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💵principles of macroeconomics review

key term - Skill-Biased Technological Change

Citation:

Definition

Skill-biased technological change refers to the phenomenon where technological advancements disproportionately benefit highly skilled workers over less skilled workers. This shift in labor demand favors workers with specialized skills and knowledge, often leading to increased wage inequality.

5 Must Know Facts For Your Next Test

  1. Skill-biased technological change has been a significant driver of increasing wage inequality in developed economies over the past few decades.
  2. The adoption of computer-based technologies and automation has led to a higher demand for workers with technical skills, problem-solving abilities, and adaptability.
  3. Highly skilled workers, such as those in fields like engineering, computer science, and finance, have seen their wages rise relative to less-skilled workers.
  4. The demand for routine, manual tasks has declined, while the demand for non-routine, cognitive tasks has increased, leading to a polarization of the labor market.
  5. Skill-biased technological change has also contributed to the decline of certain industries and the displacement of workers, particularly those with lower levels of education and training.

Review Questions

  • Explain how skill-biased technological change affects the demand for labor in the context of 4.1 Demand and Supply at Work in Labor Markets.
    • Skill-biased technological change shifts the demand for labor in favor of highly skilled workers. As new technologies are adopted, the demand for workers with the skills to operate and maintain these technologies increases, leading to higher wages for skilled workers. Conversely, the demand for less-skilled workers in routine tasks declines, putting downward pressure on their wages. This results in a widening of the wage gap between skilled and unskilled workers, as described in the concept of demand and supply at work in labor markets.
  • Discuss the impact of skill-biased technological change on international trade and its effects on jobs, wages, and working conditions, as outlined in 21.2 International Trade and Its Effects on Jobs, Wages, and Working Conditions.
    • Skill-biased technological change can have significant implications for international trade and its impact on jobs, wages, and working conditions. As countries adopt new technologies, the demand for highly skilled workers increases, leading to higher wages and better working conditions for these workers. However, this can also lead to the displacement of less-skilled workers, particularly in industries that are exposed to international competition. This can result in job losses, stagnant wages, and deteriorating working conditions for these workers, as described in the context of international trade and its effects on the labor market.
  • Evaluate how policymakers can address the challenges posed by skill-biased technological change in the context of labor markets and international trade.
    • Policymakers can implement various strategies to address the challenges posed by skill-biased technological change. This may include investing in education and workforce development programs to upskill workers, providing retraining and job placement assistance for displaced workers, and implementing policies that promote the development and adoption of new technologies while ensuring a more equitable distribution of the benefits. Additionally, policymakers can explore ways to strengthen social safety nets, such as unemployment benefits and healthcare coverage, to support workers affected by the disruptive effects of technological change. Addressing skill-biased technological change requires a multifaceted approach that balances the need for economic progress with the goal of maintaining a more inclusive and equitable labor market, both domestically and in the context of international trade.

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