, 1997. "Computing Inequality: Have Computers Changed the Labor Market?," NBER Working Papers 5956, National Bureau of Economic Research, Inc.
  11. Claudia Goldin & Robert A. Margo, 1989. "Wages, Prices, and Labor Markets Before the Civil War," NBER Working Papers 3198, National Bureau of Economic Research, Inc.
  12. 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.
  13. 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.
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