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Business Administration, Management, and Operations | Political Economy


Louis D. Johnston, Economics


This paper explores the state of the skill premium between skilled and unskilled labor in light of new forms of automation entering the workforce from 2008-2017. I build off the work started by Goldin and Katz in their book, The Race Between Education and Technology, answering the question: is demand for skilled labor currently outpacing the supply of skilled labor due to new forms of automation? I start with a historical review of the race between demand and supply of skilled labor, along with a study of policy influences on skilled labor supply. I then examine the literature currently published on automation to see if recent trends show demand for skilled labor increasing or not. I use data from the Bureau of Labor Statistics Current Population Survey to investigate whether current skill premiums have grown, diminished, or remained stagnant compared to the 2000 Census data where Goldin and Katz ended. The trends from this data is then forecasted out to 2020, 2025, 2030, and 2040 to see what current trends would augur for future skill premium levels. Trends points toward the skill premium for skilled labor increasing, contingent on the elasticity of substitution between skilled and unskilled labor. These findings would suggest that the American education system will need to explore supply side policies to keep skill premiums from sky-rocketing and income inequality in check.