Wages and Education
Relative demand shifts favoring more-educated workers have not been particularly rapid since 1980. Instead, the growth of the supply of skills slowed considerably after 1980 and the wage structure, in consequence, widened. The deceleration in the relative supply of skills of the working population came about largely from a slowdown in the growth in the educational attainment of U.S. natives for cohorts born since 1950. In contrast, the increase in unskilled immigration accounts for only a small part of the post-1980 slowdown in skill supply growth.
…Computers strongly complement the non-routine or abstract tasks of high-wage jobs, but they directly substitute for the routine tasks found in many traditional middle-wage jobs. However, computers have little impact on the non-routine manual tasks of many low-wage service jobs.
Goldin and Katz say that the U.S. wage structure is “polarizing,” meaning that wages at the top are getting higher relative to wages in the middle, although wages in the middle are not getting higher relative to wages at the bottom.
Suppose that we want to be puckish and suggest that what is going on is a combination of IQ-biased technical change and assortive mating.
With assortive mating, the distribution of skills will become more unequal. Families become more unequal. Also, kids become more unequal across families in terms of their endowments of natural and financial wealth.
What Goldin and Katz call the slowdown in the growth of average educational attainment might be due to more assortive mating. That would lead to a concentration of high ability among a relatively smaller share of children.
Then you layer on computer technology, which is complementary to abstract reasoning skills. The result will be the polarization of wages.
The difference between the Goldin-Katz story and the assortive-mating story is that the former suggests that there are lots of folks who could benefit from more investment in education. The latter suggests that this may not be the case.
Goldin and Katz cite a couple of papers suggesting that expansion in financial aid and college access and expansion in compulsory schooling have significant effects. I am skeptical, but certainly open to persuasion.
Thanks to Andrew Samwick for the pointer.