Human Capital, Technology, and the Wage Structure: What Do Time Series Show?

Abstract

The major purpose of this study was to detect effects of technologically based changes in demand for human capital on the educational and experience wage structure in annual CPS data, 1963 to 1987. Major findings are: 1. Year-to-year educational wage differentials are quite closely tracked by relative supplies of young graduates, and by indexes of relative demand, such as research and development (R & D) expenditures per worker, and ratios of service to goods employment. Of these, R and D indexes account for most of the explanatory power. Indexes of (Jorgenson type) productivity growth and of international competition are significant as alternatives, but show weaker explanatory power. 2. The observed steepening of experience profiles of wages is explained, in part, by changes in relative demographic supplies (cohort effects), and in part by the growing profitability of human capital which extends to that acquired on the job. Evidence appears in the significance of profitability variables or in demand factors underlying them, given the relative demographic supplies in the wage profile equations.