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Technological Change and the Demand for Skills in the 1980s: Does Skill Mismatch Explain the Growth of Low Earnings?

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  • David R. Howell

    (The Jerome Levy Economics Institute)

Abstract

The sharp decline in real wages and the drop in relative earnings among low–skilled workers generally is attributed to structural shifts in the labor force induced by technological change that has limited the demand for workers with low skill levels. While the claim that the cause of reduced earnings is a decline in the demand for low–skilled workers is common, the statistical evidence backing this assertion has not established such a link. In attempting to explain the reasons underlying the 15–year decline in earnings, David R. Howell asserts that, in fact, the skill mismatch does not adequately explain the problems faced by low–skill workers: If technological change did indeed reduce the demand for lower skilled workers, there should have been a corresponding decline in the employment share of these workers as well as a steadily rising rate of joblessness among them. Instead, dramatic growth in the demand for low–wage workers took place during the past 15 years, while their wages continued on a downward path. In an examination of employment trends among the nonsupervisory workforce, Howell finds that there was a rise in low–wage jobs in both goods and service industries. In fact, "the last decade and a half has made it abundantly clear that the choice concerning the nonsupervisory workforce is not limited to high skills or low wages," but instead "toward gradually higher skills with dramatically lower wages." The case study literature indicates that technological change did not alter the skill distribution among jobs, but that changes in job opportunities and skill level requirements varied by firm, industry, and occupation.

Suggested Citation

  • David R. Howell, 1999. "Technological Change and the Demand for Skills in the 1980s: Does Skill Mismatch Explain the Growth of Low Earnings?," Macroeconomics 9907003, EconWPA.
  • Handle: RePEc:wpa:wuwpma:9907003
    Note: Type of Document - Acrobat PDF; prepared on IBM PC; to print on PostScript; pages: 41; figures: included
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    References listed on IDEAS

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    1. Murphy, Kevin M & Welch, Finis, 1993. "Inequality and Relative Wages," American Economic Review, American Economic Association, vol. 83(2), pages 104-109, May.
    2. George J. Borjas & Richard B. Freeman & Lawrence F. Katz, 1992. "On the Labor Market Effects of Immigration and Trade," NBER Chapters,in: Immigration and the Workforce: Economic Consequences for the United States and Source Areas, pages 213-244 National Bureau of Economic Research, Inc.
    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. Chinhui Juhn, 1992. "Decline of Male Labor Market Participation: The Role of Declining Market Opportunities," The Quarterly Journal of Economics, Oxford University Press, vol. 107(1), pages 79-121.
    5. Levy, Frank & Murnane, Richard J, 1992. "U.S. Earnings Levels and Earnings Inequality: A Review of Recent Trends and Proposed Explanations," Journal of Economic Literature, American Economic Association, vol. 30(3), pages 1333-1381, September.
    6. Peter Cappelli, 1993. "Are Skill Requirements Rising? Evidence from Production and Clerical Jobs," ILR Review, Cornell University, ILR School, vol. 46(3), pages 515-530, April.
    7. Erica L. Groshen, 1988. "Why do wages vary among employers?," Economic Review, Federal Reserve Bank of Cleveland, issue Q I, pages 19-38.
    8. Lawrence F. Katz & Gary W. Loveman & David G. Blanchflower, 1993. "A Comparison of Changes in the Structure of Wages," NBER Working Papers 4297, National Bureau of Economic Research, Inc.
    9. Sicherman, Nachum, 1991. ""Overeducation" in the Labor Market," Journal of Labor Economics, University of Chicago Press, vol. 9(2), pages 101-122, April.
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    Cited by:

    1. L. Buron & R. Haveman & O. O'Donnell, "undated". "Recent trends in U.S. male work and wage patterns: An overview," Institute for Research on Poverty Discussion Papers 1060-95, University of Wisconsin Institute for Research on Poverty.

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    • E - Macroeconomics and Monetary Economics

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