IDEAS home Printed from https://ideas.repec.org/p/uia/iowaec/99-08.html
   My bibliography  Save this paper

An Analysis of the Evolution of the Skill Premium

Author

Listed:
  • Ingram, Beth

    (University of Iowa)

  • Neumann, George

    (University of Iowa)

Abstract

Since 1975, an increase in the return to skill (measured by years of education), in the percentage of the labor force that is skilled, and in the variance of wage income within skill categories have characterized the U.S. labor market. While the first two facts point towards an increase in the demand for skilled labor, the third fact establishes that this increase in demand has not been uniform for all members of a particular skill category. Hence, the three stylized facts point toward unobserved skill heterogeneity within education classes. In this paper, we argue that education per se does not measure skill adequately, and we suggest an alternative measure based on the observed skill characteristics of the job. We analyze the return to various dimensions of skill, including formal education. After accounting for other elements of skill, we find that the return to education has been constant since 1970. Moreover, variations in direct measures of skill, such as mathematical ability or eye-hand coordination, account for a substantial fraction of the increased dispersion in income for those with less than a college degree, and some of the increase in wage dispersion among the college educated. Surprisingly, we show that the group who has fared worst in the labor market in the past several decades are those who are educated but unskilled.

Suggested Citation

  • Ingram, Beth & Neumann, George, 1999. "An Analysis of the Evolution of the Skill Premium," Working Papers 99-08, University of Iowa, Department of Economics.
    • Handle: RePEc:uia:iowaec:99-08
    as

