How Does Technology Affect Skill Demand? Technical Changes and Capital-Skill Complementarity in the 21st Century

Abstract

This paper attempts to examine technology’s impact on the labor market through the lens of skilled labor. Technical changes in the late 20th century are skill-biased in nature, because they are found to complement with skilled labor who are adept at adopting new technologies. However, recent studies document a lower demand for high-skilled labor in the 21st century, compared with the late 20th century. Are technologies starting to substitute for human skills instead of complementing them? Drawing on the wage share data from 1975 to 2015 for 18 sectors in the United States, I find strong and robust evidence of complementary relationships between technical changes and demand for skilled labor. Furthermore, my results suggest that technologies have become more skilled-biased, not less, in the 21st century