Skills, Tasks and Technologies: Implications for Employment and Earnings

Abstract

A central organizing framework of the voluminous recent literature studying changes in the returns to skills and the evolution of earnings inequality is what we refer to as the canonical model, which elegantly and powerfully operationalizes the supply and demand for skills by assuming two distinct skill groups that perform two different and imperfectly substitutable tasks or produce two imperfectly substitutable goods. Technology is assumed to take a factor-augmenting form, which, by complementing either high or low skill workers, can generate skill biased demand shifts. In this paper, we argue that despite its notable successes, the canonical model is largely silent on a number of central empirical developments of the last three decades, including: (1) significant declines in real wages of low skill workers, particularly low skill males; (2) non-monotone changes in wages at different parts of the earnings distribution during different decades; (3) broad-based increases in employment in high skill and low skill occupations relative to middle skilled occupations (i.e., job 'polarization'); (4) rapid diffusion of new technologies that directly substitute capital for labor in tasks previously performed by moderatelyskilled workers; and (5) expanding offshoring opportunities, enabled by technology, which allow foreign labor to substitute for domestic workers in specific tasks. Motivated by these patterns, we argue that it is valuable to consider a richer framework for analyzing how recent changes in the earnings and employment distribution in the United States and other advanced economies are shaped by the interactions among worker skills, job tasks, evolving technologies, and shifting trading opportunities. We propose a tractable task-based model in which the assignment of skills to tasks is endogenous and technical change may involve the substitution of machines for certain tasks previously performed by labor. We further consider how the evolution of technology in this task-based setting may be endogenized. We show how such a framework can be used to interpret several central recent trends, and we also suggest further directions for empirical exploration.

The U.S. Information Economy: Value, Employment, Industry Structure, and Trade

“…This, however, appeared to be a reflection of the fact that most information workers in the products sector were engaged in "high-end" information jobs, while a large number of information workers in the service sector were engaged in "low-end" information jobs. 1 We also found that noninformation workers generally earned more in products industries than their counterparts in services, although the difference was not large.…”

“…Despite a dearth of detailed evidence, there are strong indications that this shift has already been taking place in other advanced economies as well. 1 Even some emerging market economies are likely to experience a similar long-run structural shift in the near future.…”

“…This section briefly discusses some of the important recent trends in international trade in the U.S. 1 In particular, as more than 80% of income and about 90% of employment are generated in services in the U.S., trade in services is of special interest. It is important to note that, although the U.S. has an overall trade deficit, it has had a surplus in services trade and, as seen below, that surplus has grown in recent years.…”

“…The monograph concludes in Section 8, with a summary and a description of our ongoing research on these topics. 1 The ways that information is conceptualized vary across disciplines. Even within a discipline, there are differences among scholars about how information is conceived and, as a result, how its larger impact in society has been analyzed.…”

“…For example, Autor et al [11,12] argued that the increased use of computers (which is used as a proxy for skillbiased technological change) and skill upgrading accounted for growth in demand for and wages of skilled workers. Autor et al [11,12,13], Autor [10], and Acemoglu and Autor [1] further explored the relationship between technological change and employment and earnings of skilled (information) workers. Berman et al [21] and Machin and Reenen [59] examined empirical evidence for skill-biased technological change for several advanced countries, including the U.S., and established that skill-biased technological progress had increased the demand for skilled workers.…”