Skills, tasks and technologies: Implications for employment and earnings

Type Journal Article - Handbook of labor economics
Title Skills, tasks and technologies: Implications for employment and earnings
Volume 4
Publication (Day/Month/Year) 2011
Page numbers 1043-1171
A central organizing framework of the voluminous recent literature studying changes in the returns to
skills and the evolution of earnings inequality is what we refer to as the canonical model, which elegantly and
powerfully operationalizes the supply and demand for skills by assuming two distinct skill groups that perform
two di§erent and imperfectly substitutable tasks or produce two imperfectly substitutable goods. Technology
is assumed to take a factor-augmenting form, which, by complementing either high or low skill workers, can
generate skill biased demand shifts. In this paper, we argue that despite its notable successes, the canonical
model is largely silent on a number of central empirical developments of the last three decades, including: (1)
signiÖcant declines in real wages of low skill workers, particularly low skill males; (2) non-monotone changes
in wages at di§erent parts of the earnings distribution during di§erent decades; (3) broad-based increases in
employment in high skill and low skill occupations relative to middle skilled occupations (i.e., job ëpolarizationí);
(4) rapid di§usion of new technologies that directly substitute capital for labor in tasks previously performed
by moderately-skilled workers; and (5) expanding o§shoring opportunities, enabled by technology, which allow
foreign labor to substitute for domestic workers speciÖc tasks. Motivated by these patterns, we argue that it
is valuable to consider a richer framework for analyzing how recent changes in the earnings and employment
distribution in the United States and other advanced economies are shaped by the interactions among worker
skills, job tasks, evolving technologies, and shifting trading opportunities. We propose a tractable task-based
model in which the assignment of skills to tasks is endogenous and technical change may involve the substitution
of machines for certain tasks previously performed by labor. We further consider how the evolution of technology
in this task-based setting may be endogenized. We show how such a framework can be used to interpret several
central recent trends, and we also suggest further directions for empirical exploration.

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