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Is There a Skills Crisis? Trends in Job Skill Requirements, Technology, and Wage Inequality in the United States


  • Michael Handel

    (The Jerome Levy Economics Institute)


Many economists and other social scientists and policymakers believe that the growth in inequality in the last two decades reflects mostly an imbalance between the demand for and the supply of employee skills driven by technological change, particularly the spread of computers. However, the empirical basis for this belief is not strong. The growth in inequality was concentrated in the recession years of the early 1980s and any imbalance between the supply of and demand for workers with technological skills likely did not occur until later. The growth of the supply of more-educated workers decelerated during the 1980s, but any impact of that likely would not have been felt until the late 1980s and 1990s. However, inequality actually stabilized during this latter period. On the demand side, trends in occupational composition do not suggest that upgrading was particularly rapid in the 1980s and 1990s compared to the 1970s. Computers do not seem to have greatly affected employment in a number of narrow occupations that are likely to be sensitive to technological change (e.g., computer programmers, bank tellers). Computer use itself does seem to be associated with more education, even controlling for occupation, but the causal status of this relationship is uncertain and even the magnitude of the observed association does not seem large enough to have seriously compromised the ability of supply to meet the implied growth in demand. By contrast, the recession of the early 1980s coincides with a dramatic decline of traditionally better paid blue collar workers, particularly in manufacturing. This suggests a need for a closer look at other possible causes of inequality growth, such as macroeconomic forces and the decline of institutional protections for workers.

Suggested Citation

  • Michael Handel, 2000. "Is There a Skills Crisis? Trends in Job Skill Requirements, Technology, and Wage Inequality in the United States," Macroeconomics 0004041, EconWPA.
  • Handle: RePEc:wpa:wuwpma:0004041 Note: Type of Document - Adobe Acrobat PDF; prepared on IBM PC; to print on PostScript; pages: 51; figures: included

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    References listed on IDEAS

    1. Lawrence F. Katz & Kevin M. Murphy, 1992. "Changes in Relative Wages, 1963–1987: Supply and Demand Factors," The Quarterly Journal of Economics, Oxford University Press, vol. 107(1), pages 35-78.
    2. Michael J. Handel, 1999. "Computers and the Wage Structure," Economics Working Paper Archive wp_285, Levy Economics Institute.
    3. Jill Constantine & David Neumark, 1994. "Training and the Growth of Wage Inequality," NBER Working Papers 4729, National Bureau of Economic Research, Inc.
    4. Peter Gottschalk & Timothy M. Smeeding, 1997. "Cross-National Comparisons of Earnings and Income Inequality," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 633-687, June.
    5. Murnane, Richard J & Willett, John B & Levy, Frank, 1995. "The Growing Importance of Cognitive Skills in Wage Determination," The Review of Economics and Statistics, MIT Press, vol. 77(2), pages 251-266, May.
    6. Eli Berman & John Bound & Zvi Griliches, 1994. "Changes in the Demand for Skilled Labor within U. S. Manufacturing: Evidence from the Annual Survey of Manufactures," The Quarterly Journal of Economics, Oxford University Press, vol. 109(2), pages 367-397.
    7. Gale, H. Frederick, Jr., 1997. "Is There A Rural-Urban Technology Gap? Results of the ERS Rural Manufacturing Survey," Agricultural Information Bulletins 33709, United States Department of Agriculture, Economic Research Service.
    8. repec:mes:challe:v:38:y:1995:i:1:p:27-35 is not listed on IDEAS
    9. John E. DiNardo & Jörn-Steffen Pischke, 1997. "The Returns to Computer Use Revisited: Have Pencils Changed the Wage Structure Too?," The Quarterly Journal of Economics, Oxford University Press, vol. 112(1), pages 291-303.
    10. David H. Autor & Lawrence F. Katz & Alan B. Krueger, 1998. "Computing Inequality: Have Computers Changed the Labor Market?," The Quarterly Journal of Economics, Oxford University Press, vol. 113(4), pages 1169-1213.
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    Cited by:

    1. Michael J. Handel, 2000. "Trends in Direct Measures of Job Skill Requirements," Macroeconomics 0004048, EconWPA.

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    • E - Macroeconomics and Monetary Economics

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