Term Paper: Changes in the Distribution of Workers Hourly Wages Between 1979 and 2009

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¶ … rank the different components / larger areas they discuss, then proceed to smaller focus some specific areas of question, then point out ways the study could be improved. The critical approach will start from global, macroscopic overall description, and focus in to describe the continents on that globe or the different major sections of the paper, through details that comprise the broader map. Micro-level focus on details will pay particular attention to specific notes, where many of the assumptions underlying the conclusions this paper draws, originate. I compare this publication with similar papers by parallel Congressional and Executive agencies and a few academic sources. Finally areas for improvement and further research will reflect implications and information necessary or useful but omitted.

Review of the Paper in General

A critical review points out strengths and weaknesses, and there are numerous factors supporting the validity and relevance of this paper. Strengths include that it was published by the Congressional Budget Office (CBO), i.e. The U.S. Congress, so the imputed authors have political stake in publishing accurate information at least; we hope their individual biases will be offset through the peer review embodied in that institution. The CBO has published numerous papers on topics similar enough for comparison. This paper includes prominent but heterodox economists like Paul Krugman and Thomas Lemieux, which improves ethos compared to examples we will consider briefly later. There are many other strengths we will pose alongside weaknesses in our closer focus below as well.

We must limit our expectations of this document stringently: This February 2011 publication "documents changes in the level and distribution of hourly wages received by workers in the United States between 1979 and 2009" (CBO 2011, unnumbered Preface), and defines some of the major supply and demand factors that affect wages for different skill sets; productivity; gender; education levels and other characteristics. Keep the limiting terms "distribution" and "wages" foremost. We are also told the paper will consider the role of "labor market institutions" that most affect wages, which we will also consider closely. This all occurs under the CBO's usual disclaimer foreswearing any type of recommendation derived by them from this "objective" and "impartial" study (Preface).

The global conclusions of this paper are that inflation-adjusted wages at the median have increased over the period 1979-2009, by about 20%; that median wage was about $17 at period's end; the gap between both high and low wages have moved away from the 50th percentile for both men and women for different reasons all around, and that these changes took different courses over time. This evidence has been discovered analyzing wage earnings that are limited in specific ways, adjusted for inflation under specific constructions, organized into percentiles, and weighted for specific factors I analyze below. These data describe events affected by market conditions, most importantly technology and productivity innovation effects; global trade patterns, and immigration, which are separate and distinct from institutional factors particularly minimum wage levels and union representation. We must consider these continents more specifically in order to describe the globe just described.

Data Set Considerations

The practice of ranking data into different grades, describing the middle and the two tails in reference to that 50th percentile has become so standardized over the last 100 years we will leave criticism of the model aside as beyond the scope of this paper. The data set is large enough; it came from the U.S. Census and was thus probably normal and random, and outliers have been removed by considering the tenth and 90th percentiles rather than the absolute tails, which is strong. Downside outliers were already removed by the minimum wage, to large degree. We consider median instead of mean, which begs discussion somewhere else, but which helps overcome distortions in distribution, which is the purview of this study, and this too is all robust.

This is about as far as we can get critiquing this paper without discovering opportunities for potential controversy. This publication relies on assumptions that begin with the adjustment of data for comparability, so-called 'chaining' both in the indexing for inflation and in weighting wages for hours worked. Nor are the U.S. Census Current Population Survey data immune from criticism on grounds of subject reporting errors, as evidenced by sustained attack by partisans for the Current Employment Survey, which boils down to administrative vs. survey data in general (Gould 2003). Imputing earnings for missing answers is a subordinate potential confound that has relatively small but real effects. The biggest problems with the data set however in my opinion, arise through chaining wages for hours worked and some specific questionable decisions made selecting data for consideration, and assigning wage rates for non-wage payroll or excluding employment classes that probably bear significantly on both the validity, relevance and thus utility of this report.

Some of these potential disagreements can be described if not solved, and thus dispensed with, in less space. The dispute over survey data as compared to administrative data, is deep but fairly clear cut. The Census Current Population Survey data, on which this survey is based, probably because it reports age, gender and ethnicity data, relies on individuals reporting their earnings and hours worked. "Administrative data," payroll data reported by employers, is more robust because it reports actual hours worked over shorter, more immediate periods and thus does not rely on individuals' potentially faulty or intentionally inaccurate reporting; rounding problems or gaps in the data that introduce measureable bias as the CBO itself describes at length in a different but similar paper (CBO 2008). This is mentioned but left unaddressed in the addenda to the 2011 Appendix a (20). CBO 2011 claims gaps in data arose through individuals' reporting for others not present (17) but that these gaps were filled by just assigning values imputed from similar individuals. CBO itself finds "matched administrative earnings avoids the apparent bias introduced by the imputed records" (2008) in a usefully similar study, and the effect was small but not trivial. These confounds are real, if not dramatic weaknesses underlying this paper.

More important to me are the choices CBO made restricting the group of wages they measured. The study does a thorough job of explaining why measuring compensation is not the goal of this study, but rather wages, which also explains the focus on individual rather than household earnings with some defensibility. Compensation includes fringe benefits; bonus earnings; options and other assets that are usually far more difficult to value and thus are not the goal of this study. But they did impute wage rates from non-wage workers in ways that are far from robust.

For the forty percent of workers not paid hourly wages, the survey data asked for weekly earnings and then divided that by hours worked to derive an imputed pay rate. These earnings were then weighted by number of hours worked, before they were sorted and ranked into percentiles such that "a worker's wage was represented in the distribution of wages in proportion to the number of hours he or she worked" (17). Since we have already excluded compensation and are considering wages, this seems reasonable up to the definition of 'hours worked.' Where hours worked were unknown, that week's earnings were divided by the prior week's hours. This may not be an accurate treatment of weekly earnings for any employee in an emergency decision making position like a business manager, public official or intellectual worker who is never really off the clock, and experiences longitudinal or intangible returns from hourly work.

Without getting into performance pay which could probably be ruled out as 'compensation,' a public official quoted in the Sunday paper would be 'at work' on a nominal day off and for the permanent future; an academic who achieves an insight while grocery shopping, develops it on the drive home and implements it in the classroom the next day; we can construct infinite examples, but CBO 2011 fails to address this vulnerability which probably confounds a significant portion of the 40% of responses that weren't paid by the hour. If these are higher-earning positions, they are even more represented in the study than they would be had hours at work (the denominator) been, more accurately, 'all the time.' This complements a rising trend toward unpaid work taken home, some 10.19 million hours in 2004, 55% of which were performed to "finish or catch up on work," with another 32% of unpaid home work explained by "nature of the job" (BLS 2004). This is not the unpaid work in family businesses already ruled out of 2011 paper's data or the self-employment excluded because survey takers couldn't gauge the share of capital investment to wages in microbusiness ownership (17). The report indicates capital gains, which are excluded from this analysis in general as neither wage or compensation earnings, are in fact increasing as a share of aggregate national income (4).

CBO 2008 finds the importance of non-wage self-employment earnings compared to wage earnings as not significant enough to… [END OF PREVIEW]

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