Skill-Biased Technological Change and Wage Inequality: Evidence from a Plant Retooling1

Roberto M. Fernandez Massachussetts Institute of Technology

One of the most popular explanations for the increased wage inequality that has occurred since the late 1970s is that technological change has resulted in a downward shift in the demand for lowskill workers. This pattern is also alleged to account for the growth in racial inequality in wages over the same period. This article reports on a case study of the retooling of a food processing plant. A unique, longitudinal, multimethod design reveals the nature of the technological change, the changes in job requirements, and the mechanisms by which the changes affect the wage distribution for hourly production workers. This research nds that, indeed, the retooling resulted in greater wage dispersion and that the changes have also been associated with greater racial inequality in wages. However, contrary to the claims of advocates of the skill-bias hypothesis, organizational and human resources factors strongly mediated the impact of the changing technology. Absent these high road organizational choices, this impact on wage distribution would have been even more extreme. One of the most prominent explanations for the increased wage inequality that has occurred since the late 1970s is that technological changes occurring over the same period have resulted in a downward shift in the
1 Funding for various phases of this project has been provided by the National Science Foundation, the Russell Sage Foundation, the Rockefeller Foundation, the Institute for Research on Poverty, the U.S. Department of Health and Human Services, and the Stanford Integrated Manufacturing Association. Chris Wellin, Judith Levine, and David Harris provided excellent research assistance on various phases of the project. I would like to thank David Card, Christopher Jencks, Frank Levy, Paul Osterman, and the AJS reviewers for their helpful comments and suggestions. Direct correspondence to Roberto M. Fernandez, Sloan School of Management, Massachussetts Institute of Technology, 50 Memorial Drive, Cambridge, Massachussetts 02142. E-mail: robertof@mit.edu

2001 by The University of Chicago. All rights reserved. 0002-9602/2001/10702-0001$10.00

AJS Volume 107 Number 2 (September 2001): 273320

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American Journal of Sociology demand for low-skill workers (for reviews, see Morris and Western 1999; Danziger and Gottschalk 1995; Levy and Murnane 1992). Skill-biased technological change is also alleged to play an important role in the growth in racial inequality in wages that has been observed over the same period. While many others factors may also be at work (Moss and Tilly 1993), changing technologyespecially in manufacturingis often implicated as one of the major factors worsening the economic plight for minorities (Wilson 1987, 1996; Kasarda 1988).2 In this article, I study the impact of technological change on changes in the overall wage distribution and on racial differences in wages within the context of a longitudinal case study of the retooling of a food processing plant. I argue that this plants experience during the retooling should be regarded as a natural experiment, and as such, it offers unique advantages over extant research in this area. The longitudinal, multimethod design developed here affords rare insight into the nature of the technological change, the changes in job requirements, the organizational context of the change, and the mechanisms by which the wage distribution is affected by the technological changes. The natural-experiment design solves the major problem vexing even the best extant studies of skill-biased technological change. While all previous empirical studies of the phenomenon infer an exogenous demandside shift in the labor market, the workers at this company experienced such a shift in a dramatic way. As such, this study provides an exceptionally clean setting in which to observe the key processes alleged to be operating in the skill-biased technological change account of growing wage inequality. Since this company endeavored to keep all its workers through the change in technology, this study also avoids the main threat to validity in extant skill-bias studies, that is, the problem of self-selection of people into jobs for which their skills complement the technology. Past studies have run the risk of attributing observed wage changes to the use of the technology rather than to the individual factors that led the person to the job in the rst place. In contrast, for the production workers in the company studied here, there is no issue of self-selection. For them,
The skill-biasing effects of technology are a specic instance of what has been called in sociology job-skill mismatch (Kasarda 1988; Morris and Western 1999). Job-skill mismatch processes are conceptualized in broader terms, encompassing phenomena like sectoral changes in the economy such as the shift from manufacturing to services. While these broader processes may also be at work in the economy (see Morris, Bernhardt, and Handcock [1994] for an innovative article distinguishing the upgrading and polarizing effects of sectoral shifts), they cannot address the apparently withinrm nature of increased wage inequality (see below). I focus here on a specic kind of mismatchthe skill-biasing effects of technological changebecause the technological changes observed in this rm offer a natural-experiment test of economists preferred explanation of growing within-rm wage inequality (see below).
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Skill-Biased Change the retooling comes as a truly exogenous, demand-side shock to their labor market. As such, this study distills the essence of the skill-biased change argument and provides a unique opportunity to observe closely workers experiences adjusting to a new technology. Moreover, because the plant also has a good representation of minority workers, the validity of arguments attributing growing racial inequality in wages to skill-biased technological change can directly be assessed. This article begins by briey reviewing the literature on past approaches to skill-biased technological change. It then describes the research setting and the details of the research design. It next discusses the changing technology and presents the evidence on the changes in job requirements that occurred with the retooling. The strategy is to compare data rst on various dimensions of job characteristics to assess whether there is direct evidence of job requirements changing with the introduction of the new technology. Then the wage distribution for hourly production workers over time is compared to see whether there is evidence of increased wage inequality associated with the changing technology. The wage changes in the factory are also contrasted against the baseline of the wage changes occurring in the labor market at large. Next, the impact of these changes on the changing pattern of racial inequality in the plant is documented. The article concludes with a discussion of the organizational factors that appear to mediate between the changing technology and changes in the wage distribution.

THE EVIDENCE ON SKILL-BIASED TECHNOLOGICAL CHANGE

Much of the evidence for the skill-biased technological change explanation of rising wage inequality has been using data from supply-side surveys of employees (e.g., Bound and Johnson 1992; Katz and Murphy 1992; for reviews, see Levy and Murnane 1992; Danziger and Gottschalk 1995). Such studies have the advantage of broad coverage, often spanning whole sectors of the economy. Unfortunately, this breadth has come at the expense of depth of information on key variables of interest, that is, technology and skill. Most of these studies proceed by attempting to control for alternative explanations of changes in the wage distribution (e.g., changes in product market demand, immigration, globalization, etc.). Changes in the wage distribution that cannot be attributed to these sources are then inferred to be taking place within rms. Although there are no direct measures of technology in these studies, by virtue of its being a process that takes place within rms, skill-biased technical change is implicated as a key factor accounting for growing wage inequality. Another set of studies takes a more direct approach to studying changes 275

