NCPA - National Center for Policy Analysis

A Wage Gap Between Skilled and Unskilled Workers May Shrink

March 11, 1999

Over the past two decades, the difference in wages between highly-skilled workers and those lacking skills has widened. But there is evidence that gap may start to narrow -- thanks to the low rate of unemployment and other factors.

  • In 1980, the median male college graduate earned about one-third more than the median high-school graduate -- a gap which widened to more than 70 percent by 1993.
  • But supply of skilled workers is swelling -- which could hold down wage growth at the top, thus decreasing the pay gap.
  • And continued low unemployment is forcing companies to hire and train less skilled workers, improving their pay prospects.

Also, analysts note that information technologies are more user- friendly -- making them more accessible to less skilled workers.

Furthermore, the U.S. labor force is projected to grow at a less than 1 percent annual rate over the next two decades -- down sharply from the 2.3 percent pace of the 1970s and 1980s. This means the labor market will be tighter, possibly further reducing the wage gap.

There is already some evidence that the wage gap is narrowing, according to Economic Policy Institute research.

  • In 1993, hourly wages of a median worker -- one right in the middle of the income distribution -- were 2.03 times the earnings of workers in the lowest 10th percentile.
  • By 1997, the wage ratio had dropped to 1.93 times -- the lowest figure in 16 years.

Source: Christopher Farrell, "Strong Growth Will Shrink the Wage Gap," Business Week, March 11, 1999.


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