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Factors Affecting Labor Markets, Income Inequality

unskilled labor, industrialized nations, jobs lower, government assistance programs, national income

Another issue involving the operation of labor markets in the U.S. economy has been the growing difference between the earnings of high-income and low-income workers at the end of the 20th century. From 1977 to 1997, families who make up the top 20 percent of income groups have seen their money income rise from 40.9 percent of the national income to 47.2 percent. Over the same period, families in the lowest 20 percent of income groups have experienced a decline from 5.5 percent of the national income to 4.2 percent. This trend is the result of several factors.

Wages for skilled workers, those with more education and training, have increased quickly because the supply of these workers in the U.S. has not risen as quickly as demand for these workers. In addition, wages for unskilled labor in the United States have been held down more than in other nations as a result of U.S. immigration policies. The United States has admitted a larger number of unskilled workers than other industrialized nations. Other countries often consider job market factors more heavily in determining who will be allowed to immigrate. As a result, the supply of unskilled workers in the United States has increased faster than in other countries, pushing wages in low-paying jobs lower.

Finally, government assistance programs for low-income families tend to be more extensive and generous in other industrialized market economies than they are in the United States. That is perhaps one of the reasons that workers in those countries are less willing to accept jobs that pay lower wages, and why unemployment rates in those countries are substantially higher than they are in the United States. The exact relationship between those factors has not been determined, however.

It is clear that it has become increasingly difficult for U.S. workers who have not at least completed high school to achieve a high or moderate level of income. In 1996 the average annual income for graduates of four-year colleges was $63,127 for males and $41,339 for females, while the average annual income for those who did not graduate from high school was only $25,283 for males and $17,313 for females.



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