The best two sentences I read today

Wage dispersion among narrowly defined groups of workers is substantially larger for older and more educated workers than for younger and less educated works.  As [a] result, I show that a large fraction of the increase in residual wage inequality is a spurious consequence of the fact that the work force has grown older and more educated since the early 1980s.

That is Thomas Lemieux, from ""Increasing Wage Inequality," the lead article in the June 2006 American Economic Review.  Lemieux also dismisses the common view that information technology is the major cause of growing wage dispersion.

Since I am having a 12-course Cantonese meal tonight at Hong Kong Palace [Falls Church], those two sentences are unlikely to be topped later today.  Here are related papers by the author.

Comments

Chow fun.

Half Sigma, you aren't measuring the impact of IQ or education, you are measuring correlation. There is a huge difference.

Giovanni,

IQ is correlated with income if you ignore education. But when you do a multiple regression analysis including both IQ and education, IQ disappears as a predictor of income.

This indicates that IQ primarily works by helping the person with higher IQ get a better credential and put him on a better career track. But once the credential is obtained, IQ does has no effect.

This tracking leads to more income inequality because once people are on the wrong track they are usually stuck there. The current system is not efficient in allowing people to change tracks if they made a mistake.

Seems to me that a good chunk of young people got to college just because they are from middle class families and that's what's expected of them. That's not drive or ambition, just inertia.

Yeah - shanghai dragon wraps are good...

Is it the characteristics of workers or the churning that is occurring in the kind of jobs available that matter here? The number and kind of jobs available - and thus the skills and other characteristics in demand (i.e. age) determine who will be hired and fired.

Deindustrialization, downsizing, M & A layoffs, outsourcing all would seem to have transformed the job market. Couldn't wage dispersion be a funciton of the kind of work as opposed to the kind of worker?

Half Sigma, multiple regression analysis is still a study of correlation which doesn't necessarly imply a cause/effect relationship. You are controlling for other significant variables which makes a strong case and you clearly know what you are doing, but it is still a correlation.

One other plausible theory: the inertia factors that you suggest cause people to get advanced degrees might be more relevant than the degrees themselves.

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