Effort: The Unrecognized Contributor to US Income Inequality / J. Rodrigo Fuentes, Edward E. Leamer.

Format:

Book

Author/Creator:

Fuentes, J. Rodrigo.

Contributor:

National Bureau of Economic Research.

Leamer, Edward E.

Series:

Working Paper Series (National Bureau of Economic Research) no. w26421.

NBER working paper series no. w26421

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Effort

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2019.

Summary:

This paper provides theory and evidence that worker effort has played an important role in the increase in income inequality in the United States between 1980 and 2016. The theory suggests that a worker needs to exert effort enough to pay the rental value of the physical and human capital, thus high effort and high pay for jobs operating expensive capital. With that as a foundation, we use data from the ACS surveys in 1980 and 2016 to estimate Mincer equations for six different education levels that explain wage incomes as a function of weekly hours worked and other worker features. One finding is a decline in annual income for high school graduates for all hours worked per week. We argue that the sharp decline in manufacturing jobs forces down wages of those with high school degrees who have precious few high-effort opportunities outside of manufacturing. Another finding is that incomes rose only for those with advanced degrees and with weekly hours in excess of 40. We attribute this to the natural talent needed to make a computer deliver exceptional value and to the relative ease with which long hours can be chosen when working over the Internet.

Notes:

Print version record

November 2019.