Wage Dispersion between and within U.S. Manufacturing Plants, 1963-86

Abstract

THIS PAPER EXPLOITS a rich and largely untapped source of information on the wages and other characteristics of individual manufacturing plants to cast new light on recent changes in the U.S. wage structure. Our primary data source, the Longitudinal Research Datafile (LRD), contains observations on more than 300,000 manufacturing plants during census years (1963, 1967, 1972, 1977, 1982) and 50,000-70,000 plants during intercensus years since 1972. We use the information in the LRD to investigate changes in the plant-wage structure over the past three decades. We also combine plant-level wage observations in the LRD with wage observations on individual workers in the Current Population In preparing the data for this study we have greatly benefited from the assistance of Bob Bechtold, Tim Dunne, James Monahan, Robert McGuckin, and other Census Bureau employees at the Center of Economic Studies. We thank Chinhui Juhn and Kevin Murphy for providing the March CPS data, Erica Groshen for providing the January 1977 CPS supplement, and Barry Hirsch for providing much of the union data. We also thank Tim Dunne, Larry Katz, Frank Levy, Richard Murnane, Robert Topel, and the participants of the December 1990 Micro BPEA conference and workshops at the University of Chicago and Yale University for helpful comments on earlier drafts. Scott Schuh provided exceptionally able research assistance. We gratefully acknowledge research support provided by the National Science Foundation, a Joint Statistical Agreement between the Census Bureau and the University of Maryland, and the Graduate School of Business at the University of Chicago. 115 116 Brookings Papers: Microeconomics 1991 Survey (CPS) to estimate the between-plant and within-plant components of overall wage dispersion.1

The New Employment Contract?

“…Nevertheless, most of our results are inconsistent with human capital explanations for wage differentials among employers (Juhn, Murphy, and Pierce 1993;Davis and Haltiwanger 1991). In the early period, controlling for skills did not systematically reduce the estimated wage gap between high-and low-wage employers (Hay, CSS, U.S.A./ Japan).…”

Product Choice and Product Switching

“…From Samuelson (1988, 1989) we know that there is substantial covariation in industry entry and exit rates, suggesting an important role for sunk costs of entry. From Samuelson (1988, 1989), Davis and Haltiwanger (1991), Bernard and Jensen (1995) and the survey by Bartelsman and Doms (2000), we know that there is an enormous amount of firm heterogeneity within narrowly classified industries and that firm characteristics, such as productivity, are correlated with exit/survival and entry into exporting.…”

Changes in managerial pay structures 1986-1992 and rising returns to skill

“…Importantly, because the employees are restricted to managers and professionals; inequality between these occupations and hourly employees cannot be examined. The sample studied by Davis and Haltiwanger [1991] examines a broader range of firm sizes and employee occupations, workers, and some of the changes they observe may not be visible in the smaller slice of firms and employees in this sample.…”

“…These results support H:2, that wage inequality between employers has risen. Davis and Haltiwanger [1991] and Groshen and Levine [1998] also find rising inequality between employers during this time period. And the rise in inequality was not due to increased sorting of skills among employers.…”