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Wage Inequality and the New Economy in the US: Does IT-Led Growth Generate Wage Inequality?

  • Lawrence Mishel
  • Jared Bernstein
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    This paper examines whether the late 1990s IT-related growth has led to a corresponding growth in wage inequality. This is of interest because observers, including Alan Greenspan, have suggested that the "new economy" boom caused growing wage inequality and even job insecurity. The late 1990s also provide insights regarding the claim that technological change generated the wage inequalities of the 1980s. We conclude that overall wage inequality, skill differentials, and within-group wage inequality did not grow in the IT-led new economy boom. So, inequality is not the "price" of technology-led growth. There are numerous reasons to be sceptical about a technology explanation of wage inequality. There is no evidence that technology affects the inequality among workers of similar experience and education, a dimension that accounts for 55 percent of the growth of inequality. Nor is there evidence that technology has had a larger impact in the 1990s or 1980s than in earlier periods.

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    Article provided by University of Toronto Press in its journal Canadian Public Policy.

    Volume (Year): 29 (2003)
    Issue (Month): s1 (January)
    Pages: 203-222

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    Handle: RePEc:cpp:issued:v:29:y:2003:i:s1:p:203-222
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    1. Stephen Machin & A Ryan & John Van Reenen, 1996. "Technology and Changes in Skill Structure: Evidence from an International Panel of Industries," CEP Discussion Papers dp0297, Centre for Economic Performance, LSE.
    2. Berman, Eli & Bound, John & Machin, Stephen, 1997. "Implications of Skill-Biased Technological Change: International Evidence," Working Paper Series 486, Research Institute of Industrial Economics.
    3. Eli Berman & John Bound & Zvi Griliches, 1993. "Changes in the Demand for Skilled Labor within U.S. Manufacturing Industries: Evidence from the Annual Survey of Manufacturing," NBER Working Papers 4255, National Bureau of Economic Research, Inc.
    4. David H. Autor & Lawrence F. Katz & Alan B. Krueger, 1997. "Computing Inequality: Have Computers Changed the Labor Market?," NBER Working Papers 5956, National Bureau of Economic Research, Inc.
    5. Alan Greenspan, 1996. "Address: job insecurity and technology," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 40(Jun), pages 173-181.
    6. Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-42, June.
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