How the internet led to greater wage inequality

THE GREAT detective has summoned everyone to the library. “I was asked to identify the culprit behind the growing wave of wage inequality” he says. “I can reveal that the offender is there.” And the assembled suspects gasp as he points, not at a human, but at the computer in the corner.

In real life, few would be too be surprised at that verdict. Economists have long pointed to “skill-biased technological change” as one of the driving forces behind inequality. But demonstrating the influence of technology is important in an era when politicians routinely blame immigration or cut-price competition from imports instead. And the evidence that technology is indeed the perpetrator is getting stronger as academics look at its impact on inequality within individual firms, as well as across the broader economy.

A new working paper* by Christopher Poliquin of the University of California, Los Angeles, examined the effect on wages at Brazilian firms that adopted broadband between 2000 and 2009. The average employee experienced a 2.3% cumulative gain in real wages, relative to workers at firms without broadband. But managers at the firm gained 8-9% while executive directors enjoyed an 18-19% boost. Mr Poliquin thinks that the internet allowed skilled workers to be much more productive than before.

His suggestion chimes with...

via Business Feeds

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