Recent empirical and case study evidence documents a strong association between the adoption of computers and increased use of college educated or non-production workers. With few exceptions, the conceptual link explaining how computer technology complements skilled labor or substitutes for unskilled labor is less well developed. In this paper, we apply an understanding of what computers do – the execution of procedural or rules-based logic – to develop a simple model of how the widespread adoption of computers in the workplace might alter workplace skill demands. An essential contention of our framework is that, to a first approximation, computer capital substitutes for a limited and well-defined set of human activities, those involving repetitive information processing (cognitive) and routine manual tasks. This observation leads to a set of hypotheses that we test using samples of workers from Census and CPS files for 1960 – 1998 augmented with Dictionary of Occupational Title variables describing their occupations ’ requirements for routine and non-routine cognitive and manual skills. We find that computerization is associated with declining relative industry demand for routine manual and cognitive skills and increased relative demand for non-routine cognitive skills (both interactive and analytical). We document that these demand shifts are evident both in changes in occupational distributions within

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A large literature documents a substantial rise in U.S. wage inequality and educational wage differentials during the 1980s and early 1990s and concludes that these wage structure changes can be accounted for by shifts in the supply of and demand for skills reinforced by the erosion of labor market institutions supporting low- and middlewage workers. Drawing on an additional decade of data, several “revisionist ” studies reject this consensus to conclude that (1) the rise in wage inequality was an “episodic ” event of the first-half of the 1980s, (2) this rise was mainly caused by a falling minimum wage, and (3) increased residual wage inequality since the mid-1980s reflects the confounding effects of labor force composition. We reexamine these claims using data from the Current Population Survey for 1963 to 2005 and find only limited support. A slowing of the growth of overall wage inequality in the 1990s hides a divergence in the paths of upper-tail (90/50) and lower-tail (50/10) inequality. Uppertail wage inequality has been increasing steadily since 1980 even after adjusting for labor force composition changes. Lower-tail wage inequality increased sharply in the first-half of the 1980s but has flattened or narrowed since the late 1980s. Strong time series correlations of the real minimum wage and upper-tail wage inequality raise questions concerning the causal interpretation of relationships between the minimum wage and both overall and

We conduct a systematic empirical study of cross-sectional inequality in the United States, integrating data from the Current Population Survey, the Panel Study of Income Dynamics, the Consumer Expenditure Survey, and the Survey of Consumer Finances. In order to understand how different dimensions of inequality are related via choices, markets, and institutions, we follow the mapping suggested by the household budget constraint from individual wages to individual earnings, to household earnings, to disposable income, and, ultimately, to consumption and wealth. We document a continuous and sizable increase in wage inequality over the sample period. Changes in the distribution of hours worked sharpen the rise in earnings inequality before 1982, but mitigate its increase thereafter. Taxes and transfers compress the level of income inequality, especially at the bottom of the distribution, but have little effect on the overall trend. Finally, access to financial markets has limited both the level and growth of consumption inequality.

shift in their labor supply function for annual hours in the 1980s, with little shift in the 1990s. These shifts account for most of the slowdown in the growth of labor supply during this period. A major development was the dramatic decrease in the responsiveness of mar-ried women’s labor supply to their own and husbands ’ wages: their own wage elasticity fell by 50%–56%, while their cross wage elas-ticity fell by 38%–47 % in absolute value. I.

exhibited a pattern of job polarization with rises in employment shares in the highest- and lowest-wage occupations. This is not entirely consistent with the idea of skill-biased technical change as a hypothesis about the impact of technology on the labor market. We argue that the “routiniza-tion ” hypothesis recently proposed by Autor, Levy, and Murnane (2003) is a better explanation of job polarization, though other factors may also be important. We show that job polarization can explain one-third of the rise in the log(50/10) wage differential and one-half of the rise in the log(90/ 50). I.

How unions affect the distribution of income is a subject that has long intrigued social scientists. The publication of What Do Unions Do? and the related papers by Freeman (1980, 1982, 1984) represented a watershed in the evolution of economists ' views on this question. Until the 1970s the dominant view was that unions tended to increase wage inequality (Johnson, 1975). Using micro data on individual workers

How does information technology affect wages and organization? To answer this question, we model an economy formed by a continuum of agents with heterogeneous cognitive skill, who use a production technology that requires physical inputs and knowledge. Our model generates an assignment of workers to positions, a wage structure, and a universe of knowledge-based hierarchies with different allocations of tasks, spans of control, and number of layers. It displays positive sorting between production workers and problem solvers, an increasing relationship between rank and cognitive ability, an increasing and convex wage schedule and a positive relation between wages and firm size. We use our model to study the impact of information technology on the labor market andonthestructureoffirms. We show that the evolution of wage inequality and firm size is consistent with decreases in the cost of accessing information in the 80’s and early 90’s and decrease in the cost of communicating information in the late 90’s. Our theory is also consistent with the evidence on decentralization, flatter hierarchies and larger spans of control. 1

In the early 1990s, the consensus in the literature was that the large increase in wage inequality of the 1980s was ubiquitous in the sense that all dimensions of inequality were growing. For example, in a simple human capital model, wage inequality can increase because returns to education and experience increase, or because residual or within-group inequality increases. Chinhui Juhn, Kevin M. Murphy and Brooks Pierce (1993) showed that all of these dimensions of inequality had been growing over time. They attributed this to a pervasive increase in the relative demand for all dimensions of skill (education, experience, unobserved ability, etc.). Other studies argue that skill biased technological change (SBTC) was the main driving force behind the rise in the relative demand for skill (e.g. Alan B. Krueger, 1993, and Eli Berman, John Bound and Zvi Griliches, 1994). More recently, however, a number of challenges to this “1990s consensus ” have emerged. One challenge that I do not explore in this paper has to do with the timing of the growth in wage inequality. In particular, David Card and John DiNardo (2002) and Paul Beaudry and David Green (2005) argue that much of the increase in the return to education was concentrated in the 1980s. In a similar vein, Thomas Lemieux (2006a)