ABSTRACT
This chapter focuses on the distribution of earnings. It starts with a discussion of how to conceptualize and measure the equality or inequality of earnings. The chapter describes how the earnings distribution in the United States has changed since 1980 using published data readily accessible to the student. It analyzes the basic forces that economists believe underlie these changes in earnings inequality. Graphs can help illustrate the concepts of dispersion, but they are a clumsy tool for measuring inequality. 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. A recent study has found evidence that the degree of earnings instability is higher now than in 1980, particularly in the lower end of the earnings distribution. Technological change appears to have played a critical role in changing the market wages for workers of various skill levels since 1980.
