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Earnings inequality over the work career.

S H Beck1

  • 1Department of Sociology/Anthropology, East Tennessee State University, Johnson City 37614.

Comprehensive Gerontology. Section B, Behavioural, Social, and Applied Sciences
|August 1, 1988
PubMed
Summary

Older workers show greater earnings inequality than younger workers. This study suggests this "aging" effect stems from increasing wage gaps between occupations, challenging human capital theories.

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Area of Science:

  • Economics
  • Sociology
  • Labor Economics

Background:

  • Empirical analyses consistently show higher earnings inequality among older workers compared to younger workers.
  • This phenomenon is often attributed to an
  • aging
  • or experience effect, but lacks rigorous investigation.
  • The human capital perspective offers a theoretical explanation for age-related increases in earnings inequality.

Purpose of the Study:

  • To investigate the underlying causes of increased earnings inequality with worker age.
  • To critically evaluate the human capital theory's explanation for this effect.
  • To present and test an alternative structural perspective on earnings inequality over the life course.

Main Methods:

  • Utilized a restricted cohort analysis approach.
  • Employed longitudinal data on earnings and wages from the Panel Study of Income Dynamics (PSID) covering the early 1970s and early 1980s.
  • Decomposed within-cohort inequality using broad occupational classes.

Main Results:

  • Findings generally support the hypothesis that earnings dispersion increases as cohorts age throughout their careers.
  • Evidence suggests that increasing wage differentials between occupational classes contribute to age-related inequality.
  • Period and cohort effects may also play a role in observed earnings inequality patterns.

Conclusions:

  • The study supports the notion of increasing earnings inequality with age, partly driven by inter-occupational wage dynamics.
  • Challenges the sole reliance on human capital theory, advocating for structural explanations.
  • Highlights the need for future research on the impact of aging on income determination and inequality.

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