Why The Wage Gap Widened

And why it has been narrowing

What's behind the growing gap between the earnings of those at the top of the income ladder and those near the bottom? Because rising wage inequality in recent decades has occurred in many countries besides the U.S. and in a variety of industries, economists have favored explanations that cut across national and industrial borders.

The most likely culprit, claim the experts, is changing technology, which has presumably boosted the demand for better-educated workers, while depressing the job opportunities and wages of the less skile just a week's notice before elections, and until recently all signs were pointing to a November date. But unexpectedly heavy monsoons in the north have rendered impassable the roads that trucks would have used to carry ballot boxes. On top of that, increasingly intense political mudslinging has contributed to the delay. In the latest round, former Deputy Premier Anwar Ibrahim, now on trial on sodomy charges he says are concocted, alleged in court that Mahathir's current right-hand man, Finance Minister Da12% over those two decades, they found that it actually fell in seven states and rose by 18% to 25% in eight others.

To explain such differences, Bernard and Jensen looked at such developments as changing technology, international trade, immigration, and falling minimum wage levels. Although their analysis implicated several, they found that changes in industrial composition played the most significant role--accounting for 30% to 55% of state changes in inequality.

Specifically, states that lost manufacturing jobs, such as those in the Northeast and Midwest, had the biggest rises in inequality, while those that gained manufacturing jobs, such as states in the South, tended to post either decreases in inequality or very modest increases. (Wyoming and Oregon also had widening wage gaps, apparently due to shocks sustained by the oil and lumber industries.)

Although it focuses on past decades, the study may shed light on recent reports that the trend toward rising wage inequality has slowed appreciably. After posting big losses in the 1980s, notes Bernard, "manufacturing jobs appear to have more or less stabilized in the 1990s."

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