American Journal of Sociology in the skill distribution. Work in this tradition has relied upon job analyses (i.e., detailed observations of tasks being performed at work) in order to measure multiple dimensions of job tasks. Studies using this approach start by looking at the changing characteristics of jobs using data sources such as the Dictionary of Occupational Titles (e.g., see Spenner 1990) or proprietary data on specic employers (Cappelli 1993). A number of studies examine whether changing job requirements have created a mismatch between the skills demanded by jobs and skills of the existing workforce (Johnston and Packer 1987; Mishel and Teixeira 1991). The results, however, have been affected by the specic measures used and the particular specication of the model, so there is little agreement across these studies. In addition, few studies examine the link between changes in the skill distribution and wages. Even if there have been changes in job requirements that have led to a skill mismatch, this would not demonstrate a link to changes in the wage distribution. The story becomes even more complicated when it is taken into account that the measured skills of the workforce have been changing as well (Hunt 1995; Murnane and Levy 1996). How these changes net out and what effect they have on the wage distribution is unclear from these studies. One prominent study has tried to establish a direct link between technology use and wages. Krueger (1993) used Current Population Survey (CPS) data from the 1980s to estimate within-job returns to the use of personal computers on the job. He concludes that wage returns to computer use after controlling for education and other human capital factors are on the order of 10%15%. More recent research casts doubt on Kruegers interpretation of his results. Several studies have raised the issue of whether these estimates of the returns to computer use may be upwardly biased. DiNardo and Pischke (1997) suggest the ndings are mostly due to unobserved human capital factors correlated with computer use. Using German data, they show that the use of pencils at work appears to have almost as big a wage return as does computer use.3 Because Krueger cannot correct for selection of people into jobs that use computers, his study winds up attributing wage increases to the use of the technology, rather than the individual factors that led the person to the job in the rst place. From my perspective, these studies have presented a less than wholly persuasive story of how growing wage inequality is due to technological
3 The same is true for use of a telephone on the job. In contrast, the use of a hammer is associated with lower wage returns. Taken together, these patterns suggest that the use of these tools has little to do with commanding a wage premium but simply are indexing white-collar vs. blue-collar status. Since wages have been rising for whitecollar work, and dropping for blue-collar work, the tools pick up the effects of whitecollar vs. blue-collar.

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Skill-Biased Change change. For one, they have tended to black box the changes in technology that are supposed to be driving the greater dispersion in the wage distribution. Even when the technology under study is precisely dened (e.g., use of personal computers), the precision seems to be misplaced because this measurement ignores how the technology is used, that is, in what ways job tasks are altered. What is missing here is a description of the context in which new technology is being introduced and any sense of the subtle interplay between production technology and job requirements. Moreover, these studies are also blind to any attendant changes in organizational or human resources practices that might accompany instances of technological change (an exception here is Siegel [1999]). There is a rich literature on technological change and its effects on jobs (for reviews, see Attewell 1987; Spenner 1990). These studies have shown that the relationship between technological change and the skill requirements of jobs is indeterminate because the same capital equipment can be surrounded with varying job routines, which can have very different effects on job requirements (e.g., Flynn 1988). Moreover, changes in work routines are often implemented at the same time as changes in capital equipment, so it is dangerous to attribute causal weight to the machinery. Indeed, the literature on high-performance manufacturing organizations (e.g., Commission on the Skills of the American Workforce 1990) is all about how the new automation relies on the alignment of work routines, human resources practices, and new production machinery to deliver large productivity and quality gains. Large-scale, supply-side studies tend to be blind to the highly contextual organizational software of these changing methods of production. While technology studies attend quite carefully to the nature of the technology and the changing job tasks, these studies have only indirectly addressed the stratication consequences of these technological changes, that is, they have not engaged the literature on the changing wage distribution. To the extent that these studies discuss wages at all, they argue that rms organizing along the high-performance work organization model would invest heavily in worker training and pay high wages when relying on new production technology. In contrast, low road rms might avoid training investments and seek to implement technical change in a wage-minimizing manner. Beyond this simple high road/low road distinction, crucial questions remain about the mechanisms by which changing technology affects the wage distribution. If high road rms are likely to pay better, which features of the high road model leads them to do so? That is, what is it that rms are buying with these policies? What kinds of skills are being valued? Does high road imply high wages for all production workers? What are the race and gender implications of 277

American Journal of Sociology taking the high road? What role does the local labor market play in the wage-setting process? I argue that there is a vital need to link the literature on high-performance organizational practices to the literature on wage inequality. Currently, there is an almost mantra-like invocation of skill-biased technological change as an explanation of growing wage inequality in policy circles, even though the supporting evidence is virtually always of the black box variety. Studies of changing reorganized work practices serve to open up the black box, but they do not go far enough in elaborating the mechanisms by which the wage distribution is linked to changing technology. The current study is offered as a means of bridging these literatures. I study the wage implications of technological change within the context of a longitudinal case study of the retooling of a food processing plant. Even more important, however, the design of this study solves the major problem vexing even the best studies of skill-biased technological change. While all large-scale studies of the phenomenon infer an exogenous demand-side shift in the labor market, the retooling induced precisely such a shift for the production workers at the company studied here. Since it is the jobs that have changed, this study gets around the thorny problem evident in all past skill-bias studies of the self-selection of people into jobs for which their skills complement the technology. Without taking account of the endogeneity of such choices, these studies will always run the risk of attributing wage increases to the use of the technology rather than the individual factors that led the person to the job in the rst place. In contrast, for the production workers in the company studied here, there is no issue of self-selection. For them, the retooling comes as an exogenous demand-side shock to their labor market. As such, this company serves as a natural experiment distilling the key processes alleged to be operating in the skill-biased technological change account of growing wage inequality and provides the unique opportunity to closely observe workers experiences adjusting to a new technology. Unique among studies of the labor market effects of changing technology, I surveyed production workers and conducted participant observation research in the plant both before and after the retooling. This longitudinal, multimethod design affords rare insight into the nature of the technological change, the changes in job requirements, the organizational context of the change, and the mechanisms by which the wage distribution is affected by the technological changes. While this focus on one rm introduces some special methodological issues (see the appendix), I agree with Morris, Bernhardt, and Handcock (1994, p. 217) that qualitative work will be important for establishing a causal connection between industrial restructuring and inequality. Furthermore, in this project 278

Skill-Biased Change I have directly confronted Morris et al.s (1994) challenge by independently measuring skills required by jobs (demand) and skills possessed by workers (supply) (p. 217) in a manner that is sensitive to the organizational context. I argue that such an approach is needed to open up the black box and get in-depth information on the relationship between technological change and wages. In addition to documenting the rms changes over time, I also compare the rms wage changes against the baseline of changes that were occurring in the local labor market over the period of the study.

RESEARCH SETTING

These issues are addressed by studying the retooling of a food processing plant located in the midwestern United States with a substantial number of minority workers. This rm is a wholesale supplier of food ingredients to other companies that produce nished, retail foods to the consumer. The company employed 195 hourly production workers (all unionized) at the beginning of the study period: 55% of these workers are racial minorities (43% black and 12% Hispanic), and 31% are female. In early 1989, the rms management received approval to build a new plant in order to accomplish a massive upgrade of the companys production equipment. The old facility was located in a cramped, 100-yearold, multistory plant in the citys central business district. The company invested $92 million in building a new facility located 10 miles from the old plant. The ground breaking for the new plant was in early 1992, and production started in the new plant in mid-1993. The companys president cited competitive pressures as the main reason for the investment: If we didnt make this move, within ve years we would be out of business. By the time this study began late in 1990, the company and the union had agreed to cooperate through the move. First, the company gave a no-layoff guarantee through the period of the retooling. Second, the company pledged that production workers wages in the new plant would be no lower than their wages in the old plant, irrespective of the job in which workers would land in the retooled plant. In return, the union agreed to more exible work arrangements through the period of the move, temporarily suspending seniority considerations in job transfer and other work rules. I developed a multimethod, before and after research design to track the retooling process, studying production workers in both the old and new plants. Beginning in the spring of 1991, a team of eld-workers did participant observation of the production work in both plants. These researchers worked as temporary employees in the plants, rotating through 279

