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Technology and the Wage Structure: Has Technology's Impact Accelerated Since the 1970s?
Abstract
This paper assesses the role of technology in generating the growth of wage inequality in the 1980s and 1990s. Much of the existing literature fails to adequately address this issue for two reasons. First, most of the literature fails to examine whether technology's impact on skill demands was greater in the 1980s and 1990s than in the 1970s, which we refer to as the question of acceleration. Since technology is complementary with skill in any given time period, the question which must be answered is whether technology's impact on wage inequality was greater in the 1980s or 1990s relative to earlier periods, i.e., is there evidence of acceleration? Second, the literature fails to adequately address the trends in within-group wage inequality or overall wage inequality; rather, the focus is on the narrower question of skill and education differentials. Also, there has been little examination of employment and wage trends in the 1990s, an important omission since these trends tend not to be consistent with a technology story. We present estimates of technology's impact which incorporate changes in skill-technology complementarities as well as the pace of technological change. Our results show no acceleration of demand for education relative to the 1970s, casting doubt on the technology explanation of growing education differentials and wage inequality. Using an even broader measure of skill (employment by wage levels) we find technology's impact more, not less, favorable on low- and middle-wage men in the post-1979 period. Technology's impact on women workers also does not fit the conventional technology story. Last, there is evidence that technology's skill bias may be neutral in the 1990s.
... Wflat is curious about the rising demand for college-educated workers is that it occurred despite an increase in the cost of employing these workers. 1994;Mishel and Bernstein 1996;Katz and Murphy 1992;Levy and Murnane 1992). ...
... Finally, some have argued that the collapse of wages in the low-skill labor market may be due to institutional factors that go beyond supply and demand, that is, to a change in employer bargaining power and in social norms regarding low-wage employment (Howell 1997;Mishel and Bernstein 1996). ...
... 3. There is another way of seeing this: Using as a cutoff the real wage level that defined the bottom two deciles of the wage structure in 1979, Mishel and Bernstein (1996) find that 33.6 percent of the workforce was earning less than that amount in 1993. ...
... Building on the previous studies are Autor, Katz and Krueger (1998), who represent the latest thinking in the mainstream, and Mishel and Bernstein (1998), who represent the dissenting view (see Ttable 4). In light of DiNardo and Pischke's study, Autor, Katz, and Krueger re-examine the impact of computers on both supply and demand in the labor market and provide an analysis of relative demand shifts. ...
... While the majority of the literature examining the impact of technological change on wage structures has found that technology has indeed had a major impact on labor market outcomes, there is a growing voice that contends otherwise. DiNardo and Pischke (1997), Handel (1998), and Mishel and Bernstein (1998) A key problem in this literature is the technology measurement issue. How to define and measure technology is a complex issue that largely determines the limitations as well as results of a study. ...
... The two most common proxies for technological change are quantity of computer stock and R&D intensity. Mishel and Bernstein (1998) use measures of capital, including "office, computing, and accounting equipment" per full-time equivalent worker. This measure may be a good proxy for technology in a service industry like banking where automation has occurred in computing activities and business services. ...
This review begins with a discussion of how technology affects wage structures. The literature reviewed is divided into two segments - studies of the impact of technological change on wages (and growing inequality), productivity, and employment and studies of the interrelationship of technology, human resource systems, and labor productivity. We conclude with suggestions for future research topics. Overall, we find that technological change accounts for only part of the changing wage structure in the United States, whereas changes in institutional forces that affect the creation of industry rents and the distribution of rents are also an important factor.
... First, some economists argue that this hypothesis is incomplete because the data do not reveal a clear acceleration in the pace of sbtc. Because many measures of U.S. inequality did not increase until about 1980 even though sbtc has been occurring for decades, Mishel and Bernstein (1996), Howell (1995), and Wood (1998) argue a 1980s acceleration is necessary to explain rising inequality. Evidence for this acceleration is somewhat mixed, however. ...
