Social and Behavioral Sciences Commons^™

Power-Biased Technological Change And The Rise In Earnings Inequality, Frederick Guy, Peter Skott

Economics Department Working Paper Series

New information and communication technologies, we argue, have been ‘power- biased’: they have allowed firms to monitor low-skill workers more closely, thus reducing the power of these workers. An efficiency wage model shows that ‘power-biased technical change’ in this sense may generate rising wage inequality accompanied by an increase in both the effort and unemployment of low-skill workers. The skill-biased technological change hypothesis, on the other hand, offers no explanation for the ob- served increase in effort.