American Journal of Sociology various jobs. While the eld-workers could not work in all the jobs, they did observe and record eld notes about all the production jobs at both plants. I used the eld notes to develop direct measures of changes in tasks associated with the retooling. I also surveyed workers at both plants, including new workers at the new plant and workers who left the company between the rst and second waves of the survey. The survey consisted of hour-long, face-to-face interviews about their demographic backgrounds, job tasks, and job rewards (response rates of 83% at time 1 and 85% at time 2). Finally, I collected employment records, work documents, and other archival materials from company records. The Changing Technology The plant under study is an industrial food processor. The company takes raw food inputs (such as sugar, our, lecithin), combines them with other key ingredients according to myriad recipes, and then cooks the materials. The products are then shipped wholesale to retail food companies in large batches (e.g., by the pallet in 50-lb. boxes). While this basic description applies to both the old and new plants, the new plant has made extensive use of smart machine technology (such as programmable logic controllers and computer-controlled pneumatic material transport) to select recipes and to speed the ow of products through the two basic cooking processes used in the plant. Where the old plant relied on operators to feed raw ingredients to stand-alone machines and physically direct the transfer of the results of each process to the next step, the new plant links these rening machines via pneumatically run lines, which automatically direct product ows across them in ways that avoid bottlenecks. Operators in the new plant sit in air-conditioned control rooms, directing the process by clicking a mouse on a computer with a 20-inch monitor with a graphical display of the entire production process (see Zuboff 1988). Changeovers from one product to another used to be very time consuming in the old plant; the new plant can accomplish these changes much more quickly.4 It would be fair to characterize this company as moving from a mass production system to a exible specialization model (Piore and Sabel 1984). A glimpse of how management envisioned these changes is shown in table 1, which reproduces the overhead slides that management used in

4 While there are other noteworthy changes between the two plants (e.g., the new plant has gone to a just-in-time inventory management system and the introduction of statistical process control into most processes), the core of the technological change is the automation of the two cooking processes and the fact that these processes are now linked in a continuous ow.

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TABLE 1 Top Management Teams Description of Differences between Old and New Facilities
Current Facility Future Facility

Individual assignments Supervised Paper system Trained for specic function Directed tasks Data collectors Information provider Physical verication Samplers Quality (lab controlled) Old technology Problem identiers Bag count system of weight control Physical implementation Physical transport of materials Primarily mechanical equipment Reactive

Work group assignments Coached Computer system Cross-trained for multiple functions Self-planned tasks Data interpretation and data entry Decision maker Computerized verication Testers Quality (self-controlledlab audit) New technology Problem solvers Actual weight control (load cell/mass meter) Computer implementation Pneumatic transport of materials Mechanical and electronic equipment Proactive

Source.Taken from overhead used in 1989 presentation to the capital investment committee during the planning phase of retooling.

a presentation to the parent rms capital allocation committee when requesting $92 million to build the new plant. What is interesting about these slides is the front-and-center role that is being afforded to human resources factors in describing the differences between the plants. Supervisors are to be transformed into coaches, and workers are to be moved from individual assignments to group assignments. While the machinery itself is mentioned occasionally (e.g., Bag Count vs. Load Cell weight control), the technology plays a relatively minor role in the description. From the earliest phases, then, organizational and human resources factors (the software, if you will) were seen as an integral part of the plant retooling.

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ANALYSIS

Changes in Job Requirements I begin by examining the nature of the changes in production job requirements associated with the retooling. As described below, the jobs have been reorganized so that their relationships to the production process have changed as a result of the retooling. Some tasks have been totally eliminated, while others have been combined. Consequently, it is questionable that there is enough continuity of job tasks to be able to make sensible comparisons at the level of the job title. Instead, I assess the net changes in job requirements along various dimensions (see below) for the production department as a whole in the old and retooled plants. Before turning to the specic measures of jobs characteristics, it is necessary to say a few words about the nature of the work reorganization that was instituted with the new technology.

Work Reorganization In the old plant, 195 frontline (i.e., nonsupervisory) workers lled 23 distinct jobs, and there are 193 workers in 23 jobs corresponding to various tasks in the new production process as well. However, this seeming stability in the number of job titles masks a substantially altered division of labor. The least common change was to have a machine totally replace the work of a human being, and only one job was totally automated away in this way. The pumpers job was to direct the ow of intermediate products such as liquids, oils, and pastes through a labyrinth of tubes, sometimes working against gravity, connecting storage tanks and the rening machinery. In the new plant, this job is done by a series of rationally ordered, dedicated lines with mechanical pigs running through them to clean out old products before reusing the lines to transfer new products. The more common kind of change is for formerly separate jobs to be combined. For example, operators of the stand-alone rening machines, which were prevalent in the old plant, were collapsed into the job of control room operators. In the new plant, operators sitting in front of computer displays can operate the string of reners by the click of a mouse. Operators work in pairs, switching between working the computer and walking the production oor, remaining in contact via hand-held twoway radios (see Zuboff 1988). A third pattern of job change was the exact opposite of this: some job responsibilities were more nely elaborated in the new plant than they had been in the old plant. The most important examples here are the jobs in the new just-in-time warehouse, where formerly general-purpose forklift drivers have had their tasks become more specialized. Finally, there 282

Skill-Biased Change are a number of jobs where the role in the division of labor may be quite stable, for example, running one of the nishing machines, which produces the material that will be packed and shippedsome of these machines were refurbished and literally transferred to the new site. However, in these jobs, some auxiliary job tasks might have been added (e.g., there is now a requirement to read and interpret a statistical process control chart as part of the nishers job). All of the jobs appear to have changed in at least one of these ways.5 In light of the reorganized nature of the jobs, I seek to describe changes in job requirements for the plant as a whole. I adopt a triangulation strategy to describe the task changes along a number of dimensions by using data from a number of sources. Dimensions of Job Changes Evidence from participant observation.A coding scheme was developed in order to summarize the ndings from the participant observations of the various jobs. These jobs are scored using the procedures followed in the Dictionary of Occupational Titles (DOT). The DOT is based on observations of jobs in a wide variety of settings across the economy. While the DOT is commonly used in studies that attempt to determine whether there has been upskilling or deskilling over time (see Spenner 1990), it has been shown to suffer from a number of problems that limit its usefulness in studying changes in job tasks (Cain and Treiman 1981). Many of these problems concern patterns of coverage and the fact that stability of job titles does not necessarily correspond to stability of tasks. Because my design calls for comparisons of tasks over time, I avoid these problems. For the purposes of summarizing the qualitative eld data, the strength of the DOT is that it identies a number of facets of a job based on direct observation. I replicated the DOTs procedures and coded seven variables for each job in the old and new plants. The seven variables are the extent to which jobs involved data, people, or things (DATA, PEOPLE,

5 Some of the changes have been quite subtle, however. For example, at rst glance, the job of feeding raw materials into hoppers at a dump station appears to be virtually identical to the task in the old plant, and indeed, workers talk about this job as if it is unchanged. Even here, however, my eldwork uncovered some changes that are noteworthy. Where dumpers in the old plant recorded their work on a clipboard located next to the workstation, the new plant has eliminated the clipboards and has data entry stations with keypads mounted on the wall for recording inventory. Dumpers must now log in and record the product code and batch number for the ingredient. This minor change in the job task has large implications for inventory control purposes, since the new tasks support the new systems real-time inventory capability.