... Similarly, Autor, Katz, and Krueger (1997) report evidence of acceleration for the 1970s and 1980s relative to the 1960s. In contrast, Mishel and Bernstein (1996) fail to find greater acceleration in the 1980s and 1990s relative to 1973-1979. ...
... For the United States we use the National Bureau of Economic Research's Productivity Data Base, an industry-year panel of 450 four-digit U.S. SIC sectors. We also use sector data (both manufacturing and services) from Autor, et al (1997), Berman, et al (1994, and Mishel and Bernstein (1996) for measures of computerization that are regarded as plausible correlates of sbtc. For the United Kingdom we use a sector-year panel of 125 three-digit sectors based on the U.K. Census of Production compiled by Oulton and O'Mahoney (1996). ...
This paper examines whether the sector bias of skill-biased technical change (SBTC) explains changing skill premia within countries in recent decades. First, using a two-factor, two-sector, two-country model we demonstrate that in many cases it is the sector bias of SBTC that determines SBTC’s effect on relative factor prices, not its factor bias. Thus, rising (falling) skill premia are caused by more extensive SBTC in skill-intensive (unskill-intensive) sectors. Second, we test the sector-bias hypothesis using industry data for many countries in recent decades. An initial consistency check strongly supports the hypothesis. Among ten countries we find a strong correlation between changes in skill premia and the sector bias of SBTC during the 1970s and 1980s. The hypothesis is also strongly supported by more structural estimation on UK and US data of the economy-wide wage changes ‘mandated’ to maintain zero profits in all sectors in response to the sector bias of SBTC. The suggestive mandated-wage estimates match the direction of actual wage changes in both countries during both the 1970s and the 1980s. Thus, the empirical evidence strongly suggests that the sector bias of SBTC can help explain changing skill premia.
... importantes cambios en el mercado de trabajo ( Mishel et al., 1996;Howell, 1997;Mishel y Bernstein, 1998). Al contrario, debemos buscar al "culpable" en los cambios institucionales (por ejemplo, los procesos de negociación colectiva), los cambios en las regulaciones (por ejemplo, el salario mínimo o las formas de contratación) y lo que se suele llamar normas (las priorizaciones o creencias que están en la base de los procesos de definición de estrategias y políticas de los agentes que intervienen en el mercado de trabajo). ...
... The role of skill-biased technical change continues to be a theme of research on contemporary wage inequality. For representative recent empirical work, see: Mishel and Bernstein (1998), Acemoglu (1999); and the papers in the symposium in the Quarterly Journal of Economics (1998, V.113-#4). Similar results with respect to the price relationship in the case of Europe can be found in Neven and change (or if the country becomes specialised). ...
... (2) above. However, Mishel, and Bernstein (1998) have hypothesised that a knowledge based economic revolution would see an accelerated demand for graduates which is above the trend rate growth in the demand for graduates, taking into account graduate supply. One way of measuring whether the acceleration exists is to see if, since the inception of the knowledge based economic revolution, there has been a spike in graduate incomes. ...
... There is a large research literature on skill-biased technological change (for reviews see Handel 2003asee Handel , 2004. One notable criticism is that even though skill upgrading may be the historical trend, in order for computers to explain rising inequality the rate of skill upgrading must have accelerated since the 1970s in computer-intensive sectors, which points to the need for time series data (Mishel and Bernstein 1998). ...
of Massachusetts—Boston for their work in planning and fielding the survey of Skills, Technology, and Management Practices (STAMP). The conceptualization and measurement of key job characteristics has not changed greatly for most social scientists since the Dictionary of Occupational Titles and Quality of Employment surveys were created, despite their recognized limitations. However, debates over the roles of job skill requirements, technology, and new management practices in the growth of inequality have led to renewed interest in better data that directly addresses current research questions. This paper reviews the paradigms that frame current debates, introduces new measures of job content designed specifically to address the issues they raise from the survey of Skills, Technology, and Management Practices (STAMP), and presents evidence on validity and reliability of the new measures.
