Technology and the Wage Structure: Has Technology's Impact Accelerated Since the 1970s?
Posted: 19 Feb 1999
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.
JEL Classification: J0
Suggested Citation: Suggested Citation