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Occupation Growth, Skill Prices, and Wage Inequality

Author

Listed:
  • Michael Böhm

    (University of Bonn and IZA)

  • Hans-Martin von Gaudecker

    (University of Bonn and IZA)

  • Felix Schran

    (AXA)

Abstract
This paper studies the relationship between occupational employment, occupational wages, and rising wage inequality. We document that in all occupations, entrants and leavers earn less than stayers. This suggests selection effects that are negative for growing occupations and positive for shrinking ones. We estimate a model of occupational prices and skills, which includes occupation-specific skill accumulation and endogenous switching across many occupations. Consistent with leading explanations for occupational changes, estimated prices (i.e., selection-corrected wages) and occupational employment growth are positively related. Just over 40% of selection is due to age in the sense that marginal workers have had less time to accumulate skills. The remainder is due to Roy-type selection, i.e., workers reacting to changing prices and shocks unrelated to age. Skill prices establish a long-suspected quantitative connection between occupational changes and the surge in wage inequality.

Suggested Citation

  • Michael Böhm & Hans-Martin von Gaudecker & Felix Schran, 2022. "Occupation Growth, Skill Prices, and Wage Inequality," ECONtribute Discussion Papers Series 167, University of Bonn and University of Cologne, Germany.
  • Handle: RePEc:ajk:ajkdps:167
    as

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    6. Bachmann, Ronald & Demir, Gökay & Green, Colin P. & Uhlendorff, Arne, 2022. "The Role of Within-Occupation Task Changes in Wage Development," IZA Discussion Papers 15647, Institute of Labor Economics (IZA).
    7. Albinowski, Maciej & Lewandowski, Piotr, 2024. "The impact of ICT and robots on labour market outcomes of demographic groups in Europe," Labour Economics, Elsevier, vol. 87(C).
    8. Cavaglia, Chiara & Etheridge, Ben, 2020. "Job polarization and the declining quality of knowledge workers: evidence from the UK and Germany," LSE Research Online Documents on Economics 105819, London School of Economics and Political Science, LSE Library.
    9. Schran, Felix, 2019. "Locational Choice and Spatial Wage Inequality," IZA Discussion Papers 12660, Institute of Labor Economics (IZA).
    10. Maximilian Longmuir & Carsten Schr der & Matteo Targa, 2020. "De-routinization of Jobs and Polarization of Earnings – Evidence from 35 Countries," LIS Working papers 796, LIS Cross-National Data Center in Luxembourg.
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    12. Bachmann, Ronald & Gonschor, Myrielle, 2022. "Technological Progress, Occupational Structure and Gender Gaps in the German Labour Market," IZA Discussion Papers 15419, Institute of Labor Economics (IZA).
    13. Schran, Felix, 2019. "Changing Returns to Occupational Skill and Women's Wages," IZA Discussion Papers 12661, Institute of Labor Economics (IZA).
    14. Ronald Bachmann & Gökay Demir & Hanna Frings, 2022. "Labor Market Polarization, Job Tasks, and Monopsony Power," Journal of Human Resources, University of Wisconsin Press, vol. 57(S), pages 11-49.
    15. Hunt, Jennifer & Nunn, Ryan, 2022. "Has U.S. employment really polarized? A critical reappraisal," Labour Economics, Elsevier, vol. 75(C).
    16. David Autor & Caroline Chin & Anna Salomons & Bryan Seegmiller, 2024. "New Frontiers: The Origins and Content of New Work, 1940–2018," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 139(3), pages 1399-1465.
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    18. Cavaglia, Chiara & Etheridge, Ben, 2020. "Job polarization and the declining quality of knowledge workers: Evidence from the UK and Germany," Labour Economics, Elsevier, vol. 66(C).
    19. Eduard Storm, 2022. "Task specialization and the Native‐Foreign Wage Gap," LABOUR, CEIS, vol. 36(2), pages 167-195, June.
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    More about this item

    Keywords

    Skill Prices; Selection Effects; Multidimensional Skill Accumulation; Occupational Employment and Wages; Administrative Panel Data; Wage Inequality;
    All these keywords.

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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