OCCUPATIONAL GROWTH AND THE EXPANSION OF EDUCATIONALLY-RELATED EARNING GAPS

I develop an argument that facilitates understanding of how occupational growth impinges on the relationship between education and earnings. Much of the literature focuses on workers employed at the ends of the occupational hierarchy, whereas my contribution applies to workers positioned all along the occupational hierarchy. I argue that an undersupply of affordable, suitable labor in expanding occupations encourages a division of labor among workers who vary in educational attainment. This division of labor, in turn, leads to greater educationally-related earnings inequality—even among workers who hold similar positions in the occupational hierarchy. Such a development can become pervasive because expanding occupations exist throughout the occupational hierarchy and because educational attainment among workers varies within most occupations. In declining occupations, a different set of conditions pervades, and these conditions facilitate employers' efforts to control their wage-bill by compressing educationally-related earning gaps. A hypothesis is derived from these arguments and tested on a nationally representative sample. The findings are consistent with the hypothesis, suggesting the arguments considered here help explain how the relationship between education and earnings is influenced by whether workers are employed in expanding or in declining occupations. Consequently, this research improves our understanding of how earnings inequality among individuals is linked to structural transformations in the economy.