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Computers and the Wage Structure

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  • Michael J. Handel

    (The Jerome Levy Economics Institute)

Abstract

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.

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  • Michael J. Handel, 2000. "Computers and the Wage Structure," Macroeconomics 0004034, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpma:0004034
    Note: Type of Document - Adobe Acrobat PDF; prepared on IBM PC; to print on PostScript; pages: 37; figures: included
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    Cited by:

    1. Michael J. Handel, 2016. "What do people do at work? [Was machen Menschen bei der Arbeit?]," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 49(2), pages 177-197, October.
    2. Fredrik Andersson & Clair Brown & Benjamin Campbell & Hyowook Chiang & Yooki Park, 2008. "The Effect of HRM Practices and R&D Investment on Worker Productivity," NBER Chapters, in: The Analysis of Firms and Employees: Quantitative and Qualitative Approaches, pages 19-43, National Bureau of Economic Research, Inc.
    3. Chris N. Sakellariou & Harry A. Patrinos, 2004. "Technology, computers and wages: evidence from a developing economy," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 47(3-4), pages 543-543.
    4. Chris Sakellariou, 2009. "Endogeneity, computers, language skills and wages among university graduates in Vietnam," Applied Economics, Taylor & Francis Journals, vol. 41(5), pages 653-663.
    5. Michael J. Handel, "undated". "Is There a Skills Crisis? Trends in Job Skill Requirements, Technology, and Wage Inequality in the United States," Economics Public Policy Brief Archive ppb_62, Levy Economics Institute.
    6. Borghans, L. & ter Weel, B.J., 2000. "How Computerization changes the UK Labour Market: The Facts viewed from a new perspective," ROA Working Paper 7E, Maastricht University, Research Centre for Education and the Labour Market (ROA).
    7. David R. Howell & Margaret Duncan & Bennett Harrison, 1998. "Low Wages in the US and High Unemployment in Europe: A Critical Assessment of the Conventional Wisdom," SCEPA working paper series. 1998-01, Schwartz Center for Economic Policy Analysis (SCEPA), The New School, revised Aug 1998.
    8. Borghans L. & Weel B. ter, 2000. "How computerizaton changes the UK Labour Market: The Facts viewed from a new Perspective," ROA Working Paper 010, Maastricht University, Research Centre for Education and the Labour Market (ROA).
    9. Clara Viñas-Bardolet & Joan Torrent-Sellens & Mònica Guillen-Royo, 2020. "Knowledge Workers and Job Satisfaction: Evidence from Europe," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 11(1), pages 256-280, March.

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