The Surprising Compression in Wages
Post Logo

Arindrajit Dube

Cheap talker.

The Surprising Compression in Wages

We have seen an incredible rise in wages at the bottom of the pay scale during the last few years. This has been driven by the ability of low-wage workers to find better opportunities.

It's surprising to see wages rise mostly at the bottom because low-wage workers lost jobs much more during the pandemic than those at higher rungs of pay. So this compression is testament to the strong fiscal and monetary policy support that allowed an unprecedented recovery in employment following a recession.

Here are findings from my work with my coauthor David Autor (MIT) and Annie McGrew (UMass Amherst) showing the wage change any wage percentile.

A common measure of inequality compares those at the 10th percentile of pay to the 90th percentile: the 90-10 gap.

Here is a fact that may surprise you: while the 90-10 gap incresed a lot between 1980 and 2019 (just prior to the pandemic), the last 3 years saw a third of that increase get erased.

Low-paid workers in America are doing much better today than they have in a while. And that's a good thing.

Liked by