Class advantage in the white-collar labor market: An investigation of social class background, job search strategies, and job search success
Ray Fang & Alan Saks
Journal of Applied Psychology, forthcoming
We proposed that individuals from upper-class backgrounds are more effective at job search than their working-class counterparts in the white-collar labor market. We further proposed that this is partly because upper-class individuals adopt different job search strategies. Our predictions were tested with a time-lagged multisource survey (Study 1) and a 4-wave, 2-month longitudinal survey (Study 2) of business student job seekers. Study 1 found that parental income strengthened the relationship between job search intensity and job search success and that this interaction was mediated by a less haphazard job search strategy. Parental income also strengthened the relationship between job interviews and job offers. Study 2 mostly replicated these findings while showing that the effects generalize to other facets of class background. Study 2 additionally explored mechanisms for why working-class individuals use a more haphazard job search strategy. Although class background positively predicted social capital and social capital negatively predicted a haphazard strategy, social capital did not mediate the negative relationship between class background and a haphazard strategy. Finally, although working-class individuals use a more haphazard strategy on average, exploratory analyses show that those with high psychological capital start with a more haphazard strategy but progress to a low haphazard strategy within two months - on par with upper-class individuals. Conversely, working-class individuals with low psychological capital maintained a more haphazard approach over time. Our findings add new insights into how individuals can conduct a more effective job search and why class inequality remains so durable.
Share the Gain but Shun the Pain: Workplace Inequality in Pay Growth
Jie He, Lei Li & Tao Shu
Federal Reserve Working Paper, November 2020
Using granular, individual-level compensation data, we study the within-firm difference in pay growth between executives and non-executive employees (i.e., “pay growth gap”). Our results reveal an asymmetric relation between a firm’s pay growth gap and the “skill” (idiosyncratic) component of its stock returns, suggesting that executives, relative to employees, are rewarded by high pay growth when firms perform well but not penalized as much by pay cuts when firms perform poorly. This asymmetric relation becomes more pronounced when firms have weaker corporate governance. Our evidence suggests that managerial rent extraction is an important driver of the within-firm pay growth inequality.
Are They All Like Bill, Mark, and Steve? The Education Premium for Entrepreneurs
Claudio Michelacci & Fabiano Schivardi
Labour Economics, forthcoming
We calculate the average yearly income obtained by entrepreneurs during their venture using the Survey of Consumer Finances since the late 1980s. We find that the premium for postgraduate education has increased substantially more for entrepreneurs than for employees. Today an entrepreneur with a postgraduate degree earns on average $100,000 a year more than one with a college degree. The difference more than doubles at the higher quantiles of the income distribution. In the late 1980s, differences were close to zero. The rise in the postgraduate premium is mainly due to increased complementarity between higher education and past labor market experience.
Corporate Taxation and the Distribution of Income
NBER Working Paper, October 2020
Higher corporate taxes reduce corporate business operations, replacing them with operations by noncorporate businesses that are risky and have undiversified ownership. This shift contributes to income dispersion, with effects so large that higher corporate taxes can increase income inequality even when the corporate tax burden falls entirely on capital owned disproportionately by the rich. Estimates suggest that the riskiness of U.S. noncorporate business increases by 12.3% the aggregate income of the top one percent, and that income dispersion created by a higher U.S. corporate tax rate offsets more than half of the distributional effects of reducing average returns to capital.
