Academic journal article Monthly Labor Review

Interindustry Wage Differentials: Patterns and Possible Sources

Academic journal article Monthly Labor Review

Interindustry Wage Differentials: Patterns and Possible Sources

Article excerpt

Data from the Occupational Employment Statistics survey are used to investigate wage differences among industries and reveal that occupations that are most closely related to the primary mission of the firm have the greatest differential

Do workers with similar skills in similar occupations receive similar wages across industries? Differences in interindustry wages have been widely documented over the last two decades, and researchers continue to discuss these differences. In particular, they seek the sources of wage dispersion among individual workers, employers, industries, and geographic areas. Recent attempts to explore the role of particular technologies, including microprocessor technologies, in wage dispersion has heightened interest in this issue.(1)

This article examines interindustry wage differentials, using data from the Occupational Employment Statistics (OES) survey. The OES classifies employment and wages of individuals by detailed occupation and three-digit Standard Industrial Classification (SIC) industry.(2) The OES survey solicits employment and wage data for more than 700 occupations in three-digit SIC industries using a sample of 1.2 million establishments.(3) Estimates of occupational employment and wages are developed for the Nation, individual States, and metropolitan statistical areas, as well as Guam, Puerto Rico, and the Virgin Islands. This article uses data from the 1996, 1997, and 1998 surveys, which when combined account for the total OES sample. (Hereafter referred to as the 1998 OES data.)(4)

The OES is useful for investigating wage differences among industries because its data provide high levels of both occupational and industrial detail. Data by detailed occupation allow re searchers to examine wage differences among industries that hold constant a relatively detailed description of individuals' job tasks and duties. Because several of the proposed explanations of interindustry wage differentials have implications for the types of tasks and duties that are expected to be most closely associated with wage differences among industries, OES data have considerable potential to add to our understanding of this issue.

Comparisons with other surveys

Most of the earlier (pre-1985) studies of wage dispersion among industries have used data obtained from households, such as the data from the Current Population Survey or those collected from the decennial census. These data contain information about workers' occupation and industry of employment, in addition to information about workers' demographic characteristics such as age, sex, work experience, and education level.(5) Recently, more studies have used data that are collected at the firm or establishment level. These data contain relatively detailed information about workers' occupation, industry of employment, and demographic characteristics.(6)

Wage data from alternative sources have different strengths. One key measure illustrates wage differences across industries for workers with similar levels of education and other "human capital" characteristics. Data obtained from household surveys that describe the demographic characteristics of workers are used to measure the portion of the difference in the wages of workers in similar occupations that is attributable to average differences in the level of workers' "human capital." Wage differences among industries represent a problem for researchers because differences in the demographic characteristics of workers in similar occupations explain only a portion of the wage differences among industries. The demographic information collected by household surveys is thus a very important strength of these data, relative to surveys that collect data classified by occupation and industry alone.

The OES estimates of wage differences among industries compare the wages of workers employed in the same detailed occupations, without also controlling for demographic characteristics. …

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