The two main sources of inequality in the US labor market---occupation and workplace---have increasingly consolidated. High-paid occupations are less likely to be employed at low-paying workplaces and low-paid occupations are rarely found at high-paying workplaces. Drawing on occupation-by-workplace data, we show that most of the rise in wage inequality since 1999 can be accounted for not by occupation or workplace inequality alone, but by their increased consolidation. This consolidation is not attributable to firm turnover or to how occupations have shifted across a fixed set of high paying firms (as in outsourcing). Instead, consolidation has resulted from new bases of workplace pay premiums. Workplace premiums associated with teams of managers and professionals have become more important, while premiums for previously high-paid blue collar workers have been cut. Yet the largest source of increased consolidation is bifurcation in the social sector, whereby some previously low-paying but high-professional share workplaces, like hospitals and schools, have deskilled their jobs, while others have raised pay. Broadly, the results demonstrate an understudied way that organizations affect wage inequality: not by directly increasing variability in workplace or occupation premiums, but by consolidating these two sources of inequality.
When employers shift from external to internal hiring, does this ease upward mobility for low-paid workers or does it protect the already advantaged? To assess the effect of within-organization job mobility on stratification, we develop a framework that accounts for inequality in both rates and pay-offs of job changing. Internal hiring facilitates advancement for workers without strong credentials, but it excludes workers in organizations with few jobs to advance into. Analyzing nationally representative panel data, we find that when internal hiring becomes a larger share of job mobility, workers are less likely to move out of low-paid occupations, while those in high-paying occupations are more likely to maintain their positions. One third of this difference is due to low-paid workers isolated in industries with few high-paying occupations to transfer into. For workers at the bottom of the occupational hierarchy, the persistence of internal hiring does more to exclude than to advantage.
This article asks why firms adopt novel managerial ideologies. Over the past forty years, managerial ideas about workers have undergone rapid change. As companies abandoned postwar models of work, some adopted a “high road” approach to management, describing their employees as assets, while others adopted a “low road” approach, describing their employees as costs. In this article, we use research on organizational identity to develop a theory of how and why firms adopt one approach or the other. We argue that firms’ previously adopted managerial ideologies are sticky, such that firms that adopted an asset orientation in the past will continue to do so in the future. Furthermore, the type of worker defining that orientation changes when firms’ occupational composition changes. We argue that the organizational adoption of new managerial ideas is characterized by ideological reorientation—that is, management ideologies shift in response to occupational changes but are also constrained by each firm’s prior cultural history. We test these ideas using computational text analysis to analyze long-run variation in management ideology across a large panel of corporate annual reports. We find that ideologies forged in the old economy guided corporations into either high-road or low-road approaches to the new economy.
How does family intervention affect earnings inequality? Stratification research has focused on how families advantage children through skill and education. But recent research on earnings inequality finds that, beyond skill, workers' earnings depend on whether they sort to high- or low-paying employers. We argue that, unlike in skill development, family intervention in worker-employer sorting can actually reduce inequality: family obligation can lead high-skill workers to accept jobs with family members at low-paying companies. Using linked employer-employee data from Sweden, we find a lower correlation between skill and company pay premiums in jobs filled by a family relative of an incumbent worker. This lower correlation is driven by high-skill workers joining relatives at low-paying companies. The pattern is especially strong when workers accept jobs with their parents or husbands or with family managers or owners. The net result of this negative sorting among family-related workers is reduced aggregate earnings inequality. The analysis show how local hierarchy can interrupt market sorting and offset earnings inequality.
In the 1970s, US workers' wages stopped growing and steadily declined through the mid-1990s. During this time, employers experimented with employment practices, like merit-based pay increases, that seemed likely to raise pay and productivity. We argue on the contrary that the introduction of merit pay actually weakened organizational constraints that previously boosted wages. First, merit pay practices loosen pay fairness constraints by justifying pay gaps on the basis of performance differences. Second, merit pay substitutes for efficiency wages, by providing an alternative mechanism through which employers can elicit worker effort. To test these ideas, we introduce new establishment-by-occupation microdata covering the critical early period of wage stagnation. We show that when establishments adopt merit pay, wages decline. These effects are concentrated on the lowest-paid workers within a job; the lower paid jobs within a workplace; and in the highest-paying blue collar workplaces. The increased prevalence of merit-based pay explains one sixth to one third of wage stagnation for low-skilled workers during this period. The analysis demonstrates that organizational practices can aggregate up to affect societal trends in inequality and wage growth.
What explains pay inequality among coworkers? Theories of organizational influence on inequality emphasize the effects of formal hierarchy. But restructuring, firm flattening, and individualized pay setting have challenged the relevance of these structuralist theories. I propose a new organizational theory of differences in pay, focused on task structure and the horizontal division of labor across jobs. When organizations specialize jobs, they reduce the variety of tasks performed by some workers. In doing so they leave exclusive job turf to other coworkers, who capture the learning and discretion associated with performing a distinct task. The division of labor thus erodes pay premiums for some workers while advantaging others through job turf. I test this theory with linked employer–employee panel data from U.S. labor unions, which include a type of data that is rarely collected: annual reporting on work tasks. Results show that reducing task variety lowers workers’ earnings, while increasing job turf raises earnings. When organizations reduce task variety for some workers, they increase job turf for others. Without assuming fixed job hierarchies and pay rates, interdependencies in organizational task allocation yield unequal pay premiums among coworkers.
