Victor R. Fuchs

English

Research Papers in Economics

This PDF is a selection from an out-of-print volume from the National Bureau
of Economic Research
Volume Title: Differentials in Hourly Earnings by Region and City Size,
1959
Volume Author/Editor: Victor R. Fuchs
Volume Publisher: UMI
Volume ISBN: 0-87014-415-4
Volume URL: http://www.nber.org/books/fuch67-1
Publication Date: 1967
Chapter Title: REGIONAL DIFFERENTIALS
Chapter Author: Victor R. Fuchs
Chapter URL: http://www.nber.org/chapters/c1258
Chapter pages in book: (p. 6 - 9)2
REGIONAL DIFFERENTIALS
Table 2 shows the regional differentials in actual hourly earnings in
dollars and in index-number form with the South equal to 100.The
figures contain few surprises. Earnings are significantly lower in the
South than in other regions; earnings in the West are slightly higher
thanin the Northeast or North Central divisions.The difference
between the SoUth and the rest of the country is much greater for non-
whites than for whites; within each color group, the differentials for
males and for females appear to be about the same.
Table 3 shows the extent to which regional earnings differences
can be explained by differences in color, age, sex, and education.
Where the comparison is for a given color-sex group, the effect of
differencesin age and educationis reflectedin the "expected"
earnings. Labor quality, as measured by these variables, appears to
be somewhat lower in the South than in the rest of the country, and
highest in the West. The regional difference is slightly greater for
males than for females.In fact, white females in the South have
slightly higher "expected" earnings than in the Northeast and North
Central.
Table 4 shows that a significant regional wage differential remains
after standardizing for color, age, sex, and education. For all non-
agricultural employed persons, the differential between the South and
the rest of the country is approximately 17 per cent. It is much greater
for nonwhites than for whites and is smallest for white males where
the differential is of the order of 14 per cent.
It is worth noting that the standardization procedure used here is
not the only one available for studying this problem.It would be
equally appropriate to standardize by using the actual earnings rates
for each color, age, sex, and education cell in each region, weighted
by the national distribution of man-hours.'2 When the two standardiza-
tionprocedures yield markedly different results,interpretation is
difficult. Fortunately, in this instance the two standardization pro-
CWcrllcu
I.e., standardized hourly earnings =Regional Differentials 7
cedures give very similar results. For white males the difference in
results is of the order of 1 per cent. For nonwhite females it goes as
high as 2 per cent.
A completely different standardization approach would be to regress
hourly earnings of individuals on a group of independent variables
with demographic characteristics and geographical location repre-
sented by a series of dummy variables. I believe the standardization
procedure followed here is easier to manage and to follow because
the numerous interactions among the various demographic character-
isticsand between the demographic characteristics and the geo-
graphicalvariables would require the use of hundreds of dummy
variables.Moreover, standardization through regression analysis
would require additional calculations in order to obtain geographical
differencesinlaborqualitycomparabletothosemeasured by
"expected" earnings.
TABLE 2
Average Hourly Earnings, Nonagricultural Employed Persons,
by Region, 1959
South
Non- North-
Southeast
North
Central West
. (Dollars perHour)
White males 2.54 2.99 2.97 2.94 3.09
White females 1.56 1.83 1.75 1.97
Nonwhite males 1.40 2.22 2.07 2.25 2.43
Nonwhite females .92 1.50 1.55 1.40 1.56
Total 2.12 2.65 2.62 2.60 2.76
(Index, South100)
White males 100 118 117 116 122
White females 100 117 118 113 126
Nonwhite males 100 159 149 161 174
Nonwhite females 100 163 168 152 170
Total 100 125 124 123 130
Source:U.S. Censuses of Population and Housing:1960, 1/1,000
Sample.
Note: For explanation of measures used inthis and succeeding
tables, see text and Appendix A.8 Differentials in Hourly Earnings by Region and City Size, 1959
This section has shown that oriiy a portion of the gross non-
South/South wage differential is attributable to demographic differ-
ences in the labor force. It is sometimes argued that the remainder is
largely attributable to differences in city size,rather than to a re-
gional differential at given city sizes. The next section deals with
the question of wage differentials associated with city size.
TABLE 3
"Expected" Average Hourly Earnings, by Region, 1959
South
Non- North- North
South east Central West
(Dollars per Hour)
White males 2.82 2.89 2.90 2.85 2.95
White females 1.77 1.76 1.72 1.75 1.85
Nonwhite males 1.74 1.91 1.90 1.88 2.01
Nonwhite females 1.16 1.24 1.19 1.21 1.31
Total 2.38 2.54 2.53 2.52 2.61
(Index, South =100)
White males 100 102 103 101 105
White females •100 99 97 99 105
Nonwhite males 100 110 109 108 116
Nonwhite females 100 107 103 104 113
Total 100 107 106 106 110
Source: See Table 2.
Note: "Expected" hourly earnings are obtained by multiplying the
national average hourly earnings of each color, age, sex, and education
cell by the annual hours worked by members of that cell in the region,
summing across all cells in the region, and dividing by the total man-
hours of the region.Regional Differentials 9
TABLE 4
Ratio of Actual to "Expected" Hourly Earnings,
by Region, 1959
South
Non-
South
North- North
east Central West
(Ratio)
White males .90 1.03 1.02 1.03 1.05
White females ..89 1.04 1.07 1.00 .1.07
Nonwhite males ..80 1.16 1.09 1.20 1.21
Nonwhite females .. .79 1.21. 1.30 1.16 1.19
Total. .89 1.04 1.04 1.03 1.06
(IndexofRatio, South.= 100)
White males 100 114 113 114 117
White females 100 117 120 112 120
Nonwhite males 100 145 136 150 151
Nonwhite females • 100 153 165 147 151
Total 100 117 117 116 119
Source: Tables 2 arid 3.

Differentials in Hourly Earnings by Region and City Size, 1959

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