Technology and U.S. Wage Inequality: A Brief Look

David Card and John E. DiNardo
Economic Review, Vol. 87, No. 3, 2002

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As labor market analysts in the late 1980s and early 1990s documented a rising wage inequality, a series of papers argued that this development was related to rapid technological change. These papers and the large literature that followed established a basis for the virtually unanimous agreement among economists that developments in computers and related information technologies in the 1970s, 80s, and 90s have led to increased wage inequality.

This view has become known as the "skill-biased technological change" (SBTC) hypothesis—the view that a burst of new technologies increased demand by employers for highly skilled workers (who are more likely to use computers) and that this increased demand led to a rise in the wages of the highly skilled relative to those of the less skilled.

The authors of this article reconsider the evidence for the SBTC hypothesis and focus on changes over time in overall wage inequality and in the evolution of different groups of workers' relative wages. In doing so, they conclude that SBTC falls far short of unicausal explanation of the substantial changes in the U.S. wage structure of the 1980s and 1990s and does not, by itself, prove to be particularly helpful in organizing or understandings these changes. The article concludes that it is time to re-evaluate the case that SBTC offers a satisfactory explanation for the rise in U.S. wage inequality.

August 2002