The Effects of Demographic Change on the Distribution of Wages, 1967-1990

A multiple skill model (MSM) of labor inputs in production functions is presented in this paper. Previous researchers have aggregated workers into a small number of categories along various demographic dimensions in a fashion that is arbitrary and inconsistent across studies. The MSM, of which category models are special cases, avoids arbitrary aggregation and permits a much richer specification of the relationship between the demographic characteristics of a population, output, and the distribution of wages. The MSM is employed to explain changes in the distribution of wages from 1967 to 1977 across four major demographic dimensions-age, education, race, and sex. The results are largely consistent with previous studies of relative wages along one or two demographic dimensions, but one finding is different. The decline in wages of young males relative to older males is confined to males with a college education.