... Howell and Weiler (1998) and Mishel and Bernstein (1996) favor an institutional change explanation for rising US inequality on the grounds that the increase in measured returns to education, and in particular falling real wages in the lower tail of the earnings distribution, began in the late 1970s. This was before the microprocessor had had much of an impact, before either in-house network computing or the internet, and before the ongoing wave of corporate reengineering began in the 1980s. ...
Information technology changes the structure of organizations in ways which reduce the bargaining power of lower ranking employees, and increase that of managers. This increases inequality directly, and by undermining trade unions contributes to institutional changes which further aggravate inequality. For these reasons, technological change can increase inequality via organizational change, even without skill bias or globalization.
... Using data from the Annual Survey of Manufacturers (ASM) and the Census of Manufacturers, they attribute more than two-thirds of this shift in employment to within-industry shifts, and conclude this as an evidence of a production labor saving technological change. Mishel & Bernstein (1998) use quintile regression technique to examine the hypothesis of skill biased technology change in the US economy. They consider more disaggregated reference groups, rather than the dichotomous groups of college/noncollege. ...
In many recent studies, modern computer-oriented technological progress has been cited as one of the main reasons behind the diverging wage differential between workers with and without a college degree. This paper explores the relationship between change in wage differential and technological growth from a developing country's perspective. An individual-level dataset collected and published by the National Sample Survey Organisation (NSSO), Government of India, has been used for the study. Variables indicating Industry-specific technology change (from the Annual Survey of Industries data) are added to this primary dataset. Limitation of data does not allow us to look beyond salaried workers employed in the manufacturing industries. A three-stage sequential selection-correction mechanism, a-la Heckman, is used to take care of this sample selection problem. Moreover, this dataset is plagued with missing information on the earnings variable. A multiple imputation technique is employed to alleviate this problem. In the manufacturing sector, a converging wage differential is observed during the period 1983-1994. My main finding is that the technological change helped to raise the wages of workers at the lowest quartile of the wage distribution, whereas the effect of technological change is insignificant for workers at the topmost quartile of the wage distribution. Moreover I do not find any significant evidence of shift in labor demand towards workers employed in non-production jobs (traditionally, white-collar jobs), caused by technological change.
... The microelectronics revolution of the 1980s has caused a considerable increase in demand for skilled labour as a proportion of total demand among the industrialized countries over time (Wood, 1995;Mishel and Bernstein, 1998;Berman, Bound and Girliches, 1994;Machin and Van Reenen, 1998;Aghion and Howitt, 2002;Piva, Santarelli and Vivarelli, 2005). As a result, technological change appears to have assumed a skill-complementary character (Redding, 1996;Acemoglu, 1998;Piva, Santarelli and Vivarelli, 2005), in contrast with the skillreplacing patterns of innovation which dominated the nineteenth and twentieth centuries. ...
This article provides empirical evidence of the link between technological change and overall income inequality in 14 EU countries. The analysis begins by testing the skill-biased technological change (SBTC) hypothesis in sectors with different levels of technology intensity. After confirming the skill complementarity of technology and the predominantly skill-replacing character of investment, the analysis turns to sectoral changes in skilled-labour demand as a possible determinant of income inequality. It finds a non-linear relationship between SB TC and inequality in five of the eight sectors considered, suggesting an inverted U-shaped pattern that can be explained by stages in labour demand and supply adjustments over time.
... As technologies such as ICT proved successful in raising the marginal productivity of skilled labour relative to unskilled labour, they also made it relatively more economical to employ skilled workers in the place of unskilled ones. Accordingly, Michel and Bernstein (1966) and Wood (1995) argue that the 1980s witnessed an acceleration in SBTC which resulted in rising skill premia 1 in many countries (see also Aghion and Howitt, 2002). However, since the evidence for this acceleration is mixed (see Autor et al., 1998), one might contend that, within a multi-sector framework, it is mostly the sector bias of technological change that is in operation, rather than the factor bias usually mentioned by labour economists. ...
