Skill-Biased Demand Shifts and the Wage Collapse in the United States: A Critical Perspective

The earnings of low-skill workers in the United States have fallen sharply since the late 1970's in both real and relative terms, an experience not shared by other advanced nations. It is widely held that the problem lies in skill-biased technological change: strong shifts in labor demand away from the least skilled caused by workplace computerization. With measures developed from both household and establishment data, we show that the skill mix of employment remained virtually unchanged after 1982 in computer-intensive manufacturing and service sectors, precisely the period in which computerization should have had its greatest employment impacts. We also find no association between wage growth and changes in skill mix across large occupation-industry groups. We conclude by suggesting that more weight should be placed on shifts in labor market institutions, public policies and managerial strategies in explaining the wage collapse.