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American Journal of Sociology THINGS), the extent of general educational development required for language, math, and reasoning tasks (GED-L, GED-M, GED-R), and the amount of specic vocational preparation required (SVP). DATA, PEOPLE, and THINGS are designed to measure job contents (i.e., to describe what people do on the job), while GED and SVP are supposed to reect the kinds of skills and knowledge required by the average person to achieve an average level of job performance. The scales on DATA, PEOPLE, and THINGS are such that lower scores indicate more complex tasks. The most complex rating for DATA is a score of 0 for synthesizing, while comparing is the least complex job activity and is coded a 6. PEOPLE varies from mentoring (coded 0) to taking instructionshelping (coded 8). The least complex relationship to THINGS is handling (coded 7), while the most complex score is for setting up (coded 0). The GED variables all range from 1 to 6, with higher scores indicating greater complexity. For example, a score of 1 on GED-M corresponds to being able to perform the four basic arithmetic operations, while a 6 might involve mathematical statistics or advanced calculus. SVP is coded on a nine-point scale where 1 refers to short demonstration only and 9 indicates over 10 years (for details on the DOT coding scheme, see Cain and Treiman [1981]). Table 2 summarizes the average scores on the DOT variables from the eld observation computed across all production jobs.6 The general pattern has been one of greater job complexity at time 2 than at time 1 (the rows with a indicate where the scores have changed in this direction). Given the crude nature of these scales, I caution against reading more precision than is warranted into the changes presented in table 2. My sense is that the greatest change among the job content measures has been along the DATA dimension but that there also has been a general intensication of job requirements. This is tracked in table 2, which shows that though the greatest change among the job content measures has been along the DATA dimension, the averages for all three variables also have declined indicating a general intensication of job requirements. A change from 4.5 to 2.6 on DATA roughly corresponds to a shift from the average job requiring copying and some computing (understood as performing calculations) to compiling with some analyzing of the data. Interestingly, this observed shift corresponds closely to the job changes prescribed by management in table 1 from data collectors to data interpreters and data entry.
6 Note that these scores vary only across job. In order to capture the redistribution of personnel that has occurred with the retooling with these measures, each job is weighted by the number of incumbents when calculating these averages. Thus, these numbers represent the job requirements experienced by the average worker at the plant.

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TABLE 2 Average Changes in Job Requirements Using DOT Scores to Summarize Field Observation of Jobs for All Production Jobs
Time 1 (1991) Time 2 (1994)

DOT variables: Job content: Data* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . People* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Things* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . General educational development: Language . . . . . . . . . . . . . . . . . . . . . . . . . . . Math . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reasoning . . . . . . . . . . . . . . . . . . . . . . . . . . . Specic vocational preparation . . . N of cases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
* Lower numbers indicate greater complexity. Indicates increased complexity at time 2.

4.5 6.8 4.4 1.2 1.4 2.2 3.7 195

2.6 6.0 3.2 1.8 1.7 2.6 3.7 193

With respect to the skill variables, the averages on all three have increased, indicating that the required skill levels have risen over the period of the study. However, it is important to note that the absolute levels on the language and math dimensions remain fairly simple. The changes in the math scores capture the observation that the rm has moved from a situation where most jobs required only basic arithmetic at time 1 to one where many (if not most) jobs at time 2 require workers to be able to compute using decimals and to read a graph (e.g., a statistical process control graph). Language-related changes also seem modest, but in the direction of greater complexity. Direct evidence of the latter changes is presented when the reading materials associated with jobs are examined below. The only variable that has not shown an increase is SVP: at both time points, the average training time is between three and six months. There has been an increase in all three GED components, so workers in the new plant could be expected to be more highly educated than in the old plant. However, the stability observed in SVP would imply that on average the retooling has not changed the extent to which job skills are rm-specic. Evidence from the surveys.In addition to the DOT-like measures, I also collected survey data to tap job incumbents assessments of the job skills and training required to do their jobs (see the top half of table 3), as well as individuals own human capital characteristics (bottom half of table 3). I asked each survey respondent to estimate the number of years of formal education needed to perform their job, as well as the number 285

TABLE 3 Average Responses to Survey Items Asking about Education and Training for All Production Jobs Time 1 (1991) Job skills and training items: Education most people haveHow many years of formal education do most people in jobs like yours have?* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Time 2 (1994)

10.38 11.85 (142) (155) Formal education neededHow much formal education do you feel is necessary to do your job well?* . . . 9.95 11.49 (150) (155) How long to trainHow long would it take to train someone to do your job? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.26 3.22 (152) (155) Human capital measures: Years of educationHow many years of school did you complete? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.43 11.75 (152) (166) Years of experienceAbout how many years have you worked full-time (35 hours or more a week) since you were 16 years old?k . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.26 17.37 (152) (166) Years of tenure# . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.55 10.85 (195) (193)

Note.Ns are given in parentheses. * Coded in years. Indicates increases. Response categories: 1 p a few hours, 2 p a few days to a week, 3 p several weeks, 4 p 25 months, 5 p 6 months to a year, 6 p a few years, 7 p ve years or more. Responses are recorded in years. k Responses are recorded verbatim, and recoded to years. # Tenure is calculated from the date of hire, which is available for all workers. We calculate the difference in days between the date of survey administration and date of hire and convert days to years (365.25 days per year). For nonrespondents, the date of survey administration is imputed as the midpoint of the survey eld period.

Skill-Biased Change of years of education that most people on the job have. I also asked workers to estimate the length of training period required to learn their job. Insofar as the rst two items tap sources of skills obtained external to the organization, these items are analogous to the general educational development concept. The third item refers to on-the-job training and is thus meant to correspond to the specic vocational preparation concept. I also examine three standard measures of human capital: years of education, years of full-time labor force experience, and years of tenure with the current employer. Similar to the pattern found in table 2, the only variable in table 3 that has not shown an increase is training time (SVP). Workers appear to agree with the judgment that the retooling has not changed the extent to which job skills are rm-specic. Consistent with eldwork-based assessments, at both time points, workers describe the average training time needed to be between three and six months. The data in table 3 are also consistent with those in table 2 in other respects. In workers judgments as well, educational requirements have gone up over the period of the study. The magnitude of this change is about 1.5 years (9.95 vs. 11.49 years), as measured by the formal education needed item. Workers also estimate that the average level of education for incumbents of their jobs has also risen by about the same amount (10.38 vs. 11.85 on the education most people have item). The bottom half of table 3 shows that the workforces human capital also increased over this period. While average labor force experience increased only slightly (from 17.26 to 17.37 years), the average years of tenure with the company increased more dramatically over this period (from 9.55 to 10.85 years). The average education of the workforce also rose over time by about one-half of a year (11.43 vs. 11.75). It is interesting to compare how the relationship between education and the job skill measures changed over time. Respondents described the plant at time 1 as employing workers who were overeducated for their job tasks by over one year on average (11.43 years of education for incumbents compared with 9.95 years of education required to do the job). At time 1, respondents underestimate the actual years of education of those working in their jobs by about a year (10.38 vs. 11.43). However, in the new plant, these relationships have changed considerably. First, time 2 respondents estimates are much more accurate with respect to the actual educational composition of the workforce (11.85 vs. 11.75). Second, the difference between workers judgments of education required and actual education have virtually disappeared (11.75 vs. 11.49). Taken together, these data suggest that, at least in workers perceptions, the retooling has served to eliminate their sense of being ahead of the educational requirements for their jobs. 287

