From: Rakesh Bhandari (bhandari@BERKELEY.EDU)
Date: Thu Sep 30 2004 - 14:28:47 EDT
Drawing on Maurice Dobb, one could offer an explanation for widening income differentials between the skilled and the unskilled other than skill intensive technological change. That technical change can have the effect of reducing the amount of labor required to produce a certain output does not mean of course mean the absolute level of employment will drop off. If demand is sufficiently elastic, the cheapening of the output may of course enable a sufficient expansion of output to maintain or even raise the absolute level of employment. But the elasticity of demand is likely to increase only if income increases first. Which leads us to the obvious question of how the expansion of output can be under way if the initial effect of the technique is to reduce employment. Now the answer to this lies in the stimulation the new technique gives to investment--Dobb draws from Joan Robinson here. Since by their utilization capitalists can put more power behind "the elbows [or fingers] of workers", i.e., raise productivity and therewith relative surplus value, there is demand for the new techniques. This should mean more employment in the machine making sector, which (I assume following James Galbraith) is relatively skill intensive. An investment boom, then induced by the availability of new technique the assimilation of which will raise the ratio of machine to largely unskilled labor, should raise the wages of skilled to unskilled labor. However, a boom may also attenuate the skill premium. If it is strong enough, it should induce more workers to "skill" themselves and employers to draw from the pool of the unskilled and train them on the job. At any rate, with the increased employment in the machine making sector--and the addition of income related to these trades-- demand for all other goods and therewith wages all around should increase as well. The building up of capital stock, while in itself raising the skill premium, should however have a buoyant influence on total employment and income, which may attenuate said premium. However, once the process of building up is over, less direct labor is indeed now required to produce a given level of output and with the drop off in the new demand provided by surging skill-intensive employment in the machine making sector, the elasticity of demand is reduced from the reduction of income; thus, an oversupply of unskilled labor may now well develop, driving wages down precipitously from competition and the shift of workers to less renumerative sectors. Of course the slow down in the demand for the output of the machine making sector may lead to reduction in the wages of skilled workers as well, but one suspects that their fall may not be as steep as for unskilled workers who will be in no position to upgrade themselves, thus relieving skilled workers of greater competition: they will have become more of a non-competing group. In short, the skill premium may be greatest at the point technological change has petered out.
This archive was generated by hypermail 2.1.5 : Sat Oct 02 2004 - 00:00:03 EDT