Computerization and the Rise in German Wage Inequality, 1979 – 2012: A New Look using Microdata

• In Event: 037 - Regular Session. Social Stratification and Inequality: Structure and Determinants

Abstract

Computerization of the labor market has become arguably the dominant explanation for the rise in wage inequality in recent decades. Despite this, few studies have directly analyzed the role of computers in inequality, primarily due to a lack of consistent individual-level computer data across time. Using a unique West German data set, I address this deficiency providing the first long-term, individual-level analysis of the consequences of computerization in a European context. Employing a new method that estimates the influence of covariates on between- and within-group inequality, I find that computerization contributes directly, though weakly to wage inequality between groups of similar men and women, though it is likewise surprisingly associated with lower residual inequality. Adding between- and within-group influences together, computerization explains about 12 percent of the growth in male earnings differentials between 1979 and 1999 but none of the rise in female wage dispersion. Moreover, the spread of computers has been associated with reduced income inequality, such that a growing share of inequality is comprised by non-computer users rather than between users and nonusers. Given its limited direct impact on individual earnings inequality, computerization therefore operates primarily at larger labor market aggregates such as occupations, establishments, and industries.

Author

• Joseph Michael King, University of California-Irvine