ABSTRACT
The theory of wage determination that has enjoyed the greatest acceptance is human capital theory: more productive workers get paid more, human capital largely determines productivity, and there is much variation in the extent to which people are endowed with and invest in human capital. Much difference in wages by demographic group reflects the working of networks in matching and promotion rather than worker productivity or employer wage discrimination. In addition to compensation, the other major reward offered by firms is promotion. Promotion marks one particular form of job mobility. Most people find promotion rewarding not only because it brings increased perquisites and pay, but also because recognition, deference, power, and greater proximity to capital are gratifying in themselves. American earnings inequality widened along most dimensions: by race, by level of education, by industry. Falling earnings inequality during the 1940s to 1970s and rising inequality thereafter have altered not the ranking order but rather the distances among ranks.
