The Computerization of the Workplace and Income Inequality: Focusing on the Computer Worker
Income inequality in the U.S. has risen over the past three decades but has increased unevenly both across and within industries. Meanwhile, the use of information and communication technology (ICT) has increased explosively. Popular models of Skill-Biased Technological Change (SBTC) offer intuitive theory about the causal connection between these two phenomena, yet studies speaking to the magnitude of this effect among computer workers are lacking. In this paper, I explore the relationship between ICT and earnings inequality in the U.S. labor force. I pair earnings data for both computer workers and non-computer workers with industry-level ICT measures from 2003 to 2016 and find that ICT tends to affect inequality among computer and non-computer workers differently. As Information Technology (IT) contributes more to productivity, income inequality increases between computer workers but decreases among non-computer workers in the service sector. In the goods-producing sector, the level of IT’s contribution to productivity is significantly and positively associated with income inequality only among computer workers with earnings in the lower tail. These effects hold when controlling for unionization and product market concentration. My findings suggest that SBTC plays out in unique ways for computer workers, rewarding those that follow new methods of creating value rather than saving labor. As such, the most valued skills of computer worker are flexibility and adaptability. Contrary to neoclassical economic theory, their market value decreases with their degree of specialization.
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