6 The deterioration of real wages was partly compensated for through increases in hours worked, suggesting backward bending labor supply curves at low income levels. This was not enough, however, to prevent an erosion of overall income for the majority of workers; Table 2.

Table 2: Average Hours Worked and Income Received

|_Schooling Level_|Wage Ea|rners|Mo|netary<br>Recipi|Income<br>ents|
|---|---|---|---|---|---|
|Avg.**Hours per Week**|1984 1994|change|1984|1994|change|
|0 - less than primary|44.8 50.7|13.3%|43.0|46.8|8.8%|
|1 - primary complete|45.1 49.0|8.6%|44.7|48.2|7.9%|
|2 - secondary complete|44.4 46.8|5.6%|44.5|46.8|5.2%|
|3 - preparatory complete|38.7 43.7|12.8%|38.9|44.1|13.4%|
|4 - university andabove|41.6 44.7|7.5%|42.2|44.7|5.9%|
|_weighted average_|_44.1 47.8_|_8.5%_|_43.3_|_46.7_|_7.8%_|
|Avg. Annual Income|1984 1994|change|1984|1994|change|
|(in 1994 Pesos)||||||
|0 - less than primary|7,530 7,674|<br>1.9%|_9,514_|8,308|<br>-12.7%|
|1 - primary complete|12,705 11,316|-10.9%|15,888|13,222|-16.8%|
|2 - secondary complete|15,343 14,097|<br>-8.1%|16,995|15,978|<br>-6.0%|
|3- preparatory complete|18,643 25,709|<br>37.9%|19,483|27,898|<br>43.2%|
|4- university and above|33,899 55,428|<br>63.5%|38,741|62,769|<br>62.0%|
|_weighted average_|_13,057 16,65_|_8 27.6%_|_14,26_|_8 16,93_|_1_<br>_18.7%_|

Source: Own calculations based on ENIGH84 and ENIGH94. All figures are weighted averages using expansion factors to achieve representation at the national level.

One explanation for a deteriorating income distribution that is closely connected to the advance in education attainment has been made by Ram (1 990). Education is generally considered to have an equalizing effect on incomes, which would indicate a positive relation between measures of income inequality and of education inequality. However, the dispersion of schooling attainment and the mean level of schooling need not be positively related in a monotonic manner. Upon exploring this relationship by way of a cross-country analysis, Ram finds a curvilinear (Kuznets-type inverted-U) relation between the mean level of schooling and schooling inequality in the labor force.<sup>4</sup> That is, as schooling expands, education inequality first increases, but then starts declining after reaching a peak. That turning point occurs when mean schooling is

> 4The theoretical rationale underlying this fmding is reminiscent of the "Laffer curve" in public finance theory. It stated that tax revenues are 0 when tax rates are 0 and will again become 0 when the tax rate approaches 100% (as that would eliminate all incentive to work.) Since revenues are positive at tax rates between 0% and 100%, the revenue-rate relationship must broadly approximate an inverted-U. In the case of education, the "theory" states that when no one in society is educated, the distribution of education is perfectly equal, as it would be when everyone in society has a Ph.D. (considered for simplicity to be the maximal level of education attainment). In the process of going from a Zeroeducation society to the Land of Ph.D.s, the distribution of education must perforce become more unequal before it ultimately improves again.