Computerization: Connecting the Dots

Inequality has social costs: it may engender political divisions, aggravate crime, and lead low-income families into poverty from which they or their children may not emerge. Dramatic shifts in relative well-being therefore demand attention. In the late. 1980s, economists discovered that the earnings of highand low-wage workers were rapidly diverging (Levy and Murnane 1992). Chart 1 plots earnings inequality for the years 1963 to 1995, measured as the percentage difference in earnings between the 90th percentile worker and the 10th percentile worker.! Between 1963 and 1979, this difference in earnings hovered steadily at approximately 220 percent among men and 190 percent among women. Over the next ten years, these gaps grew into fissures. The 9010 weekly earnings differential expanded by 110 percentage points for both genders between 1979 and 1989 and then edged slowly upward throughout the 1990s. Mirroring these trends, educational earnings inequality-the earnings gap between college and high school educated workers-increased by twothirds in the same decades (Chart 2). By 1999, educational inequality easily exceeded its high set in 1940, the earliest year for which consistent data are available. What forces caused this remarkable divergence? Naturally, economists suspected factors influencing supply and demand, in particular skill-biased technical change (SBTC) (see Bound and Johnson 1992; Katz and Murphy 1992;