Abstract

A large literature documents a substantial rise in U.S. wage inequality and educational wage differentials during the 1980s and early 1990s and concludes that these wage structure changes can be accounted for by shifts in the supply of and demand for skills reinforced by the erosion of labor market institutions supporting low- and middlewage workers. Drawing on an additional decade of data, several “revisionist ” studies reject this consensus to conclude that (1) the rise in wage inequality was an “episodic ” event of the first-half of the 1980s, (2) this rise was mainly caused by a falling minimum wage, and (3) increased residual wage inequality since the mid-1980s reflects the confounding effects of labor force composition. We reexamine these claims using data from the Current Population Survey for 1963 to 2005 and find only limited support. A slowing of the growth of overall wage inequality in the 1990s hides a divergence in the paths of upper-tail (90/50) and lower-tail (50/10) inequality. Uppertail wage inequality has been increasing steadily since 1980 even after adjusting for labor force composition changes. Lower-tail wage inequality increased sharply in the first-half of the 1980s but has flattened or narrowed since the late 1980s. Strong time series correlations of the real minimum wage and upper-tail wage inequality raise questions concerning the causal interpretation of relationships between the minimum wage and both overall and

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