Trends in US Income and Wealth Inequality: Revising After the Revisionists
Emmanuel Saez & Gabriel Zucman
NBER Working Paper, October 2020
Recent studies argue that US inequality has increased less than previously thought, in particular due to a more modest rise of wealth and capital income at the top (Smith et al., 2019; Smith, Zidar and Zwick, 2020; Auten and Splinter, 2019). We examine the claims made in these papers point by point, separating genuine improvements from arguments that do not appear to us well grounded empirically or conceptually. Taking stock of this body of work, and factoring in other improvements, we provide a comprehensive update of our estimates of US income and wealth inequality. Although some of the points raised by the revisionists are valuable, the core quantitative findings of this literature do not appear to be supported by the data. The low capital share of private business income estimated in Smith et al. (2019) is not consistent with the large capital stock of these businesses. In Smith, Zidar and Zwick (2020), the interest rate assigned to the wealthy is higher than in the datasets where both income and wealth can be observed, leading to downward biased top wealth shares; capitalizing equities using almost only dividends dramatically underestimates the wealth of billionaires relative to the Forbes 400. In Auten and Splinter (2019), business profits earned by the top 1% but not taxable (due in particular to generous depreciation rules) are classified as tax evasion; tax evasion is then allocated to the bottom 99% based on an erroneous reading of random audit data. Our revised series show a rise of inequality similar to Saez and Zucman (2016) and Piketty, Saez, and Zucman (2018) while allowing for a more granular depiction of the composition of wealth and income at the top.
The changing geography of social mobility in the United States
Dylan Shane Connor & Michael Storper
Proceedings of the National Academy of Sciences, forthcoming
New evidence shows that intergenerational social mobility - the rate at which children born into poverty climb the income ladder - varies considerably across the United States. Is this current geography of opportunity something new or does it reflect a continuation of long-term trends? We answer this question by constructing data on the levels and determinants of social mobility across American regions over the 20th century. We find that the changing geography of opportunity-generating economic activity restructures the landscape of intergenerational mobility, but factors associated with specific regional structures of interpersonal and racial inequality that have “deep roots” generate persistence. This is evident in the sharp decline in social mobility in the Midwest as economic activity has shifted away from it and the consistently low levels of opportunity in the South even as economic activity has shifted toward it. We conclude that the long-term geography of social mobility can be understood through the deep roots and changing economic fortunes of places.
The Direct Effect of Taxes and Transfers on Changes in the U.S. Income Distribution, 1967-2015
Christopher Wimer et al.
Demography, October 2020, Pages 1833-1851
Scholars have increasingly drawn attention to rising levels of income inequality in the United States. However, prior studies have provided an incomplete account of how changes to specific transfer programs have contributed to changes in income growth across the distribution. Our study decomposes the direct effects of tax and transfer programs on changes in the household income distribution from 1967 to 2015. We show that despite a rising Gini coefficient, lower-tail inequality (the ratio of the 50th to 10th percentile) declined in the United States during this period due to the rise of in-kind and tax-based transfers. Food assistance and refundable tax credits account for nearly all the income growth between 1967 and 2015 at the 5th percentile and roughly one-half the growth at the 10th percentile. Moreover, income gains near the bottom of the distribution are concentrated among households with children. Changes in the income distribution were far less progressive among households without children.
Social Security and the increasing longevity gap
Eytan Sheshinski & Frank Caliendo
Journal of Public Economic Theory, forthcoming
Growth in overall life expectancy is straining the Social Security budget, and the gap in life expectancy between the rich and poor is widening. Motivated by these facts, this paper does four things. First, we develop a simple way to summarize the degree of progressivity in a Social Security system. Second, we show that growth in the life expectancy gap over the last few decades unwinds three‐quarters of the progressivity of the Social Security system. Third, we develop simple reforms to Social Security that maintain the progressivity of the system and restore fiscal solvency. Fourth, we estimate the welfare effects of these potential reforms.
The Association of Perceived Neighborhood Safety and Inequality with Personality
Curtis Dunkel et al.
Evolutionary Psychological Science, December 2020, Pages 354-366
The relationship between neighborhood quality and personality was explored using a large nationally representative sample of midlife adults, namely, the data from the Midlife in the United States Longitudinal Study of Health and Well-Being. A multilevel approach was used to track correlations between fluctuations in perceived neighborhood safety and inequality and personality across three points in time. As predicted from life history theory, personality fluctuated along with perceived neighborhood safety and inequality such that the general factor of personality decreased as neighborhood safety decreased and neighborhood inequality increased. In a second set of analyses, monozygotic twin difference scores were used to control for possible genetic confounds. It was found that the twin who reported the greatest neighborhood safety and least neighborhood inequality also had the highest general factor of personality. Future research could be directed at identifying and remediating the specific aspects of the neighborhood that may increase the risk of negative changes in functioning.