Previous studies have suggested that technological change is the main cause of the recent increase in demand for highly skilled workers in developed countries. However, a more recent strand of literature has also introduced the “Skill Biased Organisational Change” hypothesis, according to which the increasing diffusion of new organisational practices within firms plays a role in the increasing demand for skilled workers. We estimate a SUR model for a sample of 400 Italian manufacturing firms, showing that upskilling is more a function of reorganisational strategy than a consequence of technological change alone. Moreover, some evidence of superadditive effects emerges, which is consistent with the notion that technology and organisation jointly affect the demand for labour.
... that the latter process has largely anticipated the diffusion of ICTs in the 1990s and did not accelerate as a result of it. Moreover, wages are more exposed than skill levels to competition from international trade and to changes in the sectoral composition of the economy (Mishel and Bernstein, 1996; Addison and Teixeira, 2001). The relationship between innovation and wages may run also in the opposite direction. ...
Unemployment, skill polarisation and growing wage inequality are major problems in advanced countries. Technological change - in particular the emergence of Information and Communication Technologies (ICTs) - has often been called into question as a factor in such labour market developments. This article investigates the impact innovation has on jobs, skills and wages, discussing the concepts for analysis, reviewing the evidence of major studies and providing recent empirical evidence for European countries.
... Evidence of polarisation is generally found, although the relationship to technological change is conceptually and statistically less robust, as computers are more likely to be used by more competent workers who already earn higher wages (Chennells and Van Reenen, 1999). On the other hand, the technology-wage polarisation link has been questioned by studies pointing out the lack of an acceleration in these effects in recent years, the importance of sectoral shifts and the effects of growing international trade on wages (Mishel and Bernstein, 1996; Addison and Teixeira, 2001). and 11 per cent as too low. ...
The relationship between innovation and employment is a complex one and has long been a topical issue in economic theory. Moving from the classical question ‘‘does technology create or destroy jobs?’’ recent research has investigated the impact of different types of innovation and the structural and institutional factors affecting the quantity of employment change. Quality aspects have received increasing attention, with questions of ‘‘what type of jobs are created or destroyed by innovation?’’ This line of research has asked, ‘‘how does the composition of skills change’’ and ‘‘how does the wage structure change,’’ leading to a large literature on skill biased technical change and on wage polarization. This chapter examines the enormous body of scholarly research on this topic within the advanced economies. First, the perspectives, scope, and types of innovations are considered, identifying the different employment effects they may have. Second, the effects on the quantity of employment are reviewed at the firm, industry, and macroeconomic level. Third, changes in the quality of employment are examined, considering the effects on skills and wages, and the impact of organizational innovation, again at different levels of analysis. A summary of stylized facts concludes the chapter with a discussion of future research issues.
... As for the debate on skill bias, the idea that technology is a determinant of wage polarisation has been questioned by studies pointing out that the latter process has largely anticipated the diffusion of ICTs in the 1990s and did not accelerate as a result of it. Moreover, wages are more exposed than skill levels to competition from international trade and to changes in the sectoral composition of the economy ( Mishel and Bernstein, 1996;Addison and Teixeira, 2001). The relationship between innovation and wages may run also in the opposite direction. ...
This paper investigates the dynamics of wages and profits and the influence innovation strategies have on them. The relationships between innovation, productivity, and distribution are modeled and estimated by employing panel data techniques. Two European innovation surveys (1994-96 and 1998-2000) are used with data at both the country and industry levels. Innovation is found to have positive effects on income dynamics beyond the role it has on productivity gains; it may weaken the distribution constraint posed by the competition between profits and wages. Profits are driven by both the Schumpeterian effects of new products and the diffusion effects of new technologies and production processes. Wages tend to grow faster in sectors where innovation expenditure is higher, but the factors affecting wages are different for high- and low-innovation sectors, suggesting that two contrasting models of technological and price competitiveness have important distributional implications.
