Evidence on wage inequality, worker education, and technology

Abstract

The rise in U.S. wage inequality over the past two decades is commonly associated with an increase in the use of "skill-biased" technologies (e.g., computer equipment) in the workplace, yet relatively few studies have attempted to measure the direct link between the two. This paper explores the relationship among inequality, worker education levels, and workplace computer usage using a sample of 230 U.S. industries between 1983 and 2002. The results generate two primary conclusions: First, this rising inequality in the United States has been caused predominantly by increasing wage dispersion within industries rather than between industries. Second, within-industry inequality is strongly tied to both the frequency of computer usage among workers and the fraction of total employment with a college degree. Both results lend support to the idea that skill-biased technological change has been an important element in the rise of U.S. wage inequality. © 2005, The Federal Reserve Bank of St. Louis.