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Which of the following is an explanation for the slight widening of the income distribution in the United States since 1970? a. An increase in discrimination against unskilled immigrant labor has reduced the demand for unskilled workers and caused an increase in the gap between the wages of unskilled and skilled workers. b. The increase in skill-biased technology has decreased the demand for unskilled workers and increased the demand for skilled workers, causing the gap between their wages to widen. c. More students are choosing engineering and chemistry as majors in college. d. A decrease in international trade has increased the demand for unskilled workers and decreased the demand for skilled workers, causing the gap between their wages to widen.

Ask by Pollard Burton. in the United States
Mar 10,2025

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Answer

The correct explanation is that skill-biased technology increased demand for skilled workers while decreasing demand for unskilled workers, widening the wage gap.

Solution

1. The phenomenon described is the widening income distribution. In economics, this is often examined by comparing the wages of skilled and unskilled workers. 2. Historically, research indicates that since the 1970s, wage inequality in the United States has been linked to relative changes in the demand for skilled versus unskilled labor. 3. One major factor identified is the advent of skill-biased technological change. This means that new technologies have increased the productivity (and thus the demand) for workers with high skill levels, while decreasing the relative demand for unskilled labor. 4. Formally, if we denote the wage for skilled workers as \( w_s \) and for unskilled workers as \( w_u \), the widening income gap can be described by an increasing ratio: \[ \frac{w_s}{w_u} \text{ increases over time.} \] 5. This scenario corresponds to option (b): "The increase in skill-biased technology has decreased the demand for unskilled workers and increased the demand for skilled workers, causing the gap between their wages to widen." 6. Therefore, the correct explanation is option (b).

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The slight widening of the income distribution in the United States since 1970 can be largely attributed to shifts in the job market, particularly the rise of skill-biased technology. As technology advanced, the demand for skilled workers surged—think software engineers and data analysts—while unskilled labor became less sought after. So, this dynamic caused wages to diverge, leading to that widening gap we see today between skilled and unskilled workers. Additionally, the changing landscape of education has influenced the income distribution. Students gravitating towards more lucrative and technical majors, like engineering or chemistry, play a role in this scenario. With a growing number of graduates entering high-demand fields, the competition intensifies, further pushing wages up for those specialized roles while relegating unskilled positions to slower wage growth.

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