David Green
Abstract
We present information on trends in earnings inequality among self-employed workers in the U.S. for the period 1978-92. This is of potential interest because it fills a gap in the research on the self-employed, who make up over 11 % of the labour force and yet are paid little attention in most studies. It is also of interest because a comparison of inequality trends with those for the paid employed could help in choosing among the set of explanations that have been advanced for the large increase in inequality among paid workers over this period. We find very different trends in overall inequality for male workers in the two sectors. In particular, paid workers experience an almost continuous increase in earnings inequality over this period, accompanied by almost continuous shifts left in the location of the earnings distribution. The self employed face an initial sharp increase in earnings inequality and drop in the level of earnings between the late 1970s and the early 1980s, but then experience continual decreases in inequality for the remainder of the period. The two sectors also have very different trends in differences between the earnings distributions of skill groups and in changes in the earnings distributions within skill groups. The paper concludes with a brief discussion of the Implications for the most commonly referenced reasons for the increase in inequality among paid employees.