Working Paper

Skill Development and Sustainable Prosperity: Cumulative and Collective Careers versus Skill-Biased Technical Change

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There is widespread and growing concern about the availability of good jobs in the U.S. economy. Inequality has been growing for thirty years and is now at levels not seen since the 1920s. Stable and remunerative employment has become harder for U.S. workers to find.

With the widespread plant closings of the 1980s, the loss of these “middle-class” employment opportunities was confined largely to blue-collar workers with high-school educations. As a group, members of the U.S. labor force with college educations always do better than those with high-school educations, but over the course of the 1980s the wage premium to having a college education expanded significantly. During the 1990s and 2000s, however, older and experienced college-educated white-collar workers began to find their earnings under pressure as the career employment opportunities available to them became far less plentiful, stable, secure, and remunerative than they had once been. In the 1990s major industrial corporations shifted sharply away from the norm of a white-collar career with one company that had prevailed since the 1940s. Then in the 2000s U.S. white-collar workers faced the incessant offshoring of jobs to be filled by college-educated workers in lower-wage developing economies, with India and China in the forefront. The Great Recession of 2007 to 2009 and its aftermath have only heightened these concerns about the ongoing disappearance of middle-class jobs. In this paper, we present an approach for analyzing these changes in middle-class employment opportunities that differs fundamentally from the dominant paradigm among economists known as “skill-biased technical change” (SBTC). Like all economists who adhere to the neoclassical theory of the market economy, SBTC assumes that wages are determined through the forces of supply and demand in the labor market. In contrast, our study of the development of the U.S. economy over the past half century views the primary determinant of wages on a sustainable basis as the employment practices of major business enterprises. We contend that, except when labor is an interchangeable commodity, wages are determined in business organizations where the promise of wage increases over time are both an inducement to supply more and better work effort when engaged in productive activities, and a reward for having done so in ways that add value over time. For employees in high-tech fields – known collectively as STEM (science, technology, engineering, and mathematics) workers – wages are determined not by supply and demand in the labor market but rather by the employment relations that prevail within leading business enterprises. The reason: Productivity in high-tech fields depends on learning that is both collective and cumulative. Focusing on STEM employment, we explore the hypothesis that the productivity and earnings of high-tech workers depend on collective and cumulative careers.