Declining Inter-Industry Wage Dispersion in the United States

Changhwan Kim, University of Minnesota
Arthur Sakamoto, University of Texas at Austin

Previous research indicates that wage differentials across industries were increasing through the mid 1980’s. Using more recent data, however, we find that the level of inter-industry wage dispersion thereafter declined by 36% from 1986 to 2002 despite the continuation of the general trend towards increasing inequality in the labor force as a whole. Using multi-level growth curve models, our multivariate results indicate that the decline is only weakly related to industrial changes in education, occupational mix, or even productivity in terms of value added per worker despite the fact that the latter variable had been a critical factor in the prior period of rising inter-industry dispersion. By contrast, for the more recent period, our analysis reveals that the most important factors associated with the decline in inter-industry wage dispersion are changing organizational power relations measured by unionization rates and the proportion of part-time workers.