Skill‐Biased Technological Change and Wage Inequality: Evidence from a Plant Retooling

Abstract

One of the most popular explanations for the increased wage inequality that has occurred since the late 1970s is that technological change has resulted in a downward shift in the demand for low‐skill workers. This pattern is also alleged to account for the growth in racial inequality in wages over the same period. This article reports on a case study of the retooling of a food processing plant. A unique, longitudinal, multimethod design reveals the nature of the technological change, the changes in job requirements, and the mechanisms by which the changes affect the wage distribution for hourly production workers. This research finds that, indeed, the retooling resulted in greater wage dispersion and that the changes have also been associated with greater racial inequality in wages. However, contrary to the claims of advocates of the skill‐bias hypothesis, organizational and human resources factors strongly mediated the impact of the changing technology. Absent these “high road” organizational choices, this impact on wage distribution would have been even more extreme.