... In fact, DAVID R. HOWELL 227 they find that increased investment in computers contributes to wage equalization in the bottom half of the distribution. 88 The computerization story also is challenged by comparisons of the 1980s with the 1990s. While inequality took off in the 1980s, it seems likely that the increase in the effective use of computers was far greater in the following decade. ...
It is widely accepted that global forces of technology and trade have caused a profound shift in labor demand towards the most highly skilled, generating sharply rising earnings inequality in flexible labor markets (the U.S.) and persistently high unemployment in rigid labor markets (Europe). This paper critically assesses the evidence for this "Unified Theory." It finds little compelling empirical support for either the skill-biased demand shift explanation for high U.S. earnings inequality or the rigid labor markets explanation for high unemployment in Europe. This assessment challenges the policy orthodoxy of the 1990's that developed economies feature a strict inequality-unemployment tradeoff and that policy options are therefore limited to skills enhancement in the U.S. and labor market de-regulation in Europe. It is suggested that the theoretical dominance of the textbook supply/demand model has contributed to the neglect of labor market institutions for U.S. wage outcomes and tight macroeconomic policy for European unemployment.
... 46 Longitudinal data is necessary to separate the relative importance of these two fac- tors. Evidence for the 1980s indicates that increases in the dispersion of permanent earnings and increases in the variability of transitory earnings were roughly 43 Mishel and Bernstein (1996) find no evidence of increased capital-skill complementarity while Claudia Goldin and Lawrence Katz (1996) find higher complementarity and increased skill bias when comparing the 1970s with the 1980s. 44 The basis for this distinction is the canonical error components model. ...
This article reviews the evidence on cross-national comparisons of earnings and income inequality in OECD countries. It begins with a series of stylized facts which are then examined and supported by recent studies in the field. Economic, demographic, institutional and policy-related influences on earnings and income distribution are reviewed. The paper concludes with a call for more work on empirically testable structural models of household income distribution.
The new inequality is often characterized by the increasing wage gap between workers with a college education and those without. Yet, although the gap in hourly wages between college-educated and non-college-educated women is high and rising, the topic has been overshadowed by research on gender inequality and wage inequality among men. Using the 1990 5–percent Public Use Microdata Samples, independent sources of macro data, and controls for individual human capital characteristics, I examine the association between the college/non-college wage gap and key aspects of local economic conditions for women and men. While the college/non-college wage gap among women is comparable in size to the gap among men, significant gender differences emerge in the underlying sources of high wage gaps in over 500 labor markets across the United States. Compared with men, flexible and insecure employment conditions (e.g., joblessness, casualization, and immigration) are more important in fostering high wage gaps among women than are technology, trade, and industrial composition, the prevailing explanations of rising wage inequality over time. Based on these gender differences, I reconsider the debate on labor-market restructuring and inequality and discuss a new analytical focus on differences in within-gender inequality.
Wage gaps between “skilled” and “unskilled” earners in the United States are conventionally attributed to U.S. workers’ “skill deficits,” or lack of skills necessary to deal with technological change, particularly automation. This paper argues instead that skills deficit/automation claims have always been a weak explanation for post-1979 trends. Since the mid-1990s all indications are that there is no basis for considering automation to be a significant factor in wage suppression or the growth of wage inequality. Rather, inequality growth has been an outgrowth of developments in the labor market rather than product markets. The key dynamic undercutting the typical worker’s wage growth has been the strengthening of employers’ power relative to their white-collar and blue-collar workers. The cause has not been monopoly firms exercising their power in product markets by charging higher prices to consumers. Monopolization has indeed contributed to wage suppression, but even this factor has largely run through the labor market, as monopoly firms squeezed supplier chain firms which in turn undercut their own workers’ wages while seeing a profit squeeze as well. The paper concludes that what is needed is a better balancing of power in the labor market rather than a perfecting of competition.
