Wage inequality in the United States

Pearce Gould, Edward 2021. Wage inequality in the United States. PhD Thesis, Cardiff University. Item availability restricted.

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Abstract

This research seeks to assess the factors affecting unskilled wages. This is a means to analyse the development of low paid wages, and whether it is sustainable. Chapter 1 seeks to measure relative income effects coming from outside of the individuals control as opposed to the the increase in wage inequality coming from an increase in relative level of skills. I find that skill levels attributed to high earners grew at a steady rate in the US from the 1940s. The income these skills earned stagnated after the 1970s, while unskilled wages actually decreased, after growing rapidly before the 1970s. As skilled workers can increase their earnings by growing their skill levels, not just by relying on the income growth for the pre-existing abilities, their wages continued to grow, resulting in rising wage inequality. The stagnation of income going to already obtained skills and unskilled wages is indicative of a structural shift in the economy and rising relative demand for skilled workers even as skill levels increased. This shift ensured the level of pay for Individuals’ skills grew faster than the unskilled wage. The second Chapter looks at the role of factor inputs and relative scarcity to explain an increase in demand for skilled labour. I conclude that the transition from unskilled to skilled biassed growth is a result of bottlenecks in certain inputs to production. Using US manufacturing data, I find that capital equipment predominantly complements better paid non-production workers, while energy predominantly complements worse paid production workers. As a result of the elasticity values and relative rise of inputs, there has been a large net increase in demand for non-production workers. The third chapter analyses the implications of factor inputs on technology growth and how this further impacts income distribution in a way that helps explain what type of shock or structural change has initiated the increasing inequality that has been observed. This finds that observed changes in prices and skill premium are consistent with being induced by a permanent shock in energy prices. The finding indicates potential benefits of technologies that reduce energy prices that in Chapter 2 were shown to complement lower paid workers.

Item Type:	Thesis (PhD)
Date Type:	Completion
Status:	Unpublished
Schools:	Business (Including Economics)
Uncontrolled Keywords:	Wage Inequality, Human Capital, Factor Complementarity, Endogenous Technical Progress, Skill-Premium, Two-Level CES Production Function
Date of First Compliant Deposit:	15 July 2021
Date of Acceptance:	14 July 2021
Last Modified:	02 Aug 2022 01:15
URI:	https://orca.cardiff.ac.uk/id/eprint/142584

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