Managerial And Human Resource Economics: Approaches Used In Studies

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 registered a relative demand for highly skilled workers with large falls in the demand for middle educated individuals. Polarization is a significant factor that has affected several industries and the labor market at large. Technology is said to have contributed to the demand for college education in the 1980s. Unlike technology, trade openness is said to have polarized the labor markets to a certain degree (Katz, L.F & Murphy, K.M: 1992, 50).
Measuring Changes in the Relative Demand for Labor
The topic of this paper is based on a strong hypothesis that depends on the changes in the relative demand for labor. Therefore, it is essential to consider the fact that the observed structural changes in the relative demand for labor are a reflection of the competitive levels of wage. In terms of skills, education plays the biggest role. For this reason, it would be wise to measure changes with regards to the education level of workers. Reduced demand for less-educated males can be associated with a rise in global competition, changes in product demand structure and skill-biased technological change. There are two ways that the shift in labor demand can be understood: changes in the relative factors intensities at fixed relative wages in various industries and changes in the total labor allocation at fixed relative wages between industries. Outsourcing and non-labor inputs such as computers have been labeled as the major source of shifts within industries that also include technological changes. An example of a non-labor input is computer service and outsourcing can be understood as production outside the ‘mother country.’ On the other hand, shifts that occur between industries can be associated with product demand shift across the industries, global trade shifts with reference to fixed relative wages and differences of sectors in terms of neutral growth of productivity (Michaels, G: 2014, 60).
Industrial employment distributions affect the shift in labor demand between industries where companies experience different demographic groups. Gender education groups can be one such example that repres...