Recent changes in earnings distributions in the United States: age and cohort effects.

In this article, the author uses large, Social Security administrative data sets to examine changes in earnings distributions in the United States over the 1980s through the mid-1990s. Because the earnings information contained in these data sets comes directly from the W-2 forms field by employers, self-reporting errors and top-coding problems, common in other data used for this type of analysis, are minimized. Previous research has documented an increase in overall earnings inequality during the 1970s and the 1980s. The author finds that this upward trend in overall earnings inequality continues into the mid-1990s, despite a period of nearly constant or slightly decreasing earnings inequality from 1988 through 1992. The data also suggest that between-group earnings inequality, whether dividing the sample into groups by age group or by birth cohort, is increasing. Despite the increase in between-group earnings inequality over the period examined, however, within-group earnings inequality remains by far the largest contributor to overall earnings inequality.     

The upper part of the earnings distribution in the United States: how has it changed?

This article uses Social Security Administration data to examine changes in the upper end of the earnings distribution over the period 1982-1995. These data provide a unique opportunity for analyzing those changes because they come directly from W-2 forms and are not topcoded--obvious advantages over data typically provided by surveys such as the Current Population Survey. Although they do not provide some of the information necessary to explain what one observes occurring at the top of the earnings distribution (no educational attainment information, for example), these data are sufficient for describing in great detail what happened to high earners through the 1980s and into the 1990s. This analysis clearly demonstrates the extent to which earnings are concentrated at the top of the distribution. The study's findings reinforce those of Feenberg and Poterba (2000) by showing that the very highest earners--those in the upper 1 percent--experienced the largest relative increase in earnings share from 1982 to 1995. Even within that upper 1 percent, those with earnings in the upper 0.1 percent were the ones driving the increase in the group's earnings share. Perhaps not surprisingly, the overwhelming majority of the highest earners are white men who are in the middle to latter part of their working lives. Women have made strides toward entering this elite group of earners but still form a very small percentage of the group relative to their size in the working population. Very few blacks are in the extreme upper tail of the earnings distribution, and they have made very little progress (in absolute terms) over the period 1982-1995 in increasing their numbers. In contrast, persons of racial/ethnic backgrounds other than white or black have increased their presence among top earners. They went from being relatively underrepresented in the top 0.1 percent in 1982 to being overrepresented by 1995; that is, they accounted for a larger share of the top 0.1 percent of earners than they did of the entire working population. Finally, the study also finds that the percentage of overall wage and salary earnings from Social Security-covered employment that is not taxed for the purposes of Old-Age, Survivors, and Disability Insurance because of the taxable maximum generally increased over the 1982-1995 period. Wage and salary earnings above the taxable maximum rose at a faster rate than is the average wage.