Technology and U.S. wage inequality: a brief look

As labor market analysts in the late 1980s and early 1990s documented a rising wage inequality, a series of papers argued that this development was related to rapid technological change. These papers and the large literature that followed established a basis for the virtually unanimous agreement among economists that developments in computers and related information technologies in the 1970s, '80s, and '90s have led to increased wage inequality. ; This view has become known as the "skill-biased technological change" (SBTC) hypothesis-the view that a burst of new technologies increased demand by employers for highly skilled workers (who are more likely to use computers) and that this increased demand led to a rise in the wages of the highly skilled relative to those of the less skilled. ; The authors of this article reconsider the evidence for the SBTC hypothesis and focus on changes over time in overall wage inequality and in the evolution of different groups of workers' relative wages. In doing so, they conclude that SBTC falls far short of unicausal explanation of the substantial changes in the U.S. wage structure of the 1980s and 1990s and does not, by itself, prove to be particularly helpful in organizing or understandings these changes. The article concludes that it is time to re-evaluate the case that SBTC offers a satisfactory explanation for the rise in U.S. wage inequality.Wages ; Productivity ; Technology ; Economic development

Active Labor Market Policy Evaluations: A Meta-analysis

This paper presents a meta-analysis of recent microeconometric evaluations of active labor market policies. Our sample consists of 199 program estimates drawn from 97 studies conducted between 1995 and 2007. In about one-half of these cases we have both a short-term impact estimate (for a one-year post-program horizon) and a medium-term estimate (two-year horizon). We characterize the program estimates according to the type and duration of the program, the characteristics of the participants, and the evaluation methodology. Heterogeneity in all three dimensions affects the likelihood that an impact estimate is significantly positive, significantly negative, or statistically insignificant. Comparing program types, subsidized public sector employment programs have the least favorable impact estimates. Job search assistance programs have relatively favorable short-run impacts, whereas classroom and on-the-job training programs tend to show better outcomes in the medium-run than the short-run. Programs for youths are less likely to yield positive impacts than untargeted programs, but there are no large or systematic differences by gender. Methodologically, we find that the outcome variable used to measure program effectiveness matters. Evaluations based on registered unemployment durations are more likely to show favorable short-term impacts. Controlling for the outcome measure, and the type of program and participants, we find that experimental and non-experimental studies have similar fractions of significant negative and significant positive impact estimates, suggesting that the research designs used in recent non-experimental evaluations are unbiased.

Skill Biased Technological Change and Rising Wage Inequality: Some Problems and Puzzles

The rise in wage inequality in the U.S. labor market during the 1980s is usually attributed to skill-biased technical change (SBTC), associated with the development of personal computers and related information technologies. We review the evidence in favor of this hypothesis, focusing on the implications of SBTC for economy-wide trends in wage inequality, and for the evolution of wage differentials between various groups. A fundamental problem for the SBTC hypothesis is that wage inequality stabilized in the 1990s, despite continuing advances in computer technology. SBTC also fails to explain the closing of the gender gap, the stability of the racial wage gap, and the dramatic rise in education-related wage gaps for younger versus older workers. We conclude that the SBTC hypothesis is not very helpful in understanding the myriad shifts in the structure of wages that have occurred over the past three decades.

Do Immigrant Inflows Lead to Native Outflows?

We use 1980 and 1990 Census data for 119 larger Metropolitan Statistical Areas to examine the effect of skill-group specific immigrant inflows on the location decisions of natives in the same skill group, and on the overall distribution of human capital. To control for unobserved skill-group specific demand factors, our models include lagged mobility flows of natives over the 1970-80 period. We also estimate instrumental variables models that use the fraction of Mexican immigrants in 1970 to predict skill-group specific relative immigrant inflows over the 1980s. Despite wide variation across cities in the size and relative skill composition of immigrant population changes we find no evidence of selective out-migration by natives. We conclude that immigrant inflows exert a direct effect on the relative skill composition of cities: cities that have received relatively unskilled immigrant flows have experienced proportional rises in the size of their unskilled populations.

A practical experience with independent verification and validation

One approach to reducing software cost and increasing reliability is the use of an independent verification and validation (IV & V) methodology. The Software Engineering Laboratory (SEL) applied the IV & V methodology to two medium-size flight dynamics software development projects. Then, to measure the effectiveness of the IV & V approach, the SEL compared these two projects with two similar past projects, using measures like productivity, reliability, and maintain ablilty. Results indicated that the use of the IV & V methodology did not help the overall process nor improve the product in these cases

An empirical study of software design practices

Software engineers have developed a large body of software design theory and folklore, much of which was never validated. The results of an empirical study of software design practices in one specific environment are presented. The practices examined affect module size, module strength, data coupling, descendant span, unreferenced variables, and software reuse. Measures characteristic of these practices were extracted from 887 FORTRAN modules developed for five flight dynamics software projects monitored by the Software Engineering Laboratory (SEL). The relationship of these measures to cost and fault rate was analyzed using a contingency table procedure. The results show that some recommended design practices, despite their intuitive appeal, are ineffective in this environment, whereas others are very effective