American Journal of Sociology Changes in basic skills requirements: survey evidence.In order to address the policy debates on the economic role of basic skills (see Carnevale, Gainer, and Meltzer 1990; Hunt 1995; Murnane and Levy 1996), data was collected on literacy and numeracy. Respondents were asked about their use of reading, writing, addition and subtraction, multiplication and division, fractions, and percentages. Responses to the survey conducted before the retooling then were compared to responses to the same items asked in the follow-up survey conducted after the retooling (table 4). The results are clear cut: across all items, respondents report an increase in the use of basic literacy and numeracy skills on the job over time. Changes in basic skills requirements: evidence from job documents.In addition to the survey measures of basic skills, I collected an innovative set of measures of jobs cognitive demands using direct observations of workers on the job. During the eldwork, I discovered that virtually every workstation had a set of documents (usually attached to clipboards) that were being used on the job. Workers used these documents in a variety of ways, sometimes simply in a lookup fashion (e.g., metric conversions), or perhaps to record job tasks performed (e.g., recording the number of boxes on a pallet). Often, workers might be required to handle multiple forms. As I watched workers interact with these documents, I realized that I was observing on-the-job literacy acts. This allowed me to bring a fresh perspective to the basic skills debates. Rather than speculate on what level of education or score on a test is required to do various jobs (Hunt 1995), I was in the enviable position of observing literacy requirements and how these requirements would change with the retooling. Consequently, at the end of the eldwork periods, I collected censuses of the various documents that were used in both plants. While this is a tremendous opportunity to inform the basic skills literature, there was a challenge in coming up with a way to characterize the changes in the documents over time. I identied a set of studies by Kirsch and his associates (e.g., Kirsch and Mosenthal 1990) that develop a exible grammar for parsing forms in everyday use (e.g., a train schedule). This system is called document literacy, and it summarizes the cognitive complexity of a wide variety of visual materials (e.g., tables and graphs) into a small number of dimensions, irrespective of mode of presentation (e.g., paper or computer screen). Because of its exibility and generality, the document literacy approach is adopted for coding the onthe-job documents used in the two factories. Before turning to the cognitive complexity measures, it is important to point out that there has been a huge increase in the number of documents in the plant. In the old plant, there were 16 distinct job forms, which were distributed across the various workstations in different combina288

Skill-Biased Change
TABLE 4 Average Responses to Survey Items Asking about the onthe-Job Use of Basic Skills for All Production Jobs
Time 1 (1991) Time 2 (1994)

Survey items:* . . . . . . . . . . . . . . . . . . . . Reading . . . . . . . . . . . . . . . . . . . . . . . . . Writing . . . . . . . . . . . . . . . . . . . . . . . . . Addition and subtraction . . . . . Multiplication and division . . . Fractions . . . . . . . . . . . . . . . . . . . . . . . Percentages . . . . . . . . . . . . . . . . . . . . . N of cases . . . . . . . . . . . . . . . . . . . . . . . . .

3.48 3.58 3.34 2.77 1.97 2.24 151

3.78 3.80 3.47 3.23 2.23 2.68 154

* The exact question wording is How much [of the following] do you have to do on your job? Would you say . . . (1 p none at all, 5 p a lot). Indicates increases.

tions. The maximum number any workstations clipboard contained was six, and the minimum was zero. In the new plant, 202 distinct forms were identied; every workstation had at least one form, and the maximum number of forms for any one workstation was 30. While this increase may itself seem staggering, the 202 gure may actually underestimate the extent to which documentary material has been made part of production workers job requirements since it does not reect the reading demands involved in dealing with the various computer screens that were introduced into the new plant. It is perhaps not surprising that the number of paper documents has increased with the introduction of computers, since one of the things at which computers are very good is document production. Much of the increase in paper forms is directly linked to the introduction of various computer systems since many of the forms in the new plant are either computer-generated (e.g., statistical process control charts) or involve directions on the use of computers (e.g., instructions posted next to smart keypads). The document literacy variables reect the structure and complexity of the document and the way in which the reader uses the document. Documents structure and complexity are measured by the number of specic pieces of information being referred to in the document (specics) and organizing categories (labels), which serve to classify or summarize specics. The number of specics is a measure of the length and amount of material in a document; as the number of specics increase, the difculty of the document increases. Since labels group together specics, they simplify documents and make them easier to understand. With respect to measuring the ways in which the document is used, the document literacy system denes a hierarchy of complexity on the 289

American Journal of Sociology basis of what is done with the document. I coded each documents strategy rating in a manner consistent with this hierarchy. (If a particular form asked for multiple tasks of varying levels of difculty, I assigned each form the strategy rating for the most difcult task.) Simply locating information is the simplest task (strategy rating of 1). The next most complex task is a lookup and comparison (coded 2). Next is a lookup and comparison that is conditional on textual information literally and explicitly contained in the same document, as might be the case when directions are clearly provided (coded 3). A code of 4 on strategy indicates that the conditional information dening the lookup and comparison is not literally in the document. Directions might be included, but those directions would not use literally the same words to guide the user. Consequently, level 4 documents require the user to make an inference about the applicability of the directions. The highest level of the hierarchy (a strategy rating of 5) makes the lookup and comparison conditional on special prior knowledge that is not clued, literally or otherwise, by the document itself. This would be the case if the document were to be used conditionally but there was no clarifying information provided on when to use it. As a further renement to the strategy rating, I distinguished whether the document required that the procedure be repeated. If the document called for the most complex procedure to be repeated, I added 0.50 to the strategy score. For example, a document that required the user to repeatedly perform unconditional lookup-and-compare (level 2) tasks would be given a strategy rating of 2.5. The shift in warehouse procedures provides a good example of this change. In the old plant, forklift operators would be handed a bill of lading and asked to retrieve the item on the form, for example, a pallet of a certain product (a single lookup and compare). When the operator was done retrieving the product, he (it was always a he) would hand the bill of lading to the woman in the shipping ofce (it was always a woman) who would put the form on the stack of forms she had next to the terminal awaiting entry into the system. In the new plant, the woman is gone, there is no pile, and when the operator is done retrieving the pallet, it is his or her responsibility to enter the information from the bill of lading into the centralized inventory control system. This would typically involve a repeated lookup and compare, as the information on the formthe product number, the client, the destination, and so onis cycled through and made to conform to the requirements of the inventory system.7
7 It is interesting to note that in this example, it is the way the document is used that changed, not the document itself (indeed, the typical bill of lading did not change over this period). However, adding formerly clerical tasks to the forklift operators job

