Question
8. (4 points) The figure below shows trend in median earnings among prime-age men. Between the...
8. (4 points) The figure below shows trend in median earnings among prime-age men. Between the bottom of the early 1980s recession in 1982 up to 2013, inflation-adjusted median earnings of men aged 25 through 44 fell by about $1,000, from $34,000 to $33,000. However, the samc carnings mcasure rose by more than $3,000 for white men, increascd just under S1,000 for black men, staycd flat for Hispanic men, and shot up by $10,000 for othcr men (mostly Asians). What is the reason for the discrepancy? Simpson's paradox and median earnings What is the reason for the discrepancy? Real median earnings of 25-44 year-old men by race $45,000 $40,000 $35,000 $30,000 S $25,000 $20,000 $15,000 $10,000 $5,000 So 1982 2013 All White Black Hispanic Other Source: Author's calculations from the March Curent Population Survey amingadeflated usingthe PCE dellator from the Bureau of Economic AnalysisBROOKINGS
Answers
In this particular case, the explanation lies in the changing work profile of the groups (races) over the period of 1982 to 2013: there are now many more employed people working on technologies/areas who get higher-paying jobs than there were in 1982, and hence the median earnings of each race is almost increased. But overall median earnings depends on proportion of different races in the population. With high proportion of whites, black and hispanic compared with Other (Asian) may nullify effect of the high increase in earnings of Asians in overall median earnings. Also, in the white race (highest proportion in US population), the number of people with high paying jobs are less compared with number of high paying jobs in other race groups. This would led to decrease in overall median earnings.
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