Long term trends in fair and unfair inequality in the United States

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. www.econstor.eu . Decomposing inequality into factors categorized by degree of personal responsibility, we find that education is able to explain more than twice as much of inequality today as 45 years ago. However, neither hours worked nor education, industry, marital status, or geographical location is able to explain the observed general rise in inequality. In fact, "unfair" inequality has risen faster than "fair" inequality, regardless of the set of variables chosen as fair sources of inequality (resulting from responsibility factors). We also examine inequalities within gender and racial groups and across U.S. states. Several noteworthy findings emerge. Wage inequality among males used to be lower than among females until 1990, but today the opposite is true. We also find several occasions where the distinction between the raw Gini and the Gini adjusted for certain characteristics produces different conclusions. For instance, raw inequality among black females decreased since 1969, but if we acknowledge differences resulting from hours worked and educational outcomes as "fair" inequalities, the remaining inequality measure has increased. We also find that there is substantial geographic heterogeneity in trends of unfair and overall inequality. Terms of use: Documents in D I S C U S S I O N P A P E R S E R I E S NON-TECHNICAL SUMMARYThis paper decomposes inequality in the United States into factors related to responsibility (e.g., hours worked, education) and non-responsibility (e.g., gender, race), using yearly data since 1967. We find that the reasons for the rise in income inequality are partially located in the increasing returns to education. Not having a school degree gets punished much harsher on the labor market today than in the past. The reward for completing a college education, on the other hand, has increased substantially. We then analyze inequality within gender, race, and geographical reasons. The main takeaway of the paper suggests that the reasons of the rise in income inequality can differ substantially across all these factors. Thus, potential policies targeting rising income inequality cannot be general, but rather need to specifically target the specific roots of income inequality.JEL Classification: D31, D63, J31

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