290

Skill-Biased Change As a nal measure of how the document is used, each document is examined for the presence or absence of distractors. Distractors pull the users attention away from its proper use, inviting confusion. Train schedules, for example, are everyday documents with many distractors. Because train schedules try to report the entire weekly schedule on a single piece of paper, they present lots of opportunities for confusion and misuse (e.g., being on the wrong page of the weekend vs. holiday vs. weekday parts of the schedule). Forms containing distractors require that users pay closer attention in order to use them properly; consequently, they are deemed more cognitively complex by the document literacy system. For both time points, a measure of the aggregate levels of document literacy needed in each of the plants was developed. I scored all the forms using the document literacy measures and then matched each form to the jobs that require the form. The four document literacy variables were then averaged across all the forms corresponding to each job. This yields job-level measures of the average document literacy required for each job. In order to measure the aggregate levels of document literacy required in the plant as a whole, and to be consistent with our treatment of the DOT-style measures, I weighted the job-level document literacy averages by the number of people in each job. Table 5 shows the changes in document literacy measures that occurred over the course of the study. There has been a nearly fourfold increase in the average number of documents that production workers are being asked to use on the job (2.63 vs. 10.32). With respect to the cognitive complexity measures, the job forms have become more complex on all four dimensions over time. The average number of specic pieces of information requested has increased dramatically (from 21.88 to 70.75), also indicating a huge increase in the volume of information that workers are being asked to process. At the same time, the number of labels has gone down by almost half (31.84 vs. 60.49). Since labels serve to organize and simplify the presentation of information, this too indicates an increase in the cognitive complexity demands of the job. The strategy rating has also increased (from 2.14 to 2.47), suggesting that the user of the document is being asked to do somewhat more demanding tasks with the forms. In rough terms, this corresponds to moving from a lookup and compare at time 1 to a repeated application of a lookup and compare at time 2. As such, this indicates that the density of interaction with documents has gone up over time. Finally, the percentage of documents with distractors also has increased over time. I observed a 6.7% increase in the prevalence of documents containing distractors. This suggests that the time 2 docrequirements has increased the document literacy requirement of this job along this dimension.

291

American Journal of Sociology

TABLE 5 Document Literacy Scores for Production Jobs
Time 1 (1991) Time 2 (1994)

N of documents . . . . . . . . . N of specics . . . . . . . . . . . . N of labels . . . . . . . . . . . . . . %with distractors . . . . . . . Mean strategy rating . . . N of cases . . . . . . . . . . . . . . .

2.63 21.88 60.49 50.5 2.14 195

10.32* 70.75* 31.84* 57.2* 2.47* 187

* Indicates increase in complexity. Lower numbers indicate greater complexity. We did not obtain forms from the quality control lab (N p 6).

uments require that workers pay closer attention in using the forms than when they were using the time 1 documents. Along all of these dimensions, then, the document literacy analysis strongly supports the inference that both the volume and complexity of the documents have increased over time. Changes in use and knowledge of computers.I assessed changes in workers use and knowledge of computers by a series of survey items at both time points. I asked workers to report on their use of calculators and computers during the course of their work. Table 6 shows the changes for these items over time. These results quantify what was seen qualitatively in the eldwork. At time 1, 83.4% of respondents answered that they never used a computer on the job; by time 2, the percentage of workers reporting no computer use at all had dropped to 9.8%. At the other end of the spectrum of computer use, only 5.3% of time 1 workers said they always used computers on the job, compared to 29.4% of time 2 workers. Use of an electronic calculator on the job also grew over this time period from 37.7% to 53.2%. Over half (56.3%) of the time 1 workforce used neither a calculator nor a computer on the job. By time 2, this percentage had dropped to 8.5%. Clearly, the introduction of computing equipment into the work process has been widespread over this period. This pattern is also consistent with the evidence presented in table 4 that the amount of basic math used on the job increased as well. Summary of Job Changes The data analyzed thus far tell a consistent story. Across all three data sourcesparticipation observation, surveys, job documentswhen measured at the mean, job skill requirements have increased over time. In light of the need to combine the numerous data sources and the special 292

Skill-Biased Change
TABLE 6 Survey Results of Workers Use of Calculators and Computers, All Production Jobs
Time 1 (1991) Time 2 (1994)

On the job use: %using a calculator* . . . . . . . . . . . . . . . . . . . . . %never using computer . . . . . . . . . . . . . . . . . %always using computer . . . . . . . . . . . . . . . . %not using calculator nor computer . . .

37.7 (151) 83.4 (151) 5.3 (151) 56.3 (151)

53.2 (154) 9.8 (153) 29.4 (153) 8.5 (153)

Note.Ns are given in parentheses. * The exact question wording is Do you use an electronic calculator on the job? (1 p yes, 0 p no). Indicates increases in computer use. The exact question wording is How often do you use a computer in the course of your work at [NAME OF COMPANY]? (15 scale Likert scale where 1 p never, 5 p always). Percentage reporting no to the item on calculators and never to the item on computer use.

nature of the sample, I use a sign test as a conservative statistical test of the pattern of results (see the appendix). Of the 28 job skill measures, 26 agree in the direction of the changes over time, with the only exceptions to this pattern being the two measures of SVP. The sign test shows that a pattern this extreme is very unlikely to be due to chance.8 At least in this case, the retooling appears to have been implemented in an upskilling manner. While job requirements have increased across multiple skill dimensions when comparing changes at the means of these various measures, the effects of the retooling on other points of the distribution within each skill dimension have yet to be examined. Changes at the mean could be consistent with very different scenarios with very different implications for wage inequality. On the one hand, it could be that the retooling has mainly served to increase the job requirements for jobs in the upper tails of the various skill distributions. Such a pattern might disproportionately inuence high-wage workers. On the other hand, it is possible that the main impact of the technical change has been felt mainly on the bottom ends of the distributions of job requirements, thereby mainly affecting low-

8 By using the sign test, we are treating the over-time comparisons of means of the skill dimensions as analogous to ips of an unbiased coin. The chances of getting 26 heads out of 28 ips are fewer than one in a million (sign test, P ! .0000001).

293

American Journal of Sociology wage workers. This section on job changes closes by addressing this question. Table 7 presents the results of over-time comparisons of various points in the percentile distribution for various skill measures. I omit the DOTstyle variables coded from the qualitative eld data since they are not ne-grained enough to support analysis of these distributional features. I also modify the analyses of the basic skills survey items reported in table 4. While the individual items adequately capture central tendencies and reasonably support inferences about qualitative (positive or negative) changes over time, they are measured on ve-point Likert scales and therefore provide only coarse information on the rest of the distribution.9 I combine the basic skills survey items to form a more nely graded scale by taking the average of the six items.10 I describe changes in the extremes of the distributions (i.e., the fth and ninety-fth percentiles), as well as changes occurring at each decile of the various skill dimensions. For each skill measure, I denote with a whether the values marking each percentile distribution point are strictly greater at time 2 than at time 1.11 The rst row of table 7 shows, with few exceptions, increases in the self-reported measures of basic skills (sign test, P ! .033). Similarly broad changes are evident for two of the document literacy measures. The patterns for number of documents and number of labels are statistically reliable (sign tests, P ! .0005 and P ! .033, respectively).12 The patterns for these measures support the inference that upskilling has occurred across the board and has not been localized in either the top or bottom tails of the various dimensions of skills. In marked contrast, the measure of on-the-job training (row 7 of table 7) shows no evidence of change at all. The stability of the training measure

9 While the percentage shifts over time are clear for each point on the Likert scale for the computer use item (for time 1 vs. time 2, 1: 83.4% vs. 9.8%; 2: 3.3% vs. 9.8%; 3: 4.0% vs. 17.0%; 4: 4.0% vs. 34.0%; 5: 5.3% vs. 29.4%), these items are not measured nely enough to support the percentile point comparisons we present in table 7. 10 Factor analyses of the six items showed that the basic skills items combine to form one scale, loading on one dimension in very similar ways at each time point. Both basic skills scales are highly reliable, as shown by Cronbach alpha reliability coefcients of 0.876 and 0.838 for time1 and time 2, respectively. 11 While I think it is important to examine the changes occurring across the distribution, one should bear in mind that the sample size increases the risk of slicing the data too thinly in this exercise. Depending on the particular measure, each percentile point comparison is based on 1518 cases, with the fth and ninety-fth percentile comparisons based on even fewer cases. The limits of what this data can tell us are approached in table 7. 12 The changes for the other document literacy measures are more inconsistent and are not statistically reliable as measured by sign tests (number of specics P ! .113; distractors and strategy rating are P ! .500).

