The results from the formal decomposition of total variance into between- and within-plant components based upon equations (1) and (2) are reported in Table 1 and Figure 1. Table 1 includes just selected years while Figure 1 depicts the patterns of the components for all years from 1975-92. While the formal decomposition is in terms of levels of hourly wages we are concerned about the possible effects of changes in scale. Therefore, the components in Figure 1 are depicted in terms of coefficients of variation.
There are several striking patterns in Table 1 and Figure 1. Focusing first on Figure 1 we see that the increased dispersion in overall hourly wages across workers in manufacturing over the 1975-92 period (measured by the coefficient of variation) is associated primarily with an increase in the dispersion of hourly wages between plants. Between-plant dispersion for both production and nonproduction workers increases over this time period (the dotted line). In contrast, the within-plant components do not exhibit a positive trend over this period (the dashed line). Within-plant dispersion for production workers exhibits no trend while within-plant dispersion for nonproduction workers exhibits a negative trend. In Table 1 we see that for total workers the story is still one of dominant and rising between-plant wage dispersion. However, the within-plant wage dispersion across all workers is also rising which differs from the patterns of within-plant dispersion of the two worker types. This divergence in the within-plant patterns is possible because total worker within-plant wage dispersion consists of an additional component, the within-plant wage gap between worker types. This within-plant wage gap can be thought of as the within-plant component of the cross-wage term (Wp – W”) shown in equation (1). Over the period of analysis, the within-plant wage gap has been rising. Moreover, the within-plant wage gap’s share of total within-plant variance has grown from 25% in 1977 to 49% in 1992. Thus, interestingly, within-plant dispersion by worker type has been steady or even declining but there has been some offsetting increase in the gap between production and nonproduction wages within plants.
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The bulk of overall wage dispersion is accounted for by between-plant dispersion and the contribution of this has been growing over time. Combining the contribution of between-plant wage dispersion for production and nonproduction workers in the lower panel of Table 1 shows that 53% of the overall variance in 1977 is directly accounted for by between-plant differences in wages. In 1992, the contribution of between-plant differences to overall dispersion is 64%.
Table 1: Between-Plant and Within-Plant Components of Hourly Wage Variance.
|A. Measures of Dispersion|
|Total Wage Variance||43.18||42.83||58.01||61.13|
|Coefficient of Variation:|
|Within plant, PW||.22||.19||.25||.21|
|Within plant, NPW||.47||.32||.42||.38|
|Between plant, PW||.41||.44||.45||.47|
|Between plant, NPW||.44||.48||.49||.56|
|B. Shares of Dispersion|
|(1- «) Vbpin||.25||.37||.32||.42|
|(1- a) Vbin||.03||.03||.04||.05|
Figure 1: Coefficient of Variation Within-Plant, Between-Plant