1 The Impact of Technological Change on Work and Wages

I. The Issues How technology affects work and pay has been an important topic in the study of labor markets and wage distribution. In this review article, we provide an overview of recent research in two particular areas: how technological change has affected wage and employment structures nationally, and how technological change has affected work at the establishment or plant level. With a few exceptions, we further limit our review to major empirical studies of United States data covering the 1980s and 1990s. This review seeks to identify the general consensus about the impact of technology on work and wages, as well as what is still controversial and what is still not known. Most recent studies have found that technological change has increased skill demand and has both supported and required new work practices, but ambiguities between findings at the national level and at the establishment level have led to two paradoxes. One is the paradox of productivity: the impact of new technology on productivity is much larger at the establishment or firm level than at the national level. The other is the paradox of wage inequality: wage increases for workers using advanced technology are much greater at the national level than at the establishment level, where wage dispersion appears to be occurring primarily across firms within industries. In order to explain these paradoxes, future research should focus on three major research issues: defining and measuring technology and productivity; conceptualizing and estimating the relationship between technological change, skill, and wages; and studying the impact of new technology on the firm's human resources (HR) or employment system.structure of employment globally. In this review, we first discuss how technology affects wage structures. Then we look at studies of the impact of technological change on wages (and growing inequality), productivity, and employment. Then we review studies of the interrelationship of technology, human resource systems, and labor productivity. Finally, we summarize the findings and suggest future research topics. II. Impact of Technology on Wage Structures: Basic Theory We first present a simple supply and demand model that conceptualizes the impact of technological shifts on the demand for skilled workers for skills associated with education, such as problem solving, mathematical