FirmingUp Inequality by Jae Song, David J. Price Fatih Guvenen, Nicholas Bloom
[May 2015]
Abstract
Earnings inequality in the
United States has increased rapidly over the last three decades, but little is
known about the role of firms in this trend. For example, how much of the rise
in earnings inequality can be attributed to rising dispersion between firms in
the average wages they pay, and how much is due to rising wage dispersion among
workers within firms? Similarly, how did rising inequality affect the wage
earnings of different types of workers working for the same employer—men vs.
women, young vs. old, new hires vs. senior employees, and so on? To address
questions like these, we begin by constructing a matched employer-employee data
set for the United States using administrative records. Covering all U.S. firms
between 1978 to 2012, we show that virtually all of the rise in earnings
dispersion between workers is accounted for by increasing dispersion in average
wages paid by the employers of these individuals. In contrast, pay differences
within employers have remained virtually unchanged, a finding that is robust
across industries, geographical regions, and firm size groups. Furthermore, the
wage gap between the most highly paid employees within these firms (CEOs and
high level executives) and the average employee has increased only by a small
amount, refuting oft-made claims that such widening gaps account for a large
fraction of rising inequality in the population.
Related articles:
According to a piece from Bloomberg:
http://www.bloomberg.com/news/articles/2015-05-27/the-rise-of-super-firms-is-boosting-pay-inequality
“The wage divide has widened between workers at
high-paying firms and those at low-paying companies over the past three
decades, a trend consistent across U.S. regions and industries, new research
shows”.
Washington Post
on the same topic:
http://www.washingtonpost.com/blogs/wonkblog/wp/2015/05/29/economists-have-figured-out-whos-really-to-blame-for-inequality/