OCCUPATIONS AND THE STRUCTURE OF WAGE INEQUALITY IN THE UNITED STATES , 1980 s2000 s Word Count : 11 , 942

Occupations have long been regarded as central to the stratification systems of industrial countries, but have played little role in empirical attempts to explain the well-documented increases in wage inequality that occurred in the United States in the 1980s and 1990s. We address this deficiency by assessing occupation-level effects on wage inequality using data from the Current Population Survey for 1983-2008. We model the mean and variance of wages for each occupation, controlling for education and demographic factors at the individual level, in order to test three competing explanations for the increase in wage inequality: the growth of between-occupation polarization, changes in education and labor force composition, and “residual” inequality unaccounted for by occupations and demographic characteristics. After correcting for a problem with imputed data that biased recent results by Kim and Sakamoto (2008), we find that between-occupation changes explain 66% of the increase in wage inequality from 1992-2008, although 23% of this is due to the switch to the 2000 occupation codes in 2003. Sensitivity analysis reveals that 18% of the increase in inequality from 1983-2002 results from changes in just three occupations: managers “not elsewhere classified,” secretaries, and computer systems analysts. Occupational Inequality 1 Occupations and the Structure of Wage Inequality in the United States, 1980s-2000s Sociologists have long regarded occupations as the key indicators of workers ́ positions in the societal division of labor. Their widespread use of measures of occupational prestige, status, or average earnings to represent the structure of inequality assumes that occupations are the basic components of stratification systems in industrial nations such as the United States (e.g., Parkin 1971). Many occupations constitute distinct labor markets within which supply and demand for particular types of labor intersect, and so occupational differences help explain how inequality is generated (Stolzenberg 1975, Spilerman 1977; Bielby and Kalleberg 1981). The centrality of occupations to sociologists’ theoretical conceptions of the stratification system suggests that changes in the occupational structure—i.e. in the relative size and wages of different occupations—would play a prominent role in sociological attempts to explain the well-documented increase in wage inequality in the United States over the past 25 years. Indeed, popular accounts of the increase in inequality often assume that there has been a growing polarization of occupations, illustrated by changes such as the loss of high-wage blue-collar occupations through de-industrialization, the increase in poorly paid service sector jobs, and the rapid growth in wages of managerial and professional occupations. Surprisingly, though, systematic sociological research on the role of occupations in generating patterns of wage inequality is conspicuously scarce (DiPrete 2007; Morris and Western 1999; Myles 2003). The relatively few sociological studies that have explicitly examined how occupations generate economic inequality appear to confirm the assumption that differences between occupations are primarily responsible for the growth of wage inequality (e.g., Massey and Hirst 1998; Wright and Dwyer 2003; Weeden et. al. 2007). Moreover, some economists (e.g., Autor, Katz, and Kearney 2006) also argue that increases in inequality since 1990 are due to the polarization between high and low wage occupations. Recently, however, this view of the centrality of the occupational structure in explaining changes in inequality has been challenged by several sociologists. Kim and Sakamoto (2008) use data from the Current Population Survey (CPS) to examine trends in betweenand within-occupation inequality from 1983-2002. They find that the withinoccupational component of inequality increased sharply over their study period, while the between-occupation Occupational Inequality 2 component remained relatively constant (see also Raffalovich 1993). Kim and Sakamoto (2008: 153) conclude “that the traditional sociological focus on occupations may be inadequate as the primary explanation of rising wage inequality” and suggest that occupations are declining in significance and becoming less influential in the New Economy. Their conclusion that the role of occupations in explaining wage inequality is declining has serious implications for sociologists’ assumptions about the central role played by occupations in the process of stratification. In this paper, we reevaluate the role of occupations in explaining the increase in wage inequality by using data from the Current Population Surveys from 1983-2008 to estimate models that simultaneously test individual and occupation-level effects on changes in the mean and variance of wages. This allows us to analyze the impact of occupational structure on trends in inequality controlling for changes in the returns to education and the demographic composition of the labor market. In addition, we present results at both the aggregateand detailed-level of occupations. In so doing, we are able to estimate the contribution of specific occupations to the increase in inequality over this time period, adjusting for changes in individual-level variables. Finally, we correct for the Census Bureau’s treatment of missing wage data, which imputes missing wages based on non-missing data from aggregate occupational categories rather than detailed occupations, thereby mechanically increasing within-occupation inequality. We show that much of the trend in within-occupation inequality reported by Kim and Sakamoto (2008) is an artifact of this incorrect approach to handling missing data. EXPLAINING THE INCREASE IN WAGE INEQUALITY IN THE U.S. Debates on trends in wage inequality typically identify three main sources. First, sociologists (but usually not economists) generally assume that wage differences between occupations are important for generating wage inequality. Second, economists—and many sociologists—argue that the growth of wage inequality reflects primarily changes in the composition of the labor force with regard to human capital characteristics such as education, experience, and skill otherwise measured. Finally, a growing literature in economics (as well as by sociologists such as Kim and Sakamoto 2008) has maintained that there is “residual inequality” in wages after occupations and labor force characteristics are taken into account. Occupational Inequality 3 1. Between-Occupation Inequality Sociologists often argue that “occupational structure”—i.e., the relative size and average wages of different occupations—is central to explanations of inequality (e.g., Blau and Duncan 1967; Treiman 1977; Featherman and Hauser 1978; Bielby and Kalleberg 1981). Recent descriptions such as “dissagregate structuration” (e.g., Grusky and Sorenson 1998, see also Weeden et al. 2007) contend that members of detailed occupational categories are fairly homogenous in terms of their life chances, and so economic inequalities should lie primarily between occupations, not within them. The validity of the assumption that occupations are integral to explanations of economic inequality depends on the degree to which wages differ between, relative to within, occupations. Theoretically, between-occupation wage differences—and changes in average occupational wages—result from several sources. First, occupations vary in their skill, i.e., the degree of complexity of occupational activities and the amount of training time required to perform them adequately. The skill level of an occupation may be reflected in its average education level as well as by occupation-specific skills not captured by broad educational categories. Between-occupation wage differences may also be represented by differences in the returns to education and other labor force characteristics such as gender, which also vary by occupation. In our empirical analysis, we will test for occupation effects above and beyond the returns to labor force composition by estimating models that include individual-level controls for education and other wage-related individual characteristics. Second, occupations also differ in the extent to which they are able to adopt and maintain institutional mechanisms of social closure such as licensing, educational credentialing, voluntary certification, association representation and unionization (Weeden 2002). These institutional mechanisms of social closure increase earnings by restricting the supply of workers, increasing demand and channeling it to the occupation, and signaling the quality of service. Weeden’s analysis found that occupational earnings were affected by occupational differences in both technical complexity and measures of social closure. Recently, several papers have found evidence of between-occupation effects on wage inequality, suggesting that the occupational structure has become increasingly polarized: both highand low-paying occupations have grown in size, especially in the 1990s. Massey and Hirst (1998) found empirical support for an “hourglass” pattern of growth in both highand low-paying occupations in the period 1969-89 for men (but not women); this represents a Occupational Inequality 4 change from the “escalator” pattern of the 1949-1969 period in which people worked in progressively more highly paid occupations. Wright and Dwyer (2003) examined the growth and decline of jobs of varying quality during the economic expansions in the U.S. since the 1960s and concluded that there has been a growth of jobs in the top and bottom quintiles in the 1990s, and a decline in the middle quintile. Autor, Katz and Kearney (2006) showed that the share of total hours worked by members of both high-wage and low-wage occupations increased during the 1990s, while the employment shares of middle-wage occupations declined (see also Goos and Manning [2007] for a similar analysis f