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Demand Shifts and Earnings Inequality: Wage and Hours Growth by Occupation in the U.S., 1970-97

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Abstract

CEPA Center for Economic Policy Analysis Demand Shifts and Earnings Inequality: Wage and Hours Growth by Occupation in the U.S., 1970-97 David R. Howell, Ellen Houston and William Milberg (Center for Economic Policy Analysis) CEPA Working Paper Series II Working Paper No. 6 April 1999 Center for Economic Policy Analysis New School for Social Research 80 Fifth Avenue, Fifth Floor, New York, NY 10011-8002 Tel. 212.229.5901 � Fax 212.229.5903 www.newschool.edu/cepa Demand Shifts and Earnings Inequality: Wage and Hours Growth by Occupation in the U.S., 1970-97 A Report to the Rockefeller Foundation David R. Howell, Ellen Houston and William Milberg* Center for Economic Policy Analysis New School for Social Research March 1999 (revised, April 1999) * We thank Maury Gittleman, Michel Juillard, Jared Bernstein and Larry Mishel for their comments and advice and Fred Pryor and David Schaffer for sharing their data. We also thank Friedrich Huebler, Margaret Duncan, and Josh Bivens for their research assistance. This work began under a project funded by the MacArthur Foundation. Correspondence should be directed to Howell (CEPA, New School, 80 5 Ave, 5 Fl., NY, NY 10011; [email protected]).th th SUMMARY One of the striking features of the U.S. economy over last two decades has been a sharp and continuous rise in earnings inequality. A focus of much of the recent research and policy debate has been on the growth in the “returns to skill” - the rise in earnings inequality across educational attainment groups. Indeed, even the substantial increase in within-education group inequality is commonly attributed to a payoff to “unobserved” skill. It is widely accepted that the source of the growing earnings advantage of higher skilled workers stems from strong and persistent demand shifts in their favor as work has become more computerized and markets have become more competitive and global. Much of the recent research on skills and earnings has aggregated worker

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