Age, Education and Occupational Earnings Inequality

In this paper, we will investigate the effect of six factors on occupational earnings inequality across all occupations in our sample and across occupations in five major Census subgroups. Those six factors are: differences in tasks, different levels of efficiency, institutional factors, time worked, the demand for labor and discrimination. Age and schooling will receive primary attention in our work and it will be shown that they are important determinants of earnings inequality among professional and clerical occupations but not among skilled, semi-skilled or unskilled occupations. Ability is also hypothesized as an important factor, but no measure of ability is provided in our sample. Differences in time worked and labor demand conditions, as measured by industrial and urban-rural mix, will also be analyzed, and their effect on earnings inequality is strong in most of the occupational subsamples. Differences in the race and sex composition of occupations do not appear to be significant factors in occupational earnings inequality, and the explanation offered is that discrimination takes the form of occupational segregation rather than differences in pay for similar work. In the conclusion a sketch of a "structural" theory of income distribution is proposed to account for our results.