Worker Diversity and Wage Growth Since 1940

Abstract

Since 1940 the average worker has become older, more educated, more likely to be a woman, less likely to be White, and slightly less likely to be single. How has this evolution of the average worker affected wage growth, that is, the wage of the average worker? We conduct two sets of experiments: First, we decompose wage growth between a “growth effect” and a “distribution effect.” The former measures the effect of a change in the wage function, associating wages with worker types; the latter measures the effect of the changing distribution of worker types. Both effects contribute significantly to wage growth. Second, we evaluate the contribution of changing marginal distributions of these worker types one at a time: Aging and education enhanced wage growth, while the increased participation of women and non-White workers deterred wage growth—the latter effect being a direct implication of gender and racial wage gaps.