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Skill-Biased Change
TABLE 7 Pattern of Over-Time Changes in Skills for Various Percentile Points
Percentiles 5th 10th 20th 30th 40th 50th 60th 70th 80th 90th 95th

Basic skills measures: Survey scale* . . . . . . . . . . . Document literacy: N of documents . . . . . . . . . N of specics . . . . . . . . . . . . N of labels . . . . . . . . . . . . . . %with distractors . . . . . . . Mean strategy rating . . . Education items: How long to train . . . . . . Education most people have . . . . . . . . . . . Education needed . . . . . . Human capital: Years of education . . . . . Years of experience . . . . . Years of tenure . . . . . . . . .
Note. indicates increase. * Scale based on average of six items in table 5. Cronbachs a p .876 (time 1), .838 (time 2).

is evident across the entire distribution, not just at the mean (the chance of 0 increases out of 11 comparisons is less than 5 in 100,000, sign-test P ! .00049). The education and experience measures, however, show a bifurcated pattern, with changes most evident at the bottom and at the very top of the distributions. Changes in workers reports of how much formal education is needed and how much education most people have in their jobs show a gap between the ftieth and ninetieth percentiles. Changes in the actual educational composition of the workforce show an even more bifurcated pattern. For this variable, increases are evident at the fth through the twentieth and at the eightieth percentile points. A less dramatic change in the measured education level of the workforce would be expected than in the more subjective education measures. Workers reported that they were overeducated at time 1 (see table 3), suggesting that there is room for job requirements to rise without a corresponding adjustment in the composition of the workforce. To the extent there have been changes in the educational composition of the work force, they appear to have been concentrated in the extremes of the distribution. Since very few workers were engaged in formal education between time 1 and time 2, these changes are a result of replacing workers who turned over during the period of the study. The patterns in table 7 suggest that the retooling has had a far-reaching 295

American Journal of Sociology impact on skill requirements. Considering the data in table 7 as a whole, the upskilling appears to have occurred across the board. Of the 132 percentile points compared in table 7, 81 show increases. The chances of observing a result this extreme when changes over time are random are quite small (sign test, P ! .0057). However, the question remains whether the changes have been differentially concentrated in the top or the bottom of these skill distributions. Examining above the median (i.e., the sixtieth through the ninety-fth percentiles), 36 of 60 comparisons show increases, yielding a P value of 0.077. Below the median, 37 of 60 percentile points increase (P ! .046). These results suggest that the upskilling shifts have occurred across the board and have not been localized either below or above the median. Removing from consideration the on-the-job training variable, which shows no changes at all across the entire distribution, further strengthens the inference. After omitting this variable, 36 of 55 percentile points changed in the direction of upskilling above the median (P ! .015); below the median, 37 of 55 percentile points indicated upskilling (P ! .007). As a nal point, the fact that there has been an across-the-board upward shift for many of these job skills is quite consistent with managers impressions and behavior. From the interviews, I learned that management had a broad, multidimensional conception of the nature of the job changes and that they also conceived of these changes as an overall upgrading of the job requirements. Moreover, the companys management saw a need to retrain many workers in advance of these changes. While the organization and execution of the retraining effort constitutes a study in itself, one feature of this effort is particularly noteworthy in this context. Management not only talked of the job changes as being of an acrossthe-board nature, they also acted in a manner consistent with this conception when they designed the retraining program. Most of the retraining effort was not targeted on particular individuals or groups of workers. Training in basic skills and new broadly used processes (e.g., statistical process control) was given to all production workers. (The company also tried to offer all production workers general training in computers before they ran short of money. About 75% of the production department received this training). While training focusing specically on the new capital equipment was targeted to the operators who were most likely to be running the new machinery, the fact that the company invested signicant training resources across the entire workforce is consistent with our interpretation of the patterns of table 7. From managements perspective, it is clear that signicant changes were expected across the entire range of job requirements. 296

Skill-Biased Change Changes in the Wage Distribution Although management has conceived of the new plant as having more stringent job requirements across the broad spectrum of jobs, contrary to the conventional economic model, these increased job requirements were not rewarded with higher wages overall: both the mean and median wage for hourly workers barely changed in real terms between 1991 and 1994 (see table 8). There were, however, marked changes in the dispersion of wages over this period. The standard deviation of wages increased over 30% ($1.78 vs. $2.32), and the interquartile range (the difference between the seventy-fth and twenty-fth percentiles) jumped over 82% ($1.31 vs. $2.39) between 1991 and 1994. Further examination shows that the increased wage inequality is due to a twisting of the wage distribution around the median, where wages below the median fell, while wages above the median increased. Figure 1 gives a picture of the changes in the wage distribution: it plots each percentile of the 1991 wage distribution (along the x-axis) against the 1994 wage distribution (the y-axis). The 45-degree, dotted line shows the baseline of no change in the wage distribution over this period. Although the pattern is choppy, the overall pattern is S-shaped, with wages below the median dropping below the 45-degree, dotted line and wages above the median rising above the line, especially those wages at the very top of the distribution (i.e., those above the ninetieth percentile). This S-shaped pattern tracks the changes that have been occurring in the economy as a whole: in real terms, pay for low-wage workers has dropped, while pay for high-wage workers has increased. It is important to note that in contrast to most other analyses of these changes that look across many rms and sectors, the changes documented here have occurred within the same rm. While many studies touting the skill-biased technological change explanation of increasing wage inequality have argued that such changes must be operating within rms, to our knowledge, this study is the rst to have demonstrated the predicted pattern of increasing wage inequality at the level of the rm. Moreover, I have found this pattern in a rm that has undergone a massive retooling that has dramatically altered job requirements. As shown below, the relationship between these job and wage changes is not simply coincidental. While this study has shown evidence that the wage distribution changed over time in precisely the way predicted by advocates of the skill-bias interpretation of growing inequality, a number of puzzles remain to be resolved before this account of these ndings is accepted. While a pattern of wage change that is consistent with the skill-bias explanation of increasing wage inequality has been found, the question arises whether the changes in wages are statistically reliable. Could these 297

American Journal of Sociology

TABLE 8 Hourly Wages for Hourly Production Workers (in 1991 Dollars)
Before Retooling (1991) After Retooling (1994) %Increase (199194)

Minimum . . . . . . . . . . . . . Percentile: 5th . . . . . . . . . . . . . . . . . . 10th . . . . . . . . . . . . . . . . . 20th . . . . . . . . . . . . . . . . . 30th . . . . . . . . . . . . . . . . . 40th . . . . . . . . . . . . . . . . . 50th . . . . . . . . . . . . . . . . . 60th . . . . . . . . . . . . . . . . . 70th . . . . . . . . . . . . . . . . . 80th . . . . . . . . . . . . . . . . . 90th . . . . . . . . . . . . . . . . . 95th . . . . . . . . . . . . . . . . . Maximum . . . . . . . . . . . . . Mean . . . . . . . . . . . . . . . . . . Median . . . . . . . . . . . . . . . . SD . . . . . . . . . . . . . . . . . . . . . Interquartile range . . . Valid N of cases . . . . . .

