NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

How Has Computer Use Changed the Labor Market?

"To a substantial extent, the computer revolution explains the increasing wage gap that started to develop in the 1980s between those with a college education and those with a high-school education or less."

The rapid spread of computer technology in the workplace may explain as much as 30 to 50 percent of the extra growth in the demand for more-skilled workers since 1970, according to a study by David Autor, Lawrence Katz, and Alan Krueger. To a substantial extent, the computer revolution explains the increasing wage gap that started to develop in the 1980s between those with a college education and those with a high-school education or less, they conclude.

In Computing Inequality: Have Computers Changed the Labor Market? (NBER Working Paper No. 5956), the three economists observe that the relative demand for more-skilled (college level) workers grew more rapidly on average during the 25 years from 1970 to 1995 than in the previous three decades from 1940 to 1970. This increased demand at first was met with a sufficient supply of workers with a college degree, or at least some years of college. But that slowed at the beginning of the 1980s, and the changed demand-supply relationship soon raised the wage advantage of those with a college education over high school graduates.

Looking at data going back as far as 1940, the authors find that the acceleration in the rate of growth of demand for skilled workers since 1970 is driven entirely by rapid changes within industries, rather than by shifts in employment among industries. The industries with large increases in the pace of skill upgrading in the 1970s and 1980s versus the 1960s are stronger users of computers: relative to other industries, they exhibit greater growth in the use of computers by employees; more capital investment in computers per worker; and investment in computers accounts for a larger share of total investment. This is true in both the manufacturing and non-manufacturing sectors. High computer-use sectors appear to have re-organized work and introduced new products and services in a manner that disproportionately employs more educated workers.

Since 1984, the proportion of workers who operate computer keyboards at work has grown steadily, from a starting point of one-quarter to more than one-third in 1989 and to nearly one-half in 1993. That's an average increase of 2.4 percent of the workforce per year. Women, whites, more highly-educated workers, white-collar workers, and full-time workers are more likely than other workers to use computers. These groups are also more likely to have enjoyed relative wage gains between 1984 and 1993. Those industries that experienced the greatest growth in computer use tended to shift their occupational mix more toward managers and professionals who are paid better, and away from administrative support/clerical and service workers.




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