Inequality in Earnings
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This chapter begins with a discussion of how to conceptualize and measure the equality or inequality of earnings. It describes how the earnings distribution in the United States has changed since 1980, by using published data readily accessible to students. The chapter analyzes the basic forces that economists believe underlie these changes in earnings inequality. If disparities existed in the earnings that people received, these disparities could be relatively large or relatively small. The most widely used measures of earnings inequality start with ranking the population by earnings level and by establishing into which percentile a given level of earnings falls. The real earnings of women with high school degrees actually rose in the 1980s, both absolutely and relative to those of dropouts, but because the earnings for those with bachelor’s and graduate degrees rose even more, the increased returns of higher education parallel those for men.