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Mathematics & Economics
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Managerial And Human Resource Economics: Approaches Used In Studies (Essay Sample)

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1. We studied the following two papers on technological change: Katz and Murphy (1992) "Changes in Relative Wages, 1963-1987: Supply and Demand Factors" and Michaels et al. "Has ICT polarised skill demand: Evidence from eleven countries over 25 years." Clearly state the "skill-biased technical change" hypothesis for rising wage inequality. Explain in detail the different approaches used in these two studies to investigate this phenomenon. Carefully lay out their main findings.  

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RISING WAGE BILL
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Rising Wage Bill
Introduction
The phenomenon of the rising wage bill inequality is examined through different approaches by Katz & Murphy and Michael. The two papers, Changes in Relative Wages, 1963-1987: Supply and Demand Factors and Has ICT polarized skilled demand, give different approaches towards the topic. In the 1980s, the United States experienced a substantial increase in wage inequality between men and women. The Katz & Murphy paper looks at the structural change in wage based on three major dimensions. Among the factors that led to the rise in inequality include a rise in wage due to the difference in the level of education, younger workers receiving lesser wages than the older workers and increase in wages among skilled and defined demographic groups (Katz, L.F & Murphy, K.M: 1992, 50).
The paper is mostly concerned about the skill-biased technical change with reference to the rising wage inequality. The paper is written by Murphy highlight that there was a narrow gap between men and women through to the 80s. However, between 1979 and 1987, there was an eight percent increase in the average wage of females as compared to that of males. This paper focuses on the hypothesis for the rising wage inequality due to the skill-biased technical change. Additionally, major findings and different approaches used by the authors to investigate this phenomenon will be included.
Since the major changes in the 1980s, there have been several explanations regarding the main causes of wage inequality. The main one being the skill-biased technical changes that have been experienced over the years. The wage movement patterns are well documented. The wage structure of the United States in the 1980s was determined by the relative demand for labor at that time, where more skilled and more educated individuals were favored by the system. The wage inequality gap was further widened by the onset of technology through the computer revolution; companies demand physical labor was reduced due to a relative increase in demand for flexible and more educated workers. There is a different approach that is said to have contributed to the rise in wage inequality in the 1980s; a sharp decline of employment in the manufacturing sector coupled with a shift in the employment of more educated individuals, all of which resulted from a shift in product demand that caused trade deficits. This paper also indicates that the change in wage inequality was a result of several variables such as the elimination of the value of minimum wage, decline in unions and changes in the norms of pay (Michaels, G: 2014, 64).
According to Katz and Murphy, the hypothesis of skill-biasness towards wage inequality is the major variable with regards to the topic. There is a change of interest in the labor market with reference to skill distribution; the markets are more inclined towards the middle and a relative fall at the bottom of the skill distribution. The hypothesis of middle-skill distribution demand in the labor market can be understood through the computer revolution. Information and communication technologies have greatly substituted highly skilled workers through the development of programs and software. Therefore, companies have continued to demand middle educated workers who can only perform routine tasks. In this case, their level of business is purely based on ICT polarization in countries such as the United States and Japan. However, highly educated workers have been high on demand because they are required to monitors and control sensitive and complex computer programs. Following this, most industries that have witnessed the rapid growth of ICT have regi...

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