The post-World War II period of wage compression provides a strong contrast to the last forty years of rising inequality. In this article, I argue that inequality was previously constrained by pay coordination that spanned multiple workplaces. Cross-workplace coordination practices range from multi-employer collective bargaining agreements to informal employer collusion. To quantify the influence of these practices on inequality, I draw on establishment-level Bureau of Labor Statistics microdata from 1968 to 1977. Inequality between workplaces did not increase during the 1970s and inequality was lower among workers likely to be covered by cross-workplace pay coordination. Unionization, large establishments, and pension provision reduced inequality across workplaces, not only among coworkers within workplaces. These findings indicate that cross-workplace coordination mitigated inequality during the postwar period of egalitarian economic growth.
This article examines tenant exploitation and landlord profit margins within residential rental markets. Defining exploitation as being overcharged relative to the market value of a property, the authors find exploitation of tenants to be highest in poor neighborhoods. Landlords in poor neighborhoods also extract higher profits from housing units. Property values and tax burdens are considerably lower in depressed residential areas, but rents are not. Because landlords operating in poor communities face more risks, they hedge their position by raising rents on all tenants, carrying the weight of social structure into price. Since losses are rare, landlords typically realize the surplus risk charge as higher profits. Promoting a relational approach to the analysis of inequality, this study demonstrates how the market strategies of landlords contribute to high rent burdens in low-income neighborhoods.
Since the 1970s, corporate restructuring has shifted more and more workers into workplaces substantially reliant on outside corporate buyers. During the same period, wages for U.S. workers have stagnated. Standard theories of wage determination allow bargaining power to affect wages within companies, but assume that competitive pricing allocates resources between different companies. I extend organizational theories of wage determination to between-organization interactions and I predict that powerful buyers can demand decreases in suppliers’ wages. Panel data on publicly traded companies shows that dependence on large buyers decreases suppliers’ wages and accounts for 10% of the decline in wage growth in nonfinancial firms since the 1970s. Instrumental variables analysis of mergers among buyers confirms that wage decreases result from strengthened buyer power. These findings document how networked production grew in tandem with consolidation among large buyers. The spread of unequal bargaining relations between corporate buyers and their suppliers slowed wage growth for workers.
Research on wage inequality has neglected the role consumers play in shaping the wage structure. This paper considers the consequences of the US economy’s increasing reliance on demand from high-income consumers. Unlike the mass consumers that defined the post-WWII US economy, high-income consumers pay a premium for high-quality and high-status products. These distinctive spending patterns mean that high-income consumers can increase segmentation between up-market and down-market producers and generate inequality among up-market producers. Vertical differentiation between employers serving different consumers thus underlies new types of industrial segmentation and dualism. Using input-output tables to link consumer expenditure and wage surveys, I implement variance function regression to find that industries more dependent on high-income consumers have greater wage inequality. This analysis identifies a new structural source of wage inequality not considered in previous research: the increasingly segmented composition of consumer demand reproduces wage inequality.
Amid the long decline of US unions, research on union wage effects has struggled with selection problems and inadequate theory. I draw on the sociology of labor to argue that unions use non-market sources of power to pressure companies into raising wages. This theory of union power implies a new test of union wage effects: does union activism have an effect on wages that is not reducible to workers’ market position? Two institutional determinants of union activity are used to empirically isolate the wage effect of union activism from labor market conditions: increased union revenue from investment shocks and increased union activity leading up to union officer elections. Instrumental variable analysis of panel data from the Department of Labor shows that a 1 percent increase in union spending increases a proxy for union members’ wages between 0.15 percent and 0.30 percent. These wage effects are larger in years of active collective bargaining, and when unions increase spending in ways that could pressure companies. The results indicate that non-market sources of union power can affect workers’ wages and that even in a period of labor weakness unions still play a role in setting wages for their members.
In the following chapter, I first briefly outline the history of economic inequality. Recent research has used new kinds of evidence—from historical social tables and tax data, to skeleton height measurements and village surveys—to sketch the longue durée of economic inequality. This historical trajectory introduces the broad patterns of economic inequality, which sociological research has attempted to explain. Next, I introduce five classic sociological explanations for the persistence of economic inequality: Marxist, Weberian, Veblenian, Functionalist, and institutionalist. These core sociological explanations emphasize different types of inequality (i.e. between big class groups, or as a rank ordering), and examine different mechanisms through which inequality is perpetuated. Overall, they delineate the main sociological approaches to the study of economic inequality. Finally, I use these sociological explanations to frame and summarize research on rising US earnings inequality, which has been the main empirical site of recent attempts to explain variation in economic inequality. I also briefly consider research on the effects of inequality, again in the context of rising US wage inequality. Throughout these last two sections, I emphasize ways that the five core sociological explanations for inequality have shaped recent empirical research. In doing so, I identify the distinctively sociological contributions to the analysis of economic inequality.