Changes in workers' pay relative to others in their occupation contribute heavily to widening wage gaps over careers, research published in October by the National Bureau of Economic Research found.
Movement into better-paying occupations contributes modestly to average wage growth, with its greatest effect early in careers, the authors found. Henry E. Siu, Kelly Foley and Matias Cortes wrote “The Occupational Ladder: Implications for Life-Cycle Wage Dynamics,” issued and revised in October 2026.
The authors distinguished between two ways workers rank in the wage distribution: the pay associated with their occupation and their own earnings relative to others doing that work. Their findings link widening wage gaps to changes in the relationship between those rankings.
Some occupations pay more than others even after accounting for worker characteristics. The authors used those differences to rank occupations and separate their contribution to average wage growth from their contribution to widening differences in workers' earnings.
As workers gain experience, employment shifts towards occupations that pay more, the authors found. That shift raises average wages over a career, although the authors described its contribution as modest and strongest during the early years of work.
The shift does not, however, come with a wider spread of employment across the occupational pay rankings. The authors therefore found that movement along those rankings does not directly explain why wages become more unequal over workers' careers.
Instead, the authors identified a change in how occupational standing relates to a worker's pay within an occupation. Early in their careers, workers in higher-paying occupations tend to earn far less than the average for their occupation, they found.
By mid-career, that relationship disappears. Workers' pay relative to others in the same occupation no longer depends on where their occupation ranks, removing the earlier connection between a higher-paying occupation and lower relative earnings within it.
The authors identified that changing relationship as a major contributor to widening wage differences over a career. Their distinction gives occupational moves a modest role in average wage growth while assigning a larger role in widening gaps to the interaction between the two rankings.
The supplied abstract gives no numerical estimates, sample description or period covered by the underlying data. The findings are the authors' views and do not necessarily reflect those of the National Bureau of Economic Research.
