| Sumario: | The rationale behind the consensus that, during the 1980s, relative demand increased for workers at the high end of the skill distribution and thus caused their relative wages to rise is considered, and the possible factors behind the demand shift are explored. The argument that a shift in the demand for high-skilled labor has played a prominent role in the growth of earnings inequality commences with an observation about the relative supply of high-skilled labor. By any measure, simple or complex, the workforce has become more skilled over the past few decades. A simple measure is that the fraction of the adult population—those over 24—who had completed college grew from 11 percent in 1970 to 16 percent in 1979 to 21 percent in 1989. The increase in the wage premium for skilled labor is typically understood with a conventional supply and demand model as the consequence of a large rightward shift in the demand function. The literature provides two major sets of explanations as to why the relative demand for skilled workers in the U.S. increased so rapidly during the 1980s: the increased openness of the U.S. economy and skill-biased technological change. These explanations are discussed.
|
|---|