Blue-Collar Blues

What are the links between slow US real wagegrowth, increased earnings inequality andtrade? Lawrencedeconstructs thegap between realblue-collar wagesand labor productivitygrowthover the pastquarter-centuryand estimates(a) how much ofthe gap is due tomeasurement issuesand (b) howmuch higherthese wagesmight have beenif the distributionof income beenkept constant.He also argues that while increased trade withdeveloping countries may have played somepart in causing greater wage inequality in the1980s, surprisingly, over the past decade theimpact has been too small to show up in aggregatewage data on inequality. Increases inincome inequality and slow real wage growthsince 2000 reflect strong profit growth. Increasesin inequality over the past decade alsohave resulted from dramatic income gains forthe top one percent of wage earners.

Nonresident senior fellow at the Peterson Instute; Albert L. Williams Professor of Trade and Investment at the John F. Kennedy School of Government at Harvard University; served as member of President Clinton's Council of Economic Advisers (1999); held the New Century Chair at the Brookings Institution; founded and edited the Brookings Trade Forum; and served as consultant to the Federal Reserve Bank of New York, the World Bank, the OECD, and UNCTAD.