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Title: Interindustry Wage Differentials, Technology Adoption, and Job Polarization

Citation Type: Miscellaneous

Publication Year: 2014

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Abstract: This paper explores the relationship between job polarization and interindustry wage differentials. Using the U.S. Census and EU KLEMS data, we find that the progress of job polarization between 1980 and 2009 was more evident in industries that initially paid a high wage premium to workers than in industries that did not. With a two-sector neoclassical growth model to highlight the key mechanism, we argue that this phenomenon can be explained as a dynamic response of firms to interindustry wage differentials: firms with a high wage premium seek alternative ways to cut production costs by replacing workers who perform routine tasks with Information, Communication, and Technology (ICT) capital. The replacement of routine workers with ICT capital has become more pronounced as the price of ICT capital has fallen over the past 30 years. As a result, firms that paid a relatively high industry wage premium have experienced more apparent job polarization.

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Authors: Yang, Hee-Seung; Shim, Myungkyu

Publisher: UC, San Diego

Data Collections: IPUMS CPS

Topics: Labor Force and Occupational Structure

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