High skill labor demand supply 5 supply 6 if supply

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High-skill labor demand supply $5 supply demand $10 $20 $6 If supply of low-skilled labor has gone up faster, wage gains for this group would be more modest Globalization (increased competition from low-skilled foreign workers employed in other countries) would have same effect. Possible explanations for increasing inequality 1. Skill-based technological progress 2. Immigration and globalization 3. Increased variability of income for each individual
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6 Suppose everybody starts in year 1 with $40,000 income Half the people get a $10,000 increase in year 2 but lose it in year 3 The other half get no increase in year 2 but $10,000 increase in year 3 Result: inequality is higher in years 2 and 3 than in year 1 Source: Gottschalk and Moffitt, Journal of Economic Perspectives, Fall 2009. Gottschalk and Moffitt, J. Econ. Perspectives, Fall 2009: about half the increase in U.S. cross-section income inequality since the 1980s is due to increased transitory variance
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  • Spring '08
  • Kim
  • Skill-based technological progress

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