This study examines the relationship between international trade, technology, and exposure to job displacement, using data on displaced workers as well as those at risk of job dislocation, for the two‐year sample periods 1986‐1987 and 1990‐1991. Workers employed in manufacturing industries with elevated import penetration or high shares of R&D personnel appear to have increased rates of job loss. However, the risk of job loss is materially reduced when a relatively high proportion of employees report working with computers. The opposing effects on displacement probabilities of R&D employment intensity and computer‐use carry over to the nonmanufacturing sector.
Yüzyıllar boyunca gelir ve gelir dağılımı sorunu iktisat biliminin en önemli tartışma konularından biri olmuştur. Gelir dağılımındaki adaletsizlik sadece ekonomik değil, sosyal ve politik açıdan da pek çok soruna neden olduğu için çözülmesi gereken öncelikli bir problem haline gelmiştir. Gelirin adaletsiz dağılımı sonucu oluşan sosyo-ekonomik eşitsizliğin azaltılması ve bu yönde önlem alınabilmesi için gelir adaletsizliğine sebep olan faktörlerin ortaya konulması önem arz etmektedir. Bu çalışmada 2005-2015 dönemi BRIC-T ülkelerindeki gelir adaletsizliği panel veri analizi ile incelenmiştir. Bulgulara göre; BRIC-T ülkelerinde enflasyon oranı, kamu gelirleri ve ekonomik küreselleşmenin gelir adaletsizliğini arttırdığı ortaya konulmuş, AR-GE harcamalarının ise gelir adaletsizliğini azalttığı görülmüştür.
Aside from recessions in 1980, 1981–82 and 1991–92, the United States has experienced impressive growth during the 1980s and 1990s. The 1999 Economic Report of the President trumpets almost 18 million new jobs since January 1993, bringing the unemployment rate to 4.3 percent, its lowest rate in three decades (Council of Economic Advisors, 1999). The last few years, from 1996 into 1999, are particularly notable. After two decades of decline, real wages at the bottom rungs of the wage ladder have risen, in part due to the exceptionally low rate of unemployment, a reduced rate of inflation, and a rise in the statutory minimum wage. And they rose more quickly than wages at the top of the distribution, nudging down indicators of wage inequality (Mishel et al., 1999)
The United States and other advanced economies enjoyed a remarkable period of sustained growth and broadly-shared prosperity from the late 1940s to the early 1970s. After a series of crises from the mid-1970s to mid-1980s the character of jobs and the structure of earnings changed markedly but the causes continue to be debated. Most workers' inflation-adjusted wages have stagnated since the early 1980s, employment security has fallen, and inequality has grown. One set of explanations emphasizes structural and institutional forces, such as employment shifts from manufacturing to services, deunionization, import competition, declining value of the minimum wage, macroeconomic shocks, and changing wage norms. Others stress the interplay of the supply of and demand for human capital, citing rising returns to education and skills, which they attribute to the spread of computer technology. The debate has significant implications for understanding the likely course of future labor market trends.
One of the most important economic developments over the past few decades has been the persistent increase in the inequality
of economic outcomes. Though its rise has slowed over the past few years, family income inequality—the gap between the income
of families at the bottom, middle, and top of the income distribution—was much greater in the late 1990s than at any other
time in post-World War II America. Naturally, inquiring minds have turned to economists for an explanation of this expansion
of inequality. Since labor earnings comprise the bulk of most families’ incomes, analysts have examined the causes of rising
wage dispersion to understand what is driving inequality’s inexorable climb since the late 1970s.
By extensively reviewing empirical research findings which have been published from the late 1980s to date or are due to be published shortly, this paper attempts to examine changes in skill demand in OECD countries and the impact of technology development on the changes in skill demand. In contrast with previous studies, which painted a complex and inconsistent picture of the direction of skill changes, most of the more recent studies have consistently presented the upskilling trend in the OECD economy. We can find evidence in support of the argument that the adoption and implementation of new technology raise the skill level required of the workforce as well as evidence that higher workforce skills promote the adoption and successful implementation of new technology. The upskilling effect of technology is likely to be higher for jobs requiring a high level of skill than for those requiring a low level of skill. There appears to be a positive association between information technology and upskilling, whereas this is not necessarily the case with automation technology.
