Wage Inequality, Earnings Inequality and Poverty in the U.S. Over the Last Quarter of the Twentieth Century

Abstract

This paper tracks distributional changes over the last quarter of the twentieth century. We focus on three conceptually distinct distributions: the distribution of wages, the distribution of annual earnings and the distribution of total family income adjusted for family size. We show that all three distributions became less equal during the last half of the 1970's and the 1980's. This was, however, not the case during the 1990's. Wage inequality stabilized, earnings inequality declined and family income inequality actually continued to rise. We decompose changes in family income inequality over the last quarter century and show that roughly half of the increase is accounted for by changes in the distribution of earnings. This suggests that further research on family income inequality should pay as much attention to changes in the distribution of other income sources as to factors affecting the labor market.