Social and Behavioral Sciences Commons^™

Wage Inequality And Skill Asymmetries, Peter Skott, Paul Auerbach

Peter Skott

Using a simple model with two levels of skill, we assume that high skill workers who fail to get high skill jobs may accept low skill positions; low skill workers do not have the analogous option of filling high skill position. This asymmetry implies that an adverse, skill neutral shock to aggregate employment may cause an increase in wage inequality, both between and within skill categories, as well as an increase in unemployment, especially among low skill workers. Movements in productivity, unemployment and inequality may thus be linked to induced overeducation and credentialism.