Question

Question 2

During the 1980s and 1990s, the U.S. labor market experienced a sizeable increase in wage inequality in terms of skills, suggesting that the relative demand for skilled workers was rising at a faster rate than the relative supply of skilled workers. Give an analysis as to the key variables that might have contributed to the changes in wage structure.

Answer 1

1. During the period of 1980's and 1990's, the relative demand of skilled workers increased tremendously which is the reason why the wage rate had been inclined.

2. Some economists think that one probability of wage inequality among workers might be technology and other economists think it's not.

3. There is no direct evidence after 1980's that technological change is the cause of wage inequality among the skilled workers.

4. But a strong evidence of change in wage structure is that, the employers changed the techniques of production and services which require high skilled or say educated work force.

5. Direct effect of technology is not found in this period but it may be one of the reasons which affected the wage structure.

6. Apart from the element of technology, industrial composition, supply changes, etc might be other elements affected the wage structure.

7. Technological changes have complemented more towards skilled workers rather unskilled workers in improvement of their wage structure.