Resumen
Los autores exponen datos empíricos que confirman la relación del cambio tecnológico con la desigualdad general de ingresos reinante en catorce países de la Unión Europea. Primero someten a prueba, en varios sectores con densidades de tecnología diversas, la hipótesis de que los avances tecnológicos están sesgados a favor del trabajo cualificado, y comprueban que elprogreso tecnológico es complementario de la cualificación profesional. Acto seguido analizan laposible influencia de la evolución de la demanda sectorial de recursos humanos cualificados en la desigualdad de ingresos. En cinco de los ocho sectores estudiados aparece una relación no lineal entre el cambio tecnológico sesgado y la disparidad de ingresos que dibuja una curva en forma de «U» invertida. Ello se debe probablemente al desfase que se registra entre una variación de la demanda defuerza de trabajo y el ajuste consecutivo de la oferta.
Résumé
Les auteurs apportent des éléments empiriques montrant le lien entre progrès technique et inégalités de revenu dans quatorze pays d'Europe. Ils testent l'hypothèse du changement technique favorisant les qualifications dans des secteurs ayant différentes densités en technologie et montrent la complémentarité entre progrès technique et qualifications. Ils en viennent ensuite à rechercher si l'évolution de la demande de travail qualifié est un déterminant des inégalités et observent dans cinq secteurs sur huit une relation non linéaire, suivant une courbe en U inversé, pouvant s'expliquer par le comblement dans le temps du décalage entre demande et offre de main‐d'œuvre qualifiée.
This article reports direct evidence on how technological change is related to changes in wage gaps by schooling, experience, and gender. Wage gaps by schooling increased the most in industries with rising R&D intensity and accelerating growth in the capital-labor ratio. Estimates of their relationship to high-tech capital are inconclusive. Contrary to popular notions that technological change harms older workers, wage growth of experienced workers is much greater in R&D-intensive industries than in industries with little R&D activity. The gender gap narrowed more in industries that most intensively used high-tech capital in 1979. Copyright 2001 by University of Chicago Press.
It is widely recognized that inequality of labor market earnings in the United States grew dramatically in recent decades. Over the course of more than three decades, wage growth was weak to nonexistent at the bottom of the distribution, strong at the top of the distribution, and modest at the middle. While real hourly earnings of workers in the bottom 30 percent of the earnings distribution rose by no more than 10 percentage points, earnings of workers at the 90th percentile rose by more than 40 percentage points. What is much less widely known, however, is that this smooth, monotone growth of wage inequality is a feature of a specific time period--and that this time period has passed.
A leading explanation for the rapid growth in U.S. wage inequality in the last twenty years, consistent with both human capital and postindustrial theories, is that advanced technology has increased job skill requirements and reduced the demand for less-skilled workers. Krueger's study (1993) showing a wage premium associated with using computers at work is one of the few that seems to provide direct supportive evidence. In this paper I use previously unexamined data to suggest that measured returns to computer use are upwardly biased. In addition, I find that most of the growth of inequality since 1979 occurred in the early 1980s, which is inconsistent with a primary role for computers. Finally, computer use at work had equalizing impacts on the gender wage gap and elsewhere in the wage distribution, as well as disequalizing impacts on the wage gaps between education groups. When the contribution of computer use to all components of the variance of wages is taken into account, computers seem to have had a net equalizing impact in the period Krueger studied. This casts significant doubt on this technology-based explanation of the growth in wage inequality.
