Widening the Wage Gap: The Skill Premium and Technology

Keith Sill

Senior Vice President of Research and Director of the Real-Time Data Research Center

Q4 2002

Business Review — Workers who acquire more skills and more knowledge typically earn a higher wage than those who don’t. Economists call this difference in wages between high-skill and low-skill workers the skill premium.

Over the past 30 years, the skill premium has increased dramatically. Although economists are still debating the causes of this increase, it seems likely that skill-biased technical change has played a large role. As companies have invested in new technologies, demand for workers who can use them has surged. Keith Sill reviews the literature and tells us why some theories fall flat and why technology seems to be the key to the widening wage gap.

This article appeared in the Fourth Quarter 2002 edition of Business Review.

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