microdata set. From a cross-sectional perspective, this could be examined by
looking at year-to-year changes in
(PVL +PL) + (PH + PVH)
where PVL is the percentage of workers within the very low (VL) earnings
interval and the remaining percentages are defined accordingly. (Middle
percentages do not enter the formula as the percentages all sum to a 100
per cent and an increase in the lower and upper interval shares implies a
corresponding reduction in the middle interval percentages.) Alternatively, one
could also look at the more extreme measure
(1)
PVL + PVH
concentrating on just the two end interval shares. These are called cross-
sectional measures because they do not exploit the panel nature of the data.
(2)
Table 2 presents estimates of changes in both these measures of polar-
ization (in the first two rows of each panel). Also presented are the break-
downs of these measures into the portions contributed by the upper and lower
ends separately (in the bottom four rows of each panel). Three features are
most noticeable from these results. First, a substantial degree of increased
polarization is evident in the last column of the table. Among all workers, the
interval share of individuals with earnings in the bottom two and top two
intervals increased by three percentage points between 1982 and 1996 (a 5.7
per cent increase), while the proportion of workers in just the two extreme
intervals rose by 3.8 points (or by 15.6 per cent). The corresponding in-
creases for men were 2.7 and 4.8 percentage points, respectively, and for
women 4.4 and 3.2 percentage points. Evidently, the shift is strongest in
percentage terms in the two extreme earnings intervals.
Second, the increased polarization for men occurs at both ends of the
earnings distribution with increasing shares of workers at both the very low
and very high intervals. (Estimates of what fraction of the increased
polarization is attributable to increases at one end or the other, however, are
not at all robust as they vary greatly with exactly what polarization measure is
used.) For women, though, this is not the case as the increased polarization
measures really reflect a shift up of the entire distribution such that the
increased share in the high and very high intervals (6.5 percentage points)
completely swamps the reduced share of workers in the low and very low
intervals (-2.1 percentage points). Thus what is going on in the distribution of
female earnings is not really well characterized by the term polarization. This
will be revisited below.
460
Charles M. Beach and Ross Finnie