The rapid diffusion of computers has widely changed the consequences of computer use on the labour market. While at the beginning of the eighties k nowledge of computers was an obvious advantage in a career, this same knowledge is now so commonplace that the inability to use these tools is widely seen in many industries as a professional handicap. In relation to such drastic transformations, changes in the North American wage structure during the eighties in favour of the better educated have been interpreted by many analysts as evidence of skill-biased technical change. Evidence outside the US, and in particular in Europe, seems to support the idea that similar transformations affected most other labour markets. In this study, we review the empirical evidence on the relation between computer use and labour market outcomes.
Recent empirical literature has introduced the "kill Biased Organizational Change" hypothesis, according to which organizational change can be considered as one of the main causes of the skill bias (increase in the number of highly skiled workers) exhibited by manufacturing employment in developed countries. In this paper, a specific branch of the Italian capital goods industry is analyzed, that producing specialized industrial machinery; from the estimation of a transcendental logarithmic firm cost function it turns out that skill upgrading is not a consequence of technological change alone, but is also an effect of the overall reorganization of the firm, which in turn may be linked to technological change.
Measured by changes in real wages, earnings inequality and unemployment, the economic position of lower skilled workers has declined sharply over the past two decades across the developed countries of the OECD. In this paper we survey a wide-ranging empirical literature for evidence bearing on the Unified Theory - the popular idea that strong shifts in demand away from low-skilled workers, caused mainly by computerization and related forms of advanced technology, explain both the declining wages of low skilled workers in the "flexible" labor market of the United States and high and rising unemployment in "rigid" European labor markets. On the U.S. side, we find little evidence of large or accelerating skill-biased demand shifts after the early 1980s as measured by standard indices of the skill-intensity of employment. This is significant since most of the impact of computerization on the organization and skill requirements in the workplace has occurred in precisely this later period. There is also little unambiguous evidence of a close link between computerization and relative wage change. Nor do we find that the conventional skill-biased demand-shift story offers a compelling explanation for the rise in unemployment rates experienced by most European countries. Across the OECD, rising low-skilled unemployment does not appear to drive much of the increase in the overall rate; measures of wage rigidity are not closely correlated with unemployment problems; and no clear empirical link has been established between the recent rise in unemployment and the presence of strong wage-setting institutions and social policies. If the empirical basis of the Unified Theory is so shallow, what accounts for the broad consensus in its favor? We speculate that at least part of the answer lies in the natural attraction of a simple story, particularly one that is so consistent with the textbook demand-supply model of the labor market. We conclude with some conjectur
Supply-side factors may contribute to rising wage inequality. First, certain changes in the supply of skills allegedly exacerbate wage inequality. Women's increased labor force participation and increased immigration are the leading candidates; both allegedly reduce the wages of less-skilled men. However, immigration's impact on wage inequality has been minor and the effects of women's participation is inconclusive. Second, in evaluating the likelihood that human capital investment will mitigate future inequality, evidence suggests that rising returns to education have increased the proportion of young people attending college, limiting the growth of inequality among high-wage workers. Copyright 1997 by American Economic Association.
This paper provides a critical review of the impact of technical change on the structure of relative wages and employment, and considers some alternative explanations for the immiseration of low skilled workers. In the absence of any clear and distinguishing policy blueprint, the paper also seeks to clarify the major issues raised by our discussion for employment policy. Copyright Fondazione Giacomo Brodolini and Blackwell Publishers Ltd 2001.
This paper examines whether the late 1990s IT-related growth has led to a corresponding growth in wage inequality. This is of interest because observers, including Alan Greenspan, have suggested that the "new economy" boom caused growing wage inequality and even job insecurity. The late 1990s also provide insights regarding the claim that technological change generated the wage inequalities of the 1980s. We conclude that overall wage inequality, skill differentials, and within-group wage inequality did not grow in the IT-led new economy boom. So, inequality is not the "price" of technology-led growth. There are numerous reasons to be sceptical about a technology explanation of wage inequality. There is no evidence that technology affects the inequality among workers of similar experience and education, a dimension that accounts for 55 percent of the growth of inequality. Nor is there evidence that technology has had a larger impact in the 1990s or 1980s than in earlier periods.
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