Human Capital

Question 1

What is skill-biased technological change?

Answer 1

Idea that recent changes in tech have tended to increase the productivity of only some workers

Predicts rising inequality between those with more skill and those with less

E.g. Case study on food processing plant
Due to machines, gave bigger raises to existing machines and electricians, began hiring only these kinds of workers

The more skilled workers got faster wages, became more numerous, leading to more inequality

Question 2

Two tell-tale signs of SBTC?

Answer 2

1. Occupations that employ people with more human capital also use modern technology
2. Differential wage growth by level of human capital

Question 3

What else can human capital be divided by?

Answer 3

Education

Question 4

What does the O*Net dataset ask questions about

Answer 4

1. What level of education do people in the job typically have?
   -I divide workers into three groups: 1) 0-33% with at least a two-year
   degree; 2) 34-66% with a degree; and 3) 67-100% with a degree.
2. What sorts of technologies (e.g., software like Microsoft Word, or statistical
   packages like STATA) does the job use.
    The O*Net Database also labels these technologies as “Hot” if they appear
   on a large number of job postings.

Question 5

What does new research on SBTC show?

Answer 5

Suggests a more complicated and non-monotonic relationship
between skill, employment, and earnings.

As we will see, while the largest gains in employment have gone to those in high-
skill occupations, employment growth and earnings growth is higher in low-skill
jobs than in middle-skill jobs.

Question 6

What does the case study on polarization show?

Answer 6

Mid 1990s, processing checks at a bank required 5 basic steps that (at one
major bank) were all done by a single person called a “Proof Machine Operator”

Then came OCR software (optical character recognition)
Good at doing routine things

Prior to change, he bank employed 67 workers as Proof Machine Operators

After job of Proof Machine Operator divided into three
different jobs- machine did most of check reading, basic addition

Fewer workers employed overall, widening of wage distribution

Lowered previously middle-income wages

Question 7

Benefits and costs of higher education?

Answer 7

Benefits:
- higher future earnings
- higher job satisfaction

Costs:
Out-of-pocket direct expenses, including tuition and the costs of books
* Forgone earnings from spending 4 years at least out of the labor force
* Psychic losses form having to sit through classes and study for tests
* Potential lost future income because of interest on loans

Question 8

Why is there inequality in educational attainment over time?

Answer 8

Cost of education, lack of public education funding, parents with different income

E.g. black students having more debt, facing more barriers

1. Public education: states devote more resources to low-income areas to compensate for lack of resources

• state gives additional aid to poorer district e.g. new jersey (devotes state special and state other revenue to poorest districts

2. Fairness ratio: student to teacher ratio in a district with low poverty divided by student to teacher ratio in a high poverty district

(a higher ratio is more fair e.g. if rich is 30 students/teacher and poor is 20, then ratio is higher)

Education inequality explains half the income gap between black and white workers

Question 9

What is polarization?

Answer 9

Jobs in the middle are most routine and susceptible to technological replacement