Skill Biased Financial Development: Education, Wages and Occupations in the U.S. Financial Sector
Over the past 60 years, the U.S. financial sector has grown from 2.3% to 7.7% of GDP. While the growth in the share of value added has been fairly linear, it hides a dramatic change in the composition of skills and occupations. In the early 1980s, the financial sector started paying higher wages and hiring more skilled individuals than the rest of economy. These trends reflect a shift away from low-skill jobs and towards market-oriented activities within the sector. Our evidence suggests that technological and financial innovations both played a role in this transformation. We also document an increase in relative wages, controlling for education, which partly reflects an increase in unemployment risk: Finance jobs used to be safer than other jobs in the private sector, but this is not longer the case.
We have benefited from discussions with Donghoon Lee, Holger Mueller, Tony Saunders, Bill Silber and Jeff Wurgler. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research.
“Wages and Human Capital in the U.S. Financial Industry: 1909 - 2006,” with Ariell Reshef, Quarterly Journal of Economic s , November 2012