Leadership

Real Wage Inequality

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Executive Summary

A large literature has documented a significant increase in the difference between the wage of college graduates and high school graduates over the past 30 years. The author shows that from 1980 to 2000, college graduates have experienced relatively larger increases in cost of living, because they have increasingly concentrated in metropolitan areas that are characterized by a high cost of housing. When the author deflates nominal wages using a location-specific CPI, the author finds that the difference between the wage of college graduates and high school graduates is lower in real terms than in nominal terms and has grown less.

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