page_title: Causes of income inequality in the United States
section_title: Skill-biased technological change
hierarchical_section_title: Causes of income inequality in the United States / Market factors / Skill-biased technological change
caption_attribution_description: English: U.S. Hourly Wages - Real or Adjusted for Inflation 1964-2014
context_page_description: Causes of income inequality in the United States describes the reasons for the unequal distribution of income in the US and the factors that cause it to change over time. This topic is subject to extensive ongoing research, media attention, and political interest.
  Income inequality in the United States grew significantly beginning in the early 1970s, after several decades of stability. The US consistently exhibits higher rates of income inequality than most developed nations, arguably due to the nation's relatively less regulated markets.
  According to the Congressional Budget Office, "the precise reasons for the [recent] rapid growth in income at the top are not well understood", but "in all likelihood," an "interaction of multiple factors" was involved. Researchers have offered several potential rationales. Various rationales conflict or overlap. They include:
  globalization – Lesser-skilled American workers have been losing ground in the face of competition from workers in Asia and other emerging economies.
  skills – The rapid pace of progress in information technology has increased the relative demand for higher-skilled workers.
context_section_description: As of the mid- to late- decade of the 2000s, the most common explanation for income inequality in America was "skill-biased technological change" (SBTC)  – "a shift in the production technology that favors skilled over unskilled labor by increasing its relative productivity and, therefore, its relative demand". For example, one scholarly colloquium on the subject that included many prominent labor economists estimated that technological change was responsible for over 40% of the increase in inequality. Other factors like international trade, decline in real minimum wage, decline in unionization and rising immigration, were each responsible for 10–15% of the increase.
  Education has a notable influence on income distribution. In 2005, roughly 55% of income earners with doctorate degrees – the most educated 1.4% – were among the top 15 percent earners. Among those with master's degrees – the most educated 10% – roughly half had incomes among the top 20 percent of earners. Only among households in the top quintile were householders with college degrees in the majority.
  But while the higher education commonly translates into higher income, and the highly educated are disproportionately represented in upper quintile households, differences in educational attainment fail to explain income discrepancies between the top 1 percent and the rest of the population. Large percentages of individuals lacking a college degree are present in all income demographics, including 33% of those with heading households with six figure incomes.
  From 2000 to 2010, the 1.5% of Americans with an M.D., J.D., or M.B.A. and the 1.5% with a PhD saw median income gains of approximately 5%. Among those with a college or master's degree (about 25% of the American workforce) average wages dropped by about 7%, (though this was less than the decline in wages for those who had not completed college). Post-2000 data has provided "little evidence" for SBTC's role in increasing inequality. The wage premium for college  educated has risen little and there has been little shift in shares of employment to more highly skilled occupations.
  Approaching the issue from occupations that have been replaced or downgraded since the late 1970s, one scholar found that jobs that "require some thinking but not a lot" – or moderately skilled middle-class occupations such as cashiers, typists, welders, farmers, appliance repairmen – declined the furthest in wage rates and/or numbers. Employment requiring either more skill or less has been less affected. However the timing of the great technological change of the era – internet use by business starting in the late 1990s – does not match that of the growth of income inequality (starting in the early 1970s but slackening somewhat in the 1990s). Nor does the introduction of technologies that increase the demand for more skilled workers seem to be generally associated with a divergence in household income among the population. Inventions of the 20th century such as AC electric power, the automobile, airplane, radio, television, the washing machine, Xerox machine, each had an economic impact similar to computers, microprocessors and internet, but did not coincide with greater inequality.
  Another explanation is that the combination of the introduction of technologies that increase the demand for skilled workers, and the failure of the American education system to provide a sufficient increase in those skilled workers has bid up those workers' salaries. An example of the slowdown in education growth in America (that began about the same time as the Great Divergence began) is the fact that the average person born in 1945 received two more years of schooling than his parents, while the average person born in 1975 received only half a year more of schooling.  Author Timothy Noah's "back-of-the-envelope" estimation based on "composite of my discussions with and reading of the various economists and political scientists" is that the "various failures" in America's  education system are "responsible for 30%" of the post-1978 increase in inequal
caption: U.S. real wages remain below their 1970's peak.[51]
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