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

Many economists and other social scientists and policy makers 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.

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

Despite seven years of economic growth a large gap exists in the wages earned by workers at the top of the earnings scale and those at the bottom. The leading explanation for this growth in wage inequality continues to be the skills-mismatch theory. This theory in part posits that gains in technology have resulted in jobs having highly technical skill requirements that have outpaced growth in worker skills; demand for highly skilled workers therefore rises more swiftly than that for less-skilled workers, creating upward pressure on wages for those with the most skills. The empirical evidence is examined here and shows that there is little evidence to support the mismatch theory as there has been little sign of a shortage of workers with computer or general technical skills. If the analysis is correct, then policies currently used to close the wage gap, such as improved education and training, will not alone solve the inequality problem. Rather, the solution may require macroeconomic policies aimed at maintaining economic growth and full employment, and labor policies, such as the minimum wage, that support the earnings of workers at the lower end of the wage scale.

Computers and the Wage Structure

A leading explanation for the rapid growth in U.S. wage inequality in the last twenty years, consistent with both human capital and postindustrial theories, is that advanced technology has increased job skill requirements and reduced the demand for less-skilled workers. Krueger's study (1993) showing a wage premium associated with using computers at work is one of the few that seems to provide direct supportive evidence. In this paper I use previously unexamined data to suggest that measured returns to computer use are upwardly biased. In addition, I find that most of the growth of inequality since 1979 occurred in the early 1980s, which is inconsistent with a primary role for computers. Finally, computer use at work had equalizing impacts on the gender wage gap and elsewhere in the wage distribution, as well as disequalizing impacts on the wage gaps between education groups. When the contribution of computer use to all components of the variance of wages is taken into account, computers seem to have had a net equalizing impact in the period Krueger studied. This casts significant doubt on this technology-based explanation of the growth in wage inequality.

"Computers and the Wage Structure"

A leading explanation for the rapid growth in U.S. wage inequality in the last twenty years, consistent with both human capital and postindustrial theories, is that advanced technology has increased job skill requirements and reduced the demand for less skilled workers. Krueger's study (1993) showing a wage premium associated with using computers at work is one of the few that seems to provide direct supportive evidence. In this paper I use previously unexamined data to suggest that measured returns to computer use are upwardly biased. In addition, I find that most of the growth of inequality since 1979 occurred in the early 1980s, which is inconsistent with a primary role for computers. Finally, computer use at work had equalizing impacts on the gender wage gap and elsewhere in the wage distribution, as well as disequalizing impacts on the wage gaps between education groups. When the contribution of computer use to all components of the variance of wages is taken into account, computers seem to have had a net equalizing impact in the period Krueger studied. This casts significant doubt on this technology-based explanation of the growth in wage inequality.

"Is There a Wage Payoff to Innovative Work Practices?"

During the 1980s, wage inequality increased dramatically and the American economy lost many high wage, low- to medium-skill jobs, which had provided middle class incomes to less skilled workers. Increasingly, less skilled workers seemed restricted to low wage jobs lacking union or other institutional protections. Although "good" jobs for less skilled workers are unlikely to return in their previous form, a number of sociologists, economists, and industrial relations scholars have suggested that a new paradigm of work, often called "high performance," is emerging, which offers such workers more skilled jobs and higher wages. Using a unique national data set we find little evidence that high performance work systems are associated with higher wages.

Job Skill Requirements: Levels and Trends

This background paper for MIT’s Work of the Future report (2020) reviews what is known about trends in job skill requirements. The paper reviews issues related to the conceptualization and measurement of job skill requirements and the state of existing data before discussing recent rich cross-sectional data and more variable trend data for both the United States and other OECD countries. In general, the data on current levels of skill demand are at variance with the more extreme views that emphasize the prevalence of high-tech jobs or other kinds of “knowledge work.” Trends are consistently gradual on their face and often flatter in the previous ten to twenty years relative to previous decades—there is no consistent evidence that trends have accelerated markedly since 1980, and the dominant impression is continuity rather than discontinuity. Information technology changes very rapidly, but work roles and the occupational structure change gradually and will likely to continue to do so in the future. The data on current levels of job skill demands and recent trends help provide a frame of reference for evaluating predictions regarding future changes in job skill requirements

Putting Tasks to the Test: Human Capital, Job Tasks, and Wages

Using original, representative survey data, we document that analytical, routine, and manual job tasks can be measured with high validity, vary substantially within and between occupations, are significantly related to workers’ characteristics, and are robustly predictive of wage differences between occupations and among workers in the same occupation. We offer a conceptual framework that makes explicit the causal links between human capital endowments, occupational assignment, job tasks, and wages, which motivate a Roy model of the allocation of workers to occupations. We offer two simple tests of the model’s gross predictions for the relationship between tasks and wages, both of which receive qualified empirical support.National Science Foundation (U.S.) (CAREER award SES-0239538

Putting Tasks to the Test: Human Capital, Job Tasks and Wages

Employing original, representative survey data, we document that cognitive, interpersonal and physical job task demands can be measured with high validity using standard interview techniques. Job tasks vary substantially within and between occupations, are significantly related to workers' characteristics, and are robustly predictive of wage differentials both between occupations and among workers in the same occupation. We offer a conceptual framework that makes explicit the causal links between human capital endowments, occupational assignment, job tasks, and wages. This framework motivates a Roy (1951) model of the allocation of workers to occupations. Tests of the model’s implication that 'returns to tasks' must negatively covary among occupations are strongly supported.

Implications of Information Technology for Employment, Skills, and Wages: A Review of Recent Research

An extensive review of the research literature on the effects of information technology (IT) on employment levels, job skill requirements, and wages. The first sections provide historical background on earlier waves of concern regarding automation and contemporary public opinion, then examine trends in overall employment and demand for IT workers. The second half of the paper is a detailed review of the econometric research and debate over skill-biased technological change and competing explanations of the growth of earnings inequality

Implications of Information Technology for Employment, Skills, and Wages: Findings from Sectoral and Case Study Research

This paper reviews evidence from industry-specific and case studies that shed light on the extent to which computers and automation eliminate jobs, raise job skill requirements, and, consequently, contribute to increased wage inequality between less- and more skilled workers. This paper complements a previous review of large-scale econometric studies on the same subject, Michael J. Handel, "Implications of Information Technology for Employment, Skills, and Wages: A Review of Recent Research." This paper examines the implications for work and employment of different kinds of manufacturing automation (NC/CNC machine tools, robotics, automated process control) and white-collar computer technologies (data entry, data processing, ATMs, CAD). The sectoral and case study evidence suggests technological change works mostly in the direction of skill upgrading but that the effects on employment levels, occupational composition, skill requirements within jobs, and wages are considerably more modest than theories of skill-biased technological change suggest