    Download full text from publisher

    File URL: http://www.biz.uiowa.edu/faculty/bingram/Skill%20Premium.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Bresnahan, Timothy F. & Trajtenberg, M., 1995. "General purpose technologies 'Engines of growth'?," Journal of Econometrics, Elsevier, vol. 65(1), pages 83-108, January.
    2. Goldin, Claudia & Katz, Lawrence F, 1996. "Technology, Skill, and the Wage Structure: Insights from the Past," American Economic Review, American Economic Association, vol. 86(2), pages 252-257, May.
    3. Ann P. Bartel, 1992. "Training, Wage Growth and Job Performance: Evidence From a Company Database," NBER Working Papers 4027, National Bureau of Economic Research, Inc.
    4. Greenwood, Jeremy & Yorukoglu, Mehmet, 1997. "1974," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 46(1), pages 49-95, June.
      • Greenwood, J. & Yorukoglu, M., 1996. "1974," RCER Working Papers 429, University of Rochester - Center for Economic Research (RCER).
    5. Bartel, Ann P, 1995. "Training, Wage Growth, and Job Performance: Evidence from a Company Database," Journal of Labor Economics, University of Chicago Press, vol. 13(3), pages 401-425, July.
    6. Kevin M. Murphy & W. Craig Riddell & Paul M. Romer, 1998. "Wages, Skills, and Technology in the United States and Canada," NBER Working Papers 6638, National Bureau of Economic Research, Inc.
    7. Griliches, Zvi, 1969. "Capital-Skill Complementarity," The Review of Economics and Statistics, MIT Press, vol. 51(4), pages 465-468, November.
    8. Eli Berman & John Bound & Zvi Griliches, 1993. "Changes in the Demand for Skilled Labor within U.S. Manufacturing Industries: Evidence from the Annual Survey of Manufacturing," NBER Working Papers 4255, National Bureau of Economic Research, Inc.
    9. Per Krusell & Lee E. Ohanian & JosÈ-Victor RÌos-Rull & Giovanni L. Violante, 2000. "Capital-Skill Complementarity and Inequality: A Macroeconomic Analysis," Econometrica, Econometric Society, vol. 68(5), pages 1029-1054, September.
    10. Welch, F, 1970. "Education in Production," Journal of Political Economy, University of Chicago Press, vol. 78(1), pages 35-59, Jan.-Feb..
    11. Murnane, Richard J & Willett, John B & Levy, Frank, 1995. "The Growing Importance of Cognitive Skills in Wage Determination," The Review of Economics and Statistics, MIT Press, vol. 77(2), pages 251-266, May.
    12. Mulligan, C. B. & Sala-i-Martin, X., 1997. "A labor income-based measure of the value of human capital: An application to the states of the United States," Japan and the World Economy, Elsevier, vol. 9(2), pages 159-191, May.
    13. Levy, Frank & Murnane, Richard J, 1992. "U.S. Earnings Levels and Earnings Inequality: A Review of Recent Trends and Proposed Explanations," Journal of Economic Literature, American Economic Association, vol. 30(3), pages 1333-1381, September.
    14. David H. Autor & Lawrence F. Katz & Alan B. Krueger, 1998. "Computing Inequality: Have Computers Changed the Labor Market?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(4), pages 1169-1213.
    15. repec:fth:prinin:377 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Hornstein, Andreas & Krusell, Per & Violante, Giovanni L., 2005. "The Effects of Technical Change on Labor Market Inequalities," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 20, pages 1275-1370, Elsevier.
    2. Kristjan-Olari Leping, 2009. "Measuring the Specificity of Human Capital:a Skill-based Approach," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 9(1), pages 39-54, July.
    3. Francesco Vona & Davide Consoli, 2015. "Innovation and skill dynamics: a life-cycle approach," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 24(6), pages 1393-1415.
    4. Carsten Ochsen, 2006. "Zukunft der Arbeit und Arbeit der Zukunft in Deutschland," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 7(2), pages 173-193, May.
    5. Hornstein, Andreas & Krusell, Per & Violante, Giovanni L., 2005. "The Effects of Technical Change on Labor Market Inequalities," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 20, pages 1275-1370, Elsevier.
    6. repec:pri:cepsud:113krusell is not listed on IDEAS
    7. Kristjan-Olari Leping, 2005. "Measuring the Specificity of Human Capital: a Skill-based Approach," Working Papers 134, Tallinn School of Economics and Business Administration, Tallinn University of Technology.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ingram, Beth F. & Neumann, George R., 2006. "The returns to skill," Labour Economics, Elsevier, vol. 13(1), pages 35-59, February.
    2. David H. Autor & Frank Levy & Richard J. Murnane, 2003. "The Skill Content of Recent Technological Change: An Empirical Exploration," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(4), pages 1279-1333.
    3. Weinberg, Bruce A., 2004. "Experience and Technology Adoption," IZA Discussion Papers 1051, Institute of Labor Economics (IZA).
    4. Daron Acemoglu, 2003. "Cross-Country Inequality Trends," Economic Journal, Royal Economic Society, vol. 113(485), pages 121-149, February.
    5. David B. Audretsch & Mark Sanders, 2007. "Globalization and the Rise of the Entrepreneurial Economy," Jena Economics Research Papers 2007-003, Friedrich-Schiller-University Jena.
    6. Savvidou, Eleni, 2003. "The Relationship Between Skilled Labor and Technical Change," Working Paper Series 2003:27, Uppsala University, Department of Economics.
    7. Jeff Borland, 2000. "Economic Explanations of Earnings Distribution Trends in the International Literature and Application to New Zealand," Treasury Working Paper Series 00/16, New Zealand Treasury.
    8. Eli Berman, 2000. "Does Factor-Biased Technological Change Stifle International Covergence? Evidence from Manufacturing," NBER Working Papers 7964, National Bureau of Economic Research, Inc.
    9. Cecilia Garcia-Penalosa & Campbell leith & Chol-Won Li, 2001. "Wage Inequality and the Effort Incentive Effects of Technical Progress," Working Papers 2001_14, Business School - Economics, University of Glasgow.
    10. David H. Autor & Lawrence F. Katz & Alan B. Krueger, 1998. "Computing Inequality: Have Computers Changed the Labor Market?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(4), pages 1169-1213.
    11. Hui He & Zheng Liu, 2008. "Investment-Specific Technological Change, Skill Accumulation, and Wage Inequality," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(2), pages 314-334, April.
    12. Kopytov, Alexandr & Roussanov, Nikolai & Taschereau-Dumouchel, Mathieu, 2018. "Short-run pain, long-run gain? Recessions and technological transformation," Journal of Monetary Economics, Elsevier, vol. 97(C), pages 29-44.
    13. Angel de la Fuente & Antonio Ciccone, 2003. "Human capital in a global and knowledge-based economy," UFAE and IAE Working Papers 562.03, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    14. Dennis J. Snower, 1998. "Causes of changing earnings inequality," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 69-133.
    15. Jovanovic, Boyan & Rousseau, Peter L., 2005. "General Purpose Technologies," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 18, pages 1181-1224, Elsevier.
    16. Borghans, Lex & ter Weel, Bas, 2007. "The diffusion of computers and the distribution of wages," European Economic Review, Elsevier, vol. 51(3), pages 715-748, April.
    17. Daron Acemoglu, 2002. "Technical Change, Inequality, and the Labor Market," Journal of Economic Literature, American Economic Association, vol. 40(1), pages 7-72, March.
    18. Borghans L. & Weel B. ter, 2000. "How computerizaton changes the UK Labour Market: The Facts viewed from a new Perspective," ROA Working Paper 010, Maastricht University, Research Centre for Education and the Labour Market (ROA).
    19. Borgmans, Lex & Weel, Bas ter, 2000. "How computerization changes the UK labour market: The facts viewed from a new perspective," Research Memorandum 025, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
    20. Adriaan Zon & Roberto Antonietti, 2016. "Education and training in a model of endogenous growth with creative wear-and-tear," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 33(1), pages 35-62, April.

    More about this item

    Keywords

    Skilled wage premium; wage dispersion; factor analysis; neural nets; education;
    All these keywords.

    JEL classification:

    • J0 - Labor and Demographic Economics - - General
    • J1 - Labor and Demographic Economics - - Demographic Economics
    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:uia:iowaec:99-08. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: None (email available below). General contact details of provider: https://edirc.repec.org/data/deuiaus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.