Criteria for software modularization

A central issue in programming practice involves determining the appropriate size and information content of a software module. This study attempted to determine the effectiveness of two widely used criteria for software modularization, strength and size, in reducing fault rate and development cost. Data from 453 FORTRAN modules developed by professional programmers were analyzed. The results indicated that module strength is a good criterion with respect to fault rate, whereas arbitrary module size limitations inhibit programmer productivity. This analysis is a first step toward defining empirically based standards for software modularization

Workplace heterogeneity and the rise of West German wage inequality

We study the role of establishment-specific wage premiums in generating recent increases in West German wage inequality. Models with additive fixed effects for workers and establishments are fit in four sub-intervals spanning the period from 1985 to 2009. We show that these models provide a good approximation to the wage structure and can explain nearly all of the dramatic rise in West German wage inequality. Our estimates suggest that the increasing dispersion of West German wages has arisen from a combination of rising heterogeneity between workers, rising dispersion in the wage premiums at different establishments, and increasing assortativeness in the assignment of workers to plants. In contrast, the idiosyncratic job-match component of wage variation is small and stable over time. Decomposing changes in mean wages between different education groups, occupations, and industries, we find that increasing plant-level heterogeneity and rising assortativeness in the assignment of workers to establishments explain a large share of the rise in inequality along all three dimensions

Firms and labor market inequality: Evidence and some theory

We review the literature on firm-level drivers of labor market inequality. There is strong evidence from a variety of fields that standard measures of productivity - like output per worker or total factor productivity - vary substantially across firms, even within narrowly-defined industries. Several recent studies note that rising trends in the dispersion of productivity across firms mirror the trends in the wage inequality across workers. Two distinct literatures have searched for a more direct link between these two phenomena. The first examines how wages are affected by differences in employer productivity. Studies that focus on firm-specific productivity shocks and control for the non-random sorting of workers to more and less productive firms typically find that a 10% increase in value-added per worker leads to somewhere between a 0.5% and 1.5% increase in wages. A second literature focuses on firm-specific wage premiums, using the wage outcomes of job changers. This literature also concludes that firm pay setting is important for wage inequality, with many studies finding that firm wage effects contribute approximately 20% of the overall variance of wages. To interpret these findings, we develop a model where workplace environments are viewed as imperfect substitutes by workers, and firms set wages with some degree of market power. We show that simple versions of this model can readily match the stylized empirical findings in the literature regarding rent-sharing elasticities and the structure of firm-specific pay premiums.Zunächst präsentieren wir einen Überblick über die Literatur zu den Triebfedern von Ungleichheiten am Arbeitsmarkt auf Firmenebene. Es gibt aus mehreren Richtungen mittlerweile starke Evidenz dafür, dass die Standardmaße für Produktivität, wie z. B. Output pro Beschäftigter oder die totale Faktorproduktivität, erheblich über Firmen, ja sogar in eng abgegrenzten Wirtschaftszweigen, variieren. Dabei zeigen mehrere Studien, dass der Trend zu einer zunehmenden Produktivitätsdispersion zwischen Firmen den Trend in der Lohnungleichheit zwischen Beschäftigten widerspiegelt. In der Literatur gibt es nun zwei Stränge, die sich unmittelbar mit der Verbindung zwischen diesen beiden Phänomenen beschäftigen. Im ersten Strang wird dabei untersucht, inwieweit Löhne durch Unterschiede in der Produktivität von Arbeitgebern beeinflusst werden. Diese Studien fokussieren sich dabei auf firmenspezifische Produktivitätsschocks, wobei sie für eine nicht randomisierte Zuordnung von Beschäftigten auf mehr oder weniger produktive Firmen kontrollieren. Typischerweise führt dabei eine zehn prozentige Erhöhung der Wertschöpfung pro Arbeitnehmer zu einem Anstieg der Löhne zwischen 0,5 und 1,5 Prozent. Der zweite Literaturstrang stellt auf firmenspezifische Lohnaufschläge ab, zu deren Ermittlung die Lohnpositionen von Berufswechslern herangezogen werden. Dabei zeigt sich, dass die Lohnsetzung der Firmen bedeutenden Einfluss auf die Lohnungleichheit ausübt. Zahlreiche Studien zeigen, dass firmenspezifische Lohneffekte ungefähr 20 Prozent der Gesamtvarianz der Löhne ausmachen. Um diese Ergebnisse entsprechend interpretieren zu können, entwickeln wir in einem ersten Schritt ein Modell, in dem Beschäftigte das Arbeitsumfeld als imperfektes Substitut wahrnehmen und Firmen über eine gewisse Marktmacht bei der Lohnsetzung verfügen. Bereits in einer einfachen Versionen steht dieses Modell in Einklang mit den stilisierten empirischen Ergebnisse der Literatur bezüglich den Elastizitäten von rent sharing und der Struktur von firmenspezifischer Lohnaufschlägen