Internal Migration, Education, and Intergenerational Mobility: Evidence from American History
Journal of Human Resources, forthcoming
To what extent does internal migration lead to upward mobility? Using within-brother variation and a new linked dataset from the early 20th century, I show that internal migration led to significant gains in economic status. On average, the effect of migration was three-to-four times the effect of one year of education; for those raised in poorer households, the effect was up to ten times that of education. The evidence suggests that internal migration was a key strategy for intergenerational progress in a context of rapid industrialization, large rural-to-urban flows and wide interregional income gaps.
Conflict, what conflict?: Evidence that playing down ‘conflict’ can be a weapon of choice for high‐status groups
Andrew Livingstone, Joseph Sweetman & Alexander Haslam
European Journal of Social Psychology, forthcoming
Three studies using pre‐existing (Studies 1 and 3) and minimal (Study 2) groups tested the hypothesis that ingroup status shapes whether ‘conflict’ with an outgroup is strategically acknowledged or downplayed. As predicted, high (vs. low) ingroup status led group members to downplay conflict, but only to an outgroup rather than ingroup audience (Studies 1 & 2; Ns = 127 & 292), and only when the status difference was unstable (vs. stable) and the outgroup’s action was perceived as illegitimate (Study 2). High‐status group members also collectively communicated with the outgroup in a manner designed to defuse conflict (Study 2). Survey data of industrial (manager‐worker) relations further indicated that company managers (high‐status) characterized manager-worker relations as less conflictual than did workers (low‐status) in the same companies (Study 3; N = 24,661). Findings imply that high‐status groups play down conflict as a ‘benevolent’ (but unacknowledged) means of maintaining intergroup status hierarchies.
Neurobiological origins of individual differences in mathematical ability
Michael Skeide et al.
PLoS ONE, October 2020
Mathematical ability is heritable and related to several genes expressing proteins in the brain. It is unknown, however, which intermediate neural phenotypes could explain how these genes relate to mathematical ability. Here, we examined genetic effects on cerebral cortical volume of 3-6-year-old children without mathematical training to predict mathematical ability in school at 7-9 years of age. To this end, we followed an exploration sample (n = 101) and an independent replication sample (n = 77). We found that ROBO1, a gene known to regulate prenatal growth of cerebral cortical layers, is associated with the volume of the right parietal cortex, a key region for quantity representation. Individual volume differences in this region predicted up to a fifth of the behavioral variance in mathematical ability. Our findings indicate that a fundamental genetic component of the quantity processing system is rooted in the early development of the parietal cortex.
Economic Threat Heightens Conflict Detection: sLORETA evidence
Kyle Nash et al.
Social Cognitive and Affective Neuroscience, September 2020, Pages 981-990
Economic threat has far-reaching emotional and social consequences, yet the impact of economic threat on neurocognitive processes has received little empirical scrutiny. Here, we examined the causal relationship between economic threat and conflict detection, a critical process in cognitive control associated with the anterior cingulate cortex (ACC). Participants (N = 103) were first randomly assigned to read about a gloomy economic forecast (Economic Threat condition) or a stable economic forecast (No-Threat Control condition). Notably, these forecasts were based on real, publicly available economic predictions. Participants then completed a passive auditory oddball task comprised of frequent standard tones and infrequent, aversive white-noise bursts, a task that elicits the N2, an event-related potential (ERP) component linked to conflict detection. Results revealed that participants in the Economic Threat condition evidenced increased activation source localized to the ACC during the N2 to white-noise stimuli. Further, ACC activation to conflict mediated an effect of Economic Threat on increased justification for personal wealth. Economic threat thus has implications for basic neurocognitive function. Discussion centers on how effects on conflict detection could shed light on the broader emotional and social consequences of economic threat.