Rising inequality in the amount of money Americans earn turns out to be mostly explained by where they work. And that may help solve another puzzle about the economy: why fewer and fewer workers are moving from one company to another.
For decades, economists have observed a growing disparity in earnings in the U.S. and questioned whether it stemmed from increasingly unequal pay within companies or from more unequal earnings from company to company.
Many people have assumed that most of the change has been happening within companies, as certain employees get disproportionately bigger paychecks. But a new study of U.S. incomes since the 1970s shows that most of the rise in inequality has been due to a greater spread in average earnings across companies. The researchers — Erling Barth of the Institute for Social Research, Alex Bryson of the National Institute of Economic and Social Research, James Davis of the Boston Census Research Data Center, and Richard Freeman of the National Bureau of Economic Research — attribute two-thirds to nine-tenths of the change to increasing inequality from workplace to workplace.
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