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Session9 Juhn .pdf

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Radhika Gandhi
Summary of: Wage Inequality and the Rise in Returns to Skill - Juhn et al. (1993) - Section 14.pdf

The study covers the timeline of 1963 to 1989. The data covered is men’s wages. The focus
is on log of weekly and hourly wages of full time workers. The changes in wages is taken into
consideration and is divided interms of skills. The least skilled belong to the 10 th percentile
and most skilled belong to the 90th percentile.
The paper clarifies wages as prices
The Rise in Inequality:

From the above figures, we make a comparison of the weekly wages with the hourly wages.
We see that in weekly wages, the real weekly wages increases from the time period of 196373. In comparison to the hourly wages, we see that the hourly wages also grow for low
wage and high wage workers and a lot more than a median worker. The median hourly
wages fall after the 80’s. We can conclude that as hourly median wages fell, and weekly
stayed constant people were working longer hours.

In terms of the percentage change in weekly wages by percentile, we see that skill
differentials have increased in the points of the distribution.

Radhika Gandhi

The above figure 4 explain the change in weekly wage inequality divided into periods. We
can see in the first panel (A) covers time period that increase inequality between the lowest
and highest skilled and a fall in inequality between median and lowest worker. In panel (B)
the low skilled workers lose relative to the avg, in (C) small changes but mostly similar
trends. By panel (D) the low skilled workers lose as much as the high skilled workers gain.

During the entire timeline, we can see that
the increase in inequality has been larger
above the mean, and over all it has
increased in all parts of the distributions.

Radhika Gandhi

Another comparison between experience level and education on wage changes show that
the inequality shows up within and between groups. This would imply that even the best
high school graduates could earn more than low performed college graduates.

This increased inequality arises from the high
skill prices, as the changes in cohorts and within
experience groups show similar patters.
There are several components that explain
changes in wage inequality which come from
individual characteristics, observable skills and
Expressed in:

Y it = Xitβt + uit

From the results of the observables and
unobservable, we can see that 1970’s: rise in
returns to skill.
1980’s: rise in returns to both observables
and unobservable.
Grater wage inequality occurred due to
increase in premia on observed and
unobserved dimension of skill.

Radhika Gandhi

Timing on unobserved skill is not the same as changes in skill premia on education
and labor market experiences.

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