Brooks Pierce

Wage Inequality and the Rise in Returns to Skill

Using data from the March Current Population Survey, we document an increase over the past 30 years in wage inequality for males. Between 1963 and 1989, real average weekly wages for the least skilled workers (as measured by the tenth percentile of the wage distribution) declined by about 5 percent, whereas wages for the most skilled workers (as measured by the ninetieth percentile of the wage distribution) rose by about 40 percent. We find that the trend toward increased wage inequality is apparent within narrowly defined education and labor market experience groups. Our interpretation is that much of the increase in wage inequality for males over the last 20 years is due to increased returns to the components of skill other than years of schooling and years of labor market experience. Our primary explanation for the general rise in returns to skill is that the demand for skill rose in the United States over this period.

Nondiscrimination Rules and the Distribution of Fringe Benefits

This article considers the impact of nondiscrimination (ND) rules in the federal tax code. Nondiscrimination rules limit within‐firm inequality in the provision on nonwage benefits, but they place no corresponding limit on within‐firm inequality in wages. Firms can skirt ND rules by moving workers with unusual benefits into part‐time and seasonal positions because workers in such positions are excluded from some ND compliance calculations. We examine these issues empirically and find relationships consistent with the hypothesis that ND rules provide a binding constrain on within‐firms benefits inequality.

Pure vs. mixed commodity bundling

In the commodity bundling literature, pure bundling is ruled out as a uniquely optimal strategy because mixed bundling is always (weakly) better. This paper provides a theoretical distinction between the two pricing schemes. The distinction relies on the degree of consumer heterogeneity in reservation prices. While there is a lack of empirical evidence on commodity bundling pricing schemes due to the difficulties in measuring consumer heterogeneity, we circumvent this problem by examining firm heterogeneity. Specifically, we use data from the newspaper industry in which some two edition newspaper firms are mixed bundlers and others are pure bundlers.

Inter-Industry Wage Differentials, Job Content and Unobserved Ability

The authors estimate inter-industry wage differentials using the Bureau of Labor Statisticss National Compensation Survey (NCS) dataset. The NCS dataset has a number of distinct advantages over household survey datasets typically used for this purpose, in part because its establishment data contain information on job content and more accurate measures of industry and occupation. The authors find that controlling for job functions substantially lowers inter-industry wage variation. To the extent that job function proxies for productivity, a substantial portion of inter-industry wage variation may be explained by worker sorting on (observed) ability.

How Prevalent is Performance-Related Pay in the United States? Current Incidence and Recent Trends

We address basic questions about performance-related pay in the US. How widespread is it? What characteristics of employers and jobs are associated with it? What are recent trends in its incidence? What factors are responsible for these trends? Nearly two-fifths of hours worked in the US economy in 2013 were in jobs with performance-related pay, but this share has been declining. We consider several possible causes for this trend and find that they do not have much explanatory power. We do establish, however, that any potential explanation must also account for a long-term shift in the relative incidence of performance-related pay away from low-wage and toward high-wage jobs.

Pay for Performance and Compensation Inequality: Evidence from the ECEC

This article examines the relationship between performance-based pay and widening wage inequality using data from the Employer Costs for Employee Compensation (ECEC). The results suggest that jobs using performance-based pay have made only a modest contribution to increased inequality during the 1994 to 2010 period. These results contrast with those reported by Lemieux, MacLeod, and Parent (2009), who investigated the relationship between performance-based pay and wage inequality using the Panel Study of Income Dynamics. They found that pay for performance accounted for about one-fifth of the growth in the variance of male wages between the late 1970s and the early 1990s, and for almost all of the increase in wage inequality in the top quintile during the same period.

How rare are large, multiple-fatality work-related incidents?

Despite their salience, the prevalence of incidents that result in many work-related deaths is not well-documented. This study estimated probabilities of observing large scale work-related fatal incidents using 1995-2010 records from the Census of Fatal Occupational Injuries. A range of model estimates suggest approximately a one-in-four annual chance of observing an incident resulting in 20 or more work-related fatalities. The most likely contributors are aircraft incidents, and fires and explosions. The probability that a large scale incident occurs has declined in recent years due to a general decline in the number of fatal incidents, and due to a compositional shift away from those types of incidents more likely to result in large scale outcomes.

Firm Performance and the Volatility of Worker Earnings

Using linked employer-employee data for the United States, we examine whether shocks to firm revenues are transmitted to the earnings of continuing employees. While full insurance is rejected, the elasticity of worker earnings with respect to persistent shocks in firm revenues is small and consistent with the notion that firms insulate workers from idiosyncratic shocks. Exploring the heterogeneity of effects, we find the largest elasticity in professional services among employees in the top 5% of their employers’ earnings distribution, suggesting that in certain jobs performance pay may be a countervailing force to wage insurance.

An improved measure of inter-industry pay differentials

The measurement of inter-industry pay differentials and the resulting use of this information to assess the empirical relevance of different labor market theories have been hampered by the fact that measures of total compensation – as opposed to just wages and salaries – are not available in the datasets traditionally used. We improve upon past measures of inter-industry pay differentials by being the first, to our knowledge, to incorporate microdata on nonwage compensation. Such compensation can easily exceed 40 to 50 percent of wages and thus its inclusion may either diminish or amplify measured industry pay differences. Using the Employer Costs for Employee Compensation (ECEC) data produced by the U.S. Bureau of Labor Statistics, we find that the inclusion of benefits increases industry dispersion by 16 percent when no controls are included and by an even greater 30 percent when controls are included.