WHY IS THIS IMPORTANT?
Wages provide the primary source of income for most people; as a result, wage distribution helps to reveal the distribution of economic opportunity. The ratio of wages for the 90th percentile wage to the 10th percentile wage is important to track because it shows the magnitude of the gap in income inequality between wages for those at the top of the income distribution (earning more than 90 percent of other workers) compared to those at the bottom (earning more than the bottom 10 percent of other workers). If a large percentage of jobs pay wages that are low relative to living costs, families cannot meet their basic needs without working multiple jobs. Without access to sufficient wages, individuals and families may be unable to afford stable, quality housing, or may be forced to move farther away from their jobs in order to find affordable housing. This in turn can increase transportation costs, further reducing the budget available for items such as food or health care and possibly leading to increased stress and poor health outcomes.[i]
[i] K. Murphy, C. Juhun, and B. Pierce, “Wage Inequality and the Rise in Returns to Skill,” Journal of Political Economy 101, no. 3 (1993).