Consolidated Advantage: New Organizational Dynamics of Wage Inequality

Abstract

The two main axes of inequality in the U.S. labor market—occupation and workplace—have increasingly consolidated. In 1999, the largest share of employment at high-paying workplaces was blue-collar production workers, but by 2017 it was managers and professionals. As such, workers benefiting from a high-paying workplace are increasingly those who already benefit from membership in a high-paying occupation. Drawing on occupation-by-workplace data, we show that up to two-thirds of the rise in wage inequality since 1999 can be accounted for not by occupation or workplace inequality alone, but by this increased consolidation. Consolidation is not primarily due to outsourcing or to occupations shifting across a fixed set of workplaces. Instead, consolidation has resulted from new bases of workplace pay premiums. Workplace premiums associated with teams of professionals have increased, while premiums for previously high-paid blue-collar workers have been cut. Yet the largest source of 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.