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Title: The Effect of Job-Polarizing Skill Demands on the US Wage Structure

Citation Type: Miscellaneous

Publication Year: 2018

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Abstract: What drove up wage inequality and caused the loss of middle-skill jobs in the US? I present a quan- titative model which accounts for changes in occupational wages, occupational employment shares, and the overall wage distribution in the US to answer this question. The model replicates numerous aspects of cross-sectional data observed across decades from 1979 to 2010, notably job and wage polarization. In the model, changes in production complementarities are crucial but insufficient to replicate the occu- pational and wage changes observed. The distribution of worker skills, sorting, and the distribution of skill demands also all play important roles in shaping the occupational and wage distributions. I use the model’s estimated skill demands to evaluate prominent explanations offered in the literature for changes in skill demands. I find that industry-specific trends, technological progress, and import competition from China account for up to 57% of these changes. I also find that information and communications technology spurred demand for jobs requiring interpersonal and social skills in the 1990s. This develop- ment appears far more pivotal in accounting for skill demand changes than the automation of routine jobs concentrated in the manufacturing and construction sectors.

Url: https://economics.sas.upenn.edu/system/files/2018-11/KKantenga-JMP_0.pdf

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Authors: Kantenga, Kory

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Data Collections: IPUMS CPS

Topics: Labor Force and Occupational Structure

Countries: United States