The rise in income inequality is influenced by factors like the imbalance between demand and supply of skilled labor, decline of labor unions, globalization, and skill-biased technological change.
The market for high-skilled labor can be viewed as a race between forces of supply and demand. Additional education and on-the-job training increase the supply of high-skilled labor and hold down its relative wage, while new technology and globalization drive up the demand for high-skilled labor, pushing its relative wage higher.
The rise in income inequality can be attributed to the imbalance between the increasing demand for skilled labor and the inadequate supply. Factors such as the decline of labor unions, globalization, and skill-biased technological change have contributed to this disparity.
Overall, the combination of forces in both high-skilled and low-skilled labor markets has led to increased income disparity over the years, highlighting the complex dynamics that shape the wage structure in an economy.
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