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Two-tier wage scales, with new workers getting lower pay than older ones for the same kind of work, appeared for a while at some airlines and other companies. Increasingly, salaries were no longer set to reward employees equally but rather to attract and retain types of workers who were in short supply, such as computer software experts. This helped contribute even more to the widening gap in pay between highly skilled and unskilled workers. No direct measurement of this gap exists, but U.S. Labor Department statistics offer a good indirect gauge. In 1979, median weekly earnings ranged from $215 for workers with less than a secondary school education to $348 for college graduates. In 1998, that range was $337 to $821. Even as this gap widened, many employers fought increases in the federally imposed minimum wage. They contended that the wage floor actually hurt workers by increasing labor costs and thereby making it harder for small businesses to hire new people. While the minimum wage had increased almost annually in the 1970s, there were few increases during the 1980s and 1990s. As a result, the minimum wage did not keep pace with the cost of living; from 1970 to late 1999, the minimum wage rose 255 percent (from $1.45 per hour to $5.15 per hour), while consumer prices rose 334 percent. Employers also turned increasingly to "pay-for-performance" compensation, basing workers' pay 103

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Friedrich August von Hayek, 1974 Nobel Prize Winner

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