Skill-biased technological change

Definition

Skill-biased technological change refers to technological advancements that disproportionately benefit skilled workers over unskilled workers, leading to increased demand for skilled labor while reducing demand for low-skilled jobs. This phenomenon impacts various aspects of the economy, shaping labor markets and influencing productivity growth, job structures, and economic inequality.

5 Must Know Facts For Your Next Test

1. Skill-biased technological change has been a significant driver of wage disparity between skilled and unskilled workers, contributing to rising income inequality since the late 20th century.
2. Technological innovations, particularly in information technology, have transformed industries by enhancing productivity but have also favored workers with higher education and specialized skills.
3. As industries evolve due to skill-biased technological change, there is often an increased need for ongoing education and training for workers to remain competitive in the labor market.
4. This change has resulted in labor market polarization, where high-paying jobs for skilled workers increase alongside low-paying jobs for unskilled workers, while middle-income jobs decline.
5. The impact of skill-biased technological change can be seen in the shift of job types within various sectors, leading to a greater emphasis on STEM fields and technical training programs.

Review Questions

• How does skill-biased technological change influence wage disparities in the labor market?
  • Skill-biased technological change leads to wage disparities because it increases demand for skilled workers while reducing demand for unskilled labor. As technology advances, tasks that require advanced skills become more valuable, resulting in higher wages for those who possess these skills. Conversely, unskilled workers face stagnating wages or job loss as automation replaces many of their roles, creating a widening income gap.
• Evaluate the long-term implications of skill-biased technological change on workforce training and education policies.
  • The long-term implications of skill-biased technological change necessitate a shift in workforce training and education policies to focus more on equipping individuals with the skills needed for high-demand jobs. Policymakers may need to invest in vocational training and higher education programs that emphasize STEM disciplines and technical skills. Additionally, continuous learning initiatives will be critical for existing workers to adapt to evolving job requirements influenced by technological advancements.
• Assess how skill-biased technological change could reshape the future landscape of the American economy and labor markets.
  • Skill-biased technological change is likely to reshape the American economy by further emphasizing the importance of education and skills development in determining employment outcomes. As technology continues to evolve, we can expect an increasing divide between high-skill jobs that drive innovation and low-skill jobs that may be automated. This trend could exacerbate income inequality unless addressed through targeted policies aimed at expanding access to quality education and retraining opportunities, ultimately affecting overall economic mobility and social cohesion.

Related terms

Human Capital: The collective skills, knowledge, and experience possessed by individuals, which enhance their ability to perform work and contribute to economic productivity.

Labor Market Polarization: A phenomenon where job opportunities grow at both the high-skill and low-skill ends of the job market while shrinking in the middle, often due to technological advancements.

Automation: The use of technology to perform tasks that would traditionally require human labor, which can lead to job displacement in certain sectors.