Derek Neal

The Role of Premarket Factors in Black-White Wage Differences

Many attempts to measure the wage effects of current labor market discrimination against minorities include controls for worker productivity that (1) could themselves be affected by market discrimination and (2) are very imprecise measures of worker skill. The resulting estimates of residual wage gaps may be biased. Our approach is a parsimoniously specified wage equation that controls for skill with the score of a test administered as teenagers prepared to leave high school and embark on work careers or postsecondary education. Independent evidence shows that this test score is a racially unbiased measure of the skills and abilities these teenagers were about to bring to the labor market. We find that this one test score explains all of the black-white wage gap for young women and much of the gap for young men. For todays young adults, the black-white wage gap primarily reflects a skill gap, which in turn we can trace, at least in part, to observable differences in the family backgrounds.

Industry-Specific Human Capital: Evidence from Displaced Workers

Results from the Displaced Worker Surveys show that the wage cost of switching industries following displacement is strongly correlated with predisplacement measures of both work experience and tenure. Workers apparently receive compensation for some skills that are neither completely general nor firm-specific but rather specific to their industry or line of work. Further, among displaced workers who find new jobs in their predisplacement industry, postdisplacement returns to predisplacement job tenure resemble cross-section estimates of the returns to current seniority. This suggests that firm-specific factors may contribute little to the observed slope of wage tenure profiles.

The Effects of Catholic Secondary Schooling on Educational Achievement

This article examines the effect of Catholic secondary schooling on high school graduation rates, college graduation rates, and future wages. The article introduces new measures of access to Catholic schools that serve as potential instruments for Catholic school attendance. Catholic secondary schools are geographically concentrated in urban areas, and Catholic schooling does increase educational attainment significantly among urban minorities. The gains from Catholic schooling are modest for urban whites and negligible for suburban students. Related analyses suggest that urban minorities benefit greatly from access to Catholic schooling primarily because the public schools available to them are quite poor.

The Complexity of Job Mobility among Young Men

The model of job search involves both employer matches and career matches. Workers may change employers without changing careers but cannot search over possible lines of work while working for one employer. The optimal policy implies a two‐stage search strategy in which workers search over types of work first. The patterns of job changes observed in the National Longitudinal Survey of Youth support this two‐stage search policy. Among male workers who are changing jobs, those who have previously changed employers while working in their current career are much less likely to change careers during the current job change.

THEORIES OF THE DISTRIBUTION OF EARNINGS

Several empirical regularities motivate most theories of the distribution of labor earnings. Earnings distributions tend to be skewed to the right and display long right tails. Mean earnings always exceed median earnings and the top percentiles of earners account for quite a disproportionate share of total earnings. Mean earnings also differ greatly across groups defined by occupation, education, experience, and other observed traits. With respect to the evolution of the distribution of earnings for a given cohort, initial earnings dispersion is smaller than the dispersion observed in prime working years.We explore several models that address these stylized facts. Stochastic theories examine links between assumptions about the distribution of endowments and implied features of earnings distributions given assumptions about the processes that translate endowments into earnings. Selection models describe how workers choose a career. Because workers select their best option from a menu of possible careers, their allocation decisions tend to generate skewed earnings distributions. Sorting models illustrate this process in an environment where workers learn about their endowments and therefore adjust their allocation decisions over time.Human capital theory demonstrates that earnings dispersion is a prerequisite for significant skill investments. Without earnings dispersion, workers would not willingly make the investments necessary for high-skill jobs. Human capital models illustrate how endowments of wealth and talent influence the investment decisions that generate observed distributions of earnings.Agency models illustrate how wage structures may determine rather than reflect worker productivity. Tournament theory addresses the long right tails of wage distributions within firms. Efficiency wage models address differences in wages across employments that involve different monitoring technologies.

Supervision and Wages across Industries

This paper uses supervision data from a supplement to the 1977 wave of the Panel Survey of Income Dynamics to examine differences in supervision and wages across industries and to evaluate relationships between supervision practices and interindustry wage differentials. The results demonstrate that workers in high-wage industries are supervised with equal or greater stringency than secondary sector workers. Further, the results offer no evidence that interindustry differences in monitoring contribute to interindustry wage differentials. Such findings appear to contradict explanations for industry wage premiums that are motivated by efficiency wage models of shirking. Copyright 1993 by MIT Press.

The Prison Boom and Sentencing Policy

The existing literature on the role of changes in sentencing policies as drivers of growth in prison populations contains findings that appear contradictory. We present a new method for characterizing changes in the severity of expected punishments for offenders and build a new simulation model based on this method. We provide clear evidence that changes in sentencing policy drove recent growth in prison populations in the United States, and our approach sheds light on the reasons that some previous studies did not reach this conclusion. The shift to more punitive sentencing policies had a disproportionate effect on black communities, even though, for the most part, this shift did not target blacks or crimes that blacks commit relatively more than whites.