Extending the Race between Education and Technology

Income Distribution, New Findings, January 2020

The race between edu­ca­tion and tech­nol­o­gy pro­vides a canon­i­cal frame­work that does an excel­lent job of explain­ing US wage struc­ture changes across the twen­ti­eth cen­tu­ry. The frame­work involves sec­u­lar increas­es in the demand for more-edu­cat­ed work­ers from skill-biased tech­no­log­i­cal change, com­bined with vari­a­tions in the sup­ply of skills from changes in edu­ca­tion­al access. We expand the analy­sis back­wards and for­wards. The frame­work helps explain ris­ing skill dif­fer­en­tials in the nine­teenth and twen­ty-first cen­turies, but needs to be aug­ment­ed to illu­mi­nate the recent con­vex­i­fi­ca­tion of edu­ca­tion returns and implied slow­down in the growth of the rel­a­tive demand for col­lege work­ers. Increased edu­ca­tion­al wage dif­fer­en­tials explain 75 per­cent of the rise of U.S. wage inequal­i­ty from 1980 to 2000 as com­pared to 38 per­cent for 2000 to 2017.