6.96 8.32 8.32 9.31 9.56 9.81 10.01 10.17 10.47 10.91 13.25 15.00 16.48 10.30 10.01 1.78 1.31 195

6.95 8.02 8.16 8.21 8.96 9.23 10.06 10.44 10.62 10.86 13.77 15.88 20.65 10.23 10.06 2.32 2.39 187

.1 3.6 1.9 11.8 6.3 5.9 .5 2.6 1.4 .5 3.9 5.8 25.3 .6 .5 30.3 82.4

patterns to be due to chance? As discussed in the appendix, the approach taken in this study to assessing the statistical signicance is to use bootstrap procedures to determine how common it would be to nd results that contradict the observed pattern in random resamplings of the data (Efron and Tibshirani 1986). The rst inference tested in this manner is whether wage inequality increased between 1991 and 1994. For both measures of inequality (the standard deviation and the interquartile range), I seek to determine how safe it is to infer that wage inequality has increased over this period. I ran 1,000 bootstrap samplings based on the original data and found that the interquartile range for 1991 never exceeded the corresponding measure for 1994; thus, the P value is less than 0.001. With respect to the standard deviation, the 1991 standard deviation of wages exceeded the 1994 standard deviation twice in 1,000 random samples, yielding a P ! .003. This leads to the conclusion that the increase in wage inequality observed over this period is not sensitive to the random inclusion (or exclusion) of a few cases in the study. While it is clear that wage inequality has increased in these data, the results of the tests just reported do not specify the particular form of the growth in inequality. For example, it is quite possible that the changes in inequality might have grown differentially at the top, rather than at the bottom of the wage distribution. Indeed, visual inspection of gure 1 298

Skill-Biased Change

Fig. 1.Change in wage distribution, 199194

seems to suggest such a pattern. In order to locate where the increase in inequality is coming from, a test of whether the S-shaped form in gure 1 is statistically reliable needs to be specied. I dene a test statistic that summarizes the degree to which the changes in the wage distribution follow the hypothesized S-shape. I take a ratio between 99 percentile points taken from the 1991 and 1994 wage distributions (i.e., the rst to the forty-ninth and the fty-rst to the 100th, excluding the ftieth). In order to assess whether these changes conform to the hypothesized S-shaped change, below the median, I compute the ratio of the 1991 percentile points to the 1994 percentile points. This measures the extent to which 1991 wages exceed 1994 wages below the median. Above the median, the comparison is reversed by taking a ratio of the 1994 to 1991 percentile points and measuring the degree to which 1994 wages exceed 1991 wages. I then average across the 99 percentile points to get a summary measure of the change. I also compute two submeasures of this statistic in order to assess the extent to which the changes in the wage distribution are localized below the median (the rst to the forty-ninth) or above the median (the fty-rst to 100th). I then test whether the measures are statistically reliable by applying bootstrap techniques. 299

American Journal of Sociology Test statistic for entire distribution: Average :

[( ) (
W911st W941st

W912nd W94 2nd

51st

W91 (W94 )
49th 49th 52nd

(W94 ) (W94 ) W91 W91

51st 52nd

(W94 )], W91

100th 100th 49th 49th

(1)

below median: Average : and above median: Average :

[( [(

W911st W941st

W91 ) (W94 )
2nd 2nd

W91 (W94 )] ,

(2)

W94 51st W9151st

) (W94 ) W91
52nd 52nd

(W94 )] , W91
100th 100th

(3)

where W91n corresponds to the nth percentile of the 1991 wage distribution, and W94 n refers to the nth percentile of the 1994 wage distribution. The test statistics are one when there has been no change in the wage distribution (i.e., the 45-degree line in g. 1), greater than one when the numerators are greater than the denominators (corresponding to an Sshape), and negative when the denominators are greater than the numerators (a reverse S-shape). Several points are worth noting about these measures. First, the measures are equal to 1 when there has been no change in the percentile points, so they have a natural baseline to compare to as a null model. Second, as averages of ratios, they measure average proportionate changes over time in the hypothesized direction, down below the median, and up above the median. As such, the measures become more positive as the data depart further from the 45-degree line in gure 1 in an S-shaped pattern. Beginning with the test statistic for the entire wage distribution, I nd that the observed value of the statistic is 1.045, indicating that the percentiles have shifted an average of 4.5% in the direction of an S-shape over time (table 9). I tested whether this statistic is reliably different from 1, the expected value of the statistic under the null model of no change over time (i.e., the 45-degree line in g. 1). In 1,000 bootstrap replications, the test statistic was never one or less, suggesting that the observed Sshaped change in the wage distribution is very unlikely to be due to chance. Separate test statistics for the changes occurring above and below the median are also computed. Below the median, the observed value of the 300

Skill-Biased Change
TABLE 9 Bootstrap Signicance Test of the S-Shaped Change in Wage Distribution, 199194
Entire Distribution (Eq. 1) Below Median (Eq. 2) Above Median (Eq. 3)

Observed test statistic . . . . Bootstrap SE . . . . . . . . . . . . . . Statistical signicance* . . .

1.045 .010 .001

1.059 .016 .001

1.030 .020 .052

Note.Data are from 1,000 bootstrap replications. N p 195 (1991), 187 (1994). * Proportion of bootstrap samples where the test statistic is less than or equal to one.

statistic is 1.059, and values of 1 or less never occur in 1,000 bootstrap replications. Consequently, the inference that wages below the median dropped over the period of the study is robust to random perturbations of the original data. The pattern observed above the median reveals an average 3.1% shift in the direction of increasing wage inequality. The bootstrap signicance test shows that violations of the hypothesized Sshaped change (i.e., statistics of one or less) occurred 51 out of 1,000 times yielding a P value of 0.052. While less impressive than the statistical signicance level computed for the data below the median, this pattern is still quite robust considering the small number of cases that are being used to estimate changes across a broad span of the wage distribution. A closer look at table 8 and gure 1 reveals that the largest wage changes occurred at the very top of the wage of distribution, that is, from the ninetieth percentile and above. Even with this thin case base, however, the magnitudes of the wage increases that occurred above the ninetieth percentile are so large that we can be reasonably condent that wages at the very top of the distribution went up in real terms over the period of our study. At the risk of slicing the data too nely, I recalculated statistics based on changes above the ninetieth percentile and above the ninetyfth percentile. At the ninetieth percentile and above, the 1994 wages exceed the 1991 wages by an average of 8.5%. The bootstrap tests show that the data did not follow the hypothesized pattern 10 times out of 1,000 bootstrap replications, yielding a P ! .011. Looking at the ninety-fth percentile and above, wages rose an average of 12.2%. The bootstrap test shows only two violations of the hypothesis out of 