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Lower-income earners’ wages have grown faster than others

A tight labor market has helped low-income workers raise their wages, according to a new working paper.

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Many young people without degrees have left jobs in restaurants and hospitality to move to higher paying fields.
Many young people without degrees have left jobs in restaurants and hospitality to move to higher paying fields.
Joseph Eid/AFP via Getty Images

Workers in the lowest-paid jobs have gotten the biggest wage increases during the pandemic — much bigger than those in higher-paying jobs, according to a new working paper from the National Bureau of Economic Research.

Because of that, the “college wage premium” has narrowed for the first time in decades. So has income inequality — wage inequality has fallen substantially in the last three years.

“This is surprising because we actually saw jobs at the bottom fall the most at the onset of the pandemic,” said Arindrajit Dube, an economics professor at the University of Massachusetts, Amherst, who co-authored the paper.

Young people with no college degree who were working in those jobs in restaurants and hospitality have gotten the biggest pay increases in the last three years, he said.

“This is driven largely by people leaving really bad jobs” for better ones in different industries, Dube added.

Many of those who have stayed or gone into low-paying jobs in the service sector are also making more because it’s difficult to find people now.

“Unfortunately, it’s really not across the board,” said Molly Kinder at the Brookings Institution. “You’re really seeing the biggest gains in the sectors that shut down during the early days of the pandemic.”

“Low-wage essential workers who kept going to work, whether at a grocery store or retail or at a nursing home” haven’t gotten real, significant wage increases in quite the same way, she added.

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