The Wage Gap

One of the most striking economic trends in the United States is the ever-widening wage gap between workers at the top end of the pay scale and those at the low end of the pay scale. Highly educated workers have seen their wages rise dramatically, while those with less formal schooling have fallen farther and farther behind.

While some people may not see this trend as a problem, many have expressed concern that rising inequality in income might mean the poor will not be able to maintain even a basic standard of living. Many also argue that rising inequality in the labor market may create perceptions of unfairness which, in turn, could lead to social conflict.

Why is this happening? What can be done?

A new study, Earnings Inequality within the Urban United States: 2000 to 2006, by economist Christopher H. Wheeler presents information that may help answer these questions. Wheeler looked at data for nearly 300 cities, including four metropolitan areas within the Eighth Federal Reserve District—Little Rock, Louisville, Memphis and St. Louis. His findings will be of interest to policymakers and anyone interested in social issues.

To read the study, visit the St. Louis Fed's web site at www.stlouisfed.org/community. Print versions are available free of charge by contacting Cynthia Davis at 314-444-8761 or by sending her an e-mail at communitydevelopment@stls.frb.org.