\begin{Schunk}
\begin{Sinput}
 occlev <- levels(dat$occupationf)
 dat$occupationf2 <- dat$occupationf
 dat$occupationf2[dat$occupationf2 %in% occlev[2:4]] <- occlev[2]
 levels(dat$occupationf2)[2] <- "sales/clerk/serv"
 with(dat, table(occupationf2, occupationf))
\end{Sinput}
\begin{Soutput}
                  occupationf
occupationf2       Management Sales Clerical Service Professional Other
  Management               55     0        0       0            0     0
  sales/clerk/serv          0    38       97      83            0     0
  Clerical                  0     0        0       0            0     0
  Service                   0     0        0       0            0     0
  Professional              0     0        0       0          105     0
  Other                     0     0        0       0            0   156
\end{Soutput}
\begin{Sinput}
 mod3 <- lm(wage ~ occupationf2, data=dat)
\end{Sinput}
\end{Schunk}
