Educational Attainment, Industrial Structure, and Male Earnings, 1973-1987

Between 1973 and 1987, men's average earnings declined and the percentage of men with low earnings (defined as annual earnings less than $12,000 a year) increased for whites, blacks and Hispanics. We estimate regression models of the level and distribution of male earnings for each of these three groups using data from the 1974, 1980 and 1988 March Current Population Surveys. We find that changes in the distribution of workers across industries and in the level of educational attainment had more significant effects on the lower tail of the earnings distribution than on the means.

Much of the decline at the mean can be attributed to changes in the returns to education, experience, and industry of employment -- changes that we attribute to demand-side factors, such as changes in technology. While a substantial portion of the increase in the incidence of low earnings can be attributed to similar demand-side changes, shifts in industrial employment patterns (such as the shift from durable manufacturing to service sector jobs) had large effects on the probability of low earnings among blacks and whites. We also find that educational upgrading over the 15 year period kept mean wages from falling even further and helped to hold down the growth of low earnings among blacks and Hispanics.