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According to University of Pennsylvania professor of management Adam Cobb, “Wage inequality refers to the extent to which wages are distributed unevenly among a population.” Wage inequality has become a relevant issue in the past fifty years as wage inequality has risen sharply in the United States since the early 1970’s (Acemoglu 10) largely due to the increasing disparity between the pay of skilled and unskilled workers. In the late 18th century, economist Adam Smith wrote in his book The Wealth of Nations about the five causes of wage inequality among various professions citing the pleasantness of the job, the cheapness of learning it, the consistency of the job, the trust of the customer in the laborer, and the likelihood of success in the profession (102). Since The Wealth of Nations was published in 1776, globalization and technological innovation not accounted for by Smith have created new reasons for wage inequality, and significantly altered Smith’s reasons. These developments pose the question, what are the current reasons for wage inequality in the U.S. and do the unique characteristics of certain employments directly affect the number of workers entering the fields of employment? To begin, a new reason for wage inequality is the offshoring (moving of companies overseas to take advantage of lower costs) of low skill jobs to foreign countries with a low skill population. According to geography professors David Rigby, of UCLA, and Tom Kemeny, of the London School of Economics, in their joint journal U.S. Wage Inequality and Low-Wage Import Competition, “growth in US wage inequality since the early-1990s is largely the result of rising import competition” (584). The essay continues to explain this growing inequality by stating that as more and more low skill jobs are moved to low wage countries, the demand for low wage workers in the offshoring countries declines (584). Competition refers to the competition between low skilled laborers in the offshoring country and low skilled laborers in the foreign country. This competition almost always favors the low skill labor of the foreign country because those countries have fewer labor laws and workers will accept lower compensation for the same work. For these reasons, it tends to be more affordable to import goods directly from a foreign manufacturer or import from a U.S. company exploiting foreign labor instead of using domestic labor. The reduced demand for low skilled laborers caused by offshoring and foreign imports can be demonstrated by the massive decrease in manufacturing unemployment post-2000. According to the Bureau of Labor Statistics (BLS), “Between 2000 and 2010, manufacturing employment declined by almost 6 million jobs-about one-third of its total.” This reflects the decrease in demand for low skill labor, but the return of some manufacturing jobs after the recession (after 2010) being mostly skill professions such as running computers (BLS) expresses the lasting and even increasing demand for skill-intensive labor after the beginning of the offshoring trend in the 1990’s. The shift in demand for skilled v. unskilled labor affects wage inequality because demand for workers will directly influence their wage for their labor. Some experts say that the major offshoring trend that took off in the 1990’s and affected wage inequality, started to reverse itself after the recession in 2010 in a movement called reshoring. According to senior partner at the Boston Consulting Group Harold Sirkin in an article for Forbes in 2016,  many major companies are bringing some manufacturing jobs back to the U.S. including Google, Boeing, and General Electric. However, in comparison to the scale of offshoring, reshoring is a far smaller phenomenon. According to the Reshoring Initiative, 249,000 jobs were restored to the U.S. in 2010-2016 but 220,000 jobs were lost to offshoring per year between 2000-2007 (Sirkin). Another dimension of reshoring that needs to be analyzed before it can be assumed to reverse the effects of offshoring are the types of manufacturing jobs that are returning to the U.S. According to Mark Muro, Director of Policy at the Brookings Institution’s Metropolitan Policy Program, “the best prospects for new manufacturing jobs are sectors where products are complicated, often large and include new content that requires continuing research and development” (Melnik and Alcantara). This demonstrates that only more advanced and more skill intensive manufacturing is making a modest return to the U.S, meaning that the return of many skill necessary jobs to the U.S. will not result in a reversal of the increasing wage inequality trend that continued after the beginning of offshoring.Offshoring is a significant reason for the rise in wage inequality after 1990 but an explanation is necessary to explain the sharp increase in inequality beginning in the early 1970s. In his essay for the American Economic Association, David Acemoglu argues that technological change beginning in 1970 favored skilled laborers and that “skill bias” causes wage inequality (9). The main evidence supporting the argument that the technological change in the 1970’s benefitted skilled laborers is that if technological inventions such as the computer, that started being implemented into the workplace in the 1970’s (BBC), did not favor skilled workers than the ratio of skilled workers’ wage to unskilled workers’ wage would be significantly lower than it actually was. This is because the large supply of skilled workers that existed in the 1970s (Acemoglu 10) would not be able to use their education to gain a higher paying job if the skill required jobs did not exist, making their wage similar to that of their low skilled peers. Additionally, Acemoglu makes the case that the rate of return (return of profit on an investment) for a college education, only stays constant when education rates are increasing, if the number of jobs for individuals with a college education is increasing (10). Because college education increased over this time period so did the number of jobs because the rate of return stayed constant. If new jobs were not created, workers with a college education would not be getting compensated for the cost of their education because they would be forced to work in low skill and lower paying jobs. David Autor, Frank Levy, and Richard Murnane sought to explain why technological developments in the 70’s favored skilled instead of unskilled workers arguing that computer technology replaced workers with routine tasks “while complementing workers executing non-routine tasks demanding… problem-solving capabilities and complex communications” (Steelman and Weinberg 10). The characteristics of non-routine tasks is skill biased because those skills are more directed towards individuals with a college education. The effects of the technological developments of the 1970’s are still continuing today and it contributed to the 6 million manufacturing jobs lost between 2000 and 2010.Next, the technological changes that began in 1970’s has made a college education more necessary for workers than ever. According to a report by the U.S. Department of Education (DOE) in 2015, “College graduates with a bachelor’s degree typically earn 66 percent more than those with only a high-school diploma; and are also far less likely to face unemployment.” As in the time of Smith, the higher wage of college graduates is given  to pay the expense of their education (Smith 103). However, in comparison to the the time of Smith, college is more important for getting a job and will be even more so in the future. “In 2013, Oxford University researchers forecast that machines might be able to perform half of all U.S. jobs in the next two decades” and that the most easily learned jobs are the ones most susceptible to automation (Thompson 9). This means that most jobs for humans in the future will require a college education. The DOE report also predicts that “By 2020, ? of job openings will require a postsecondary education or training.” In the past people could find employment regardless of their education level, but now in order to find a job it is increasingly vital to have a college education as the jobs become more and more skill oriented. On the other hand, many argue that the value of college is decreasing on the basis that the wages of college graduates is declining. According to Derek Thompson, “the real wages of recent college graduates have fallen by 7.7 percent since 2000.” At a glimpse this does reflect a declining value in college education but it does not take into account the value of the education in making the worker hirable. Even if the wage of college graduates is declining, the education is opening up employment to the worker in a growing skilled labor sector. It also should be noted that just between between 2005 and 2015 public college enrollment increased by about 12 percent (College Board). When more people are attending and graduating college there is more competition amongst skilled workers for skill intensive jobs. This trend results in lower wages for college graduates but still greater than in if they had not received a post-secondary education.In 1776 Adam Smith argued that the advantages and disadvantages of different jobs would lead to equal popularity amongst all jobs so that relatively balanced numbers of workers will seek employment in each. However, the rise in the cost of living has made the advantage of higher wage superior to the other disadvantages of a profession. Trudi Redwick in her journal “Basic Needs Budget Revisited: Does the U.S. Consumer Price Index Overestimate the changes in the Cost of Living for Low Income Families” uses the change in a basic needs budget (cost of maintaining a decent standard of living based on the price of different necessities) to estimate the change in the cost of living between 1983 and 1996. Her report saw a 17% rise in the monthly cost of goods and services for single earner families and a 14% rise for two earner families over just 14 years. When the cost of living increases many people are forced to sacrifice advantages of certain employments for greater pay. One example of this is the massive employment in night work, employments with irregular hours, or employments with flexible hours (15 million according to a 2004 BLS study) that all sacrifice sleep, consistency, and or normal working hours for a greater paycheck. This demonstrates that wage is the most important characteristic of a job for workers seeking employment because people will sacrifice most other aspects of a job to allow their pay to rise with the increasing cost of living.

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