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The Collapse of Low-Skill Wages

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  • David R. Howell

    (The Jerome Levy Economics Institute)

Abstract

This paper assesses the empirical support for the skill mismatch story, outlines an institutionalist alternative, and contrasts their policy implications. The first part of the paper considers the empirical support for the underlying premise of the skill mismatch explanation for the earnings collapse: Has there, in fact, been a strong shift in demand away from low-skill workers? Does the timing of employment shifts by skill group across industries match trends in computerization? Have there been observable declines in low-wage employment shares and substantial increases in low-skill joblessness, as the neoclassical model would predict if there is skill mismatch? I find that the answer to each of these questions is no and conclude that it is necessary to look beyond supply and demand shifts to explain the wage collapse. The second part of the paper represents a tentative first attempt to do this. And as befits a working paper, the paper concludes with a discussion of the policy implications of the two explanations.

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File URL: http://128.118.178.162/eps/mac/papers/9805/9805027.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Macroeconomics with number 9805027.

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Length: 52 pages
Date of creation: 30 Jun 1998
Date of revision:
Handle: RePEc:wpa:wuwpma:9805027

Note: Type of Document - Acrobat PDF; prepared on IBM PC ; to print on PostScript; pages: 52; figures: included
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Web page: http://128.118.178.162

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References

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  1. David R. Howell & Edward N. Wolff, 1991. "Trends in the growth and distribution of skills in the U.S. workplace, 1960├╗1985," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 44(3), pages 486-502, April.
  2. Dinardo, J. & Fortin, N.M. & Lemieux, T., 1994. "Labor Market Institutions and the Distribution of Wages, 1973-1992: A Semiparametric Approach," Cahiers de recherche 9406, Centre interuniversitaire de recherche en ├ęconomie quantitative, CIREQ.
  3. McKinley L. Blackburn & David E. Bloom & Richard B. Freeman, 1989. "The Declining Economic Position of Less-Skilled American Males," NBER Working Papers 3186, National Bureau of Economic Research, Inc.
  4. Allen, Steven G, 2001. "Technology and the Wage Structure," Journal of Labor Economics, University of Chicago Press, vol. 19(2), pages 440-83, April.
  5. Juhn, Chinhui, 1992. "Decline of Male Labor Market Participation: The Role of Declining Market Opportunities," The Quarterly Journal of Economics, MIT Press, vol. 107(1), pages 79-121, February.
  6. Rachel M. Friedberg & Jennifer Hunt, 1995. "The Impact of Immigrants on Host Country Wages, Employment and Growth," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 23-44, Spring.
  7. Steve J. Davis & John Haltiwanger, 1991. "Wage Dispersion Between and Within U.S. Manufacturing Plants, 1963-1986," NBER Working Papers 3722, National Bureau of Economic Research, Inc.
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Cited by:
  1. Manso, Enrique Palazuelos, 2006. "The influence of earnings on income distribution in the United States," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 35(4), pages 710-726, August.

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