Bringing Productivity Back In: Rising Inequality and Economic Rents in the U.S. Manufacturing Sector, 1971 to 2001

Using data on earnings and productivity for U.S. manufacturing industries from 1971 to 2001, we investigate economic rents and rising income inequalities. The results suggest that rents are most significant for managers, professionals, middle‐aged workers, and older workers. Conversely, negative rents are evident for women, Hispanics, single men, and blue‐collar workers. The underpayment of Hispanics appears to have increased while African Americans have gone from being underpaid to being overpaid. Workers with a college degree have become overpaid (i.e., “credentialism”) while “gift‐exchange” efficiency wages have declined. The marginal productivity of labor input has increased but is increasingly underpaid.