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

  • David R. Howell

    (The Jerome Levy Economics Institute)

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.

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File URL: http://econwpa.repec.org/eps/mac/papers/9907/9907003.pdf
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Paper provided by EconWPA in its series Macroeconomics with number 9907003.

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Length: 41 pages
Date of creation: 08 Jul 1999
Date of revision:
Handle: RePEc:wpa:wuwpma:9907003
Note: Type of Document - Acrobat PDF; prepared on IBM PC; to print on PostScript; pages: 41; figures: included
Contact details of provider: Web page: http://econwpa.repec.org

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  1. 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.
  2. Erica L. Groshen, 1988. "Why do wages vary among employers?," Economic Review, Federal Reserve Bank of Cleveland, issue Q I, pages 19-38.
  3. David R. Howell & Edward N. Wolff, 1991. "Trends in the growth and distribution of skills in the U.S. workplace, 1960û1985," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 44(3), pages 486-502, April.
  4. Peter Cappelli, 1993. "Are skill requirements rising? Evidence from production and clerical jobs," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 46(3), pages 515-530, April.
  5. Murphy, Kevin M & Welch, Finis, 1993. "Inequality and Relative Wages," American Economic Review, American Economic Association, vol. 83(2), pages 104-09, May.
  6. Jeffrey H. Keefe, 1991. "Numerically controlled machine tools and worker skills," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 44(3), pages 503-519, April.
  7. 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 1333-81, September.
  8. 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.
  9. 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.
  10. Nachum Sicherman, 1987. "Over-Education in the Labor Market," University of Chicago - George G. Stigler Center for Study of Economy and State 48, Chicago - Center for Study of Economy and State.
  11. 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.
  12. 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.
  13. Topel, Robert, 1993. "What Have We Learned from Empirical Studies of Unemployment and Turnover?," American Economic Review, American Economic Association, vol. 83(2), pages 110-15, May.
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