Evidence from the Self-Employed on Changing Wages for Less-Educated Men in the 1980's
Most recent version: June, 2004. (Requested Revision)

Abstract:It is well-established that less-educated workers exhibited a decrease in their relative wages from the late nineteen-seventies to the early nineties. But the cause of this decrease is still unresolved: some argue that skill-biased technological change is the primary cause for this change, while others argue that changes in labor market institutions are responsible. I compare changes in the wages of the self-employed and their wage and salary counterparts to show that skill-biased technological change is probably not the primary factor responsible for these wage dynamics. Instead, it appears that the decline in the real value of the minimum wage and labor unions is a better explanation for the relative wage decrease of the less educated, and I show that there is not convincing evidence to suggest that skill-biased technical change is the cause of the decline in these labor market institutions.