| Sumario: | Increased earnings inequality has been the focus of considerable attention from economists. There is general agreement that the primary reason earnings inequality has increased in the U.S. over the past two decades is technical change, leading to increased relative demand for skilled workers. However, it is proposed that increased earnings inequality in the U.S. has been caused by a different kind of technological change, the move from mass to flexible production. Flexible production raises the relative demand for skilled, highly paid workers, resulting in greater earnings inequality. The timing of the changes and the experiences of other countries are offered as evidence for this theory. In addition, earnings inequality has grown the most in the U.S. and the U.K., the two countries where the global move to flexible production has been most obvious.
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