Routine-biased technology explains stalled Black-white wage gap
A Federal Reserve Bank of Cleveland working paper argues that routine-biased technological change (RBTC) contributed to the stagnation of the Black-white wage gap after 1980. The study focuses on male workers between 1980 and 2000, using new empirical evidence and a novel theoretical framework.
Occupational shifts defy expectations
The study documents that Black workers increased their employment share in routine-intensive occupations, while white workers moved out of these roles.
These divergent shifts were most pronounced among workers with a high school diploma or less and younger cohorts, and cannot be explained by demographic differences.
Applying the Oaxaca-RIF decomposition, the paper shows that this occupational sorting amplified racial wage gaps, particularly at the lower end of the wage distribution.
These patterns are especially evident in commuting zones with high concentrations of routine-intensive employment, highlighting the critical role of occupational composition in shaping the racial wage gap.
The findings are interpreted through a novel theoretical framework that combines RBTC with statistical discrimination.
Stalled progress since 1980
The Black-white wage gap in the United States narrowed substantially during the 1960s and 1970s, driven by civil rights protections, educational gains, and economic growth.
However, this progress largely stalled by the 1980s, with the hourly wage gap between Black and white male workers stabilizing at roughly 20 percent and remaining at this level through the 1990s.
This stagnation occurred during a period when routine-biased technological change (RBTC), particularly the adoption of computers, significantly affected the labor market.
RBTC disproportionately impacted routine-intensive tasks in clerical, operations, and production roles, leading to labor market polarization.
Beyond simple task replacement
This paper significantly refines the understanding of RBTC by integrating statistical discrimination and divergent occupational sorting.
Its novel framework explains why the Black-white wage gap stagnated despite broader technological shifts.
The findings underscore the complex, often counterintuitive, ways technology interacts with existing labor market inequalities.
Source: Technological Change and Racial Wage Gaps
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