Trade and inequality: a review of the literature

The last three decades have witnessed some sharp changes in labor earnings and earnings inequality in the United Sates. The first is that labor earnings, adjusted for inflation, have stagnated since 1973, after rising briskly in the preceding quarter century. The second is that the dispersion of earnings among all workers (or among all male workers) in the economy has trended upward since 1970, after remaining flat over the preceding 25 years. The third is the rising returns to schooling, particularly a college education, since 1980 or so. A. Average Earnings Figure 1 and Table 1 document trends in both overall average wages and salaries and overall average employee compensation, defined as wages and salaries plus the fringe benefits provided by employers, over the period from 1947 to 1997. I have used as wide an assortment of measures of labor compensation as possible from available data sources. Fortunately, the results are surprisingly consistent among these alternative data sources and series. These include the Bureau of Labor Statistics series on hourly wages and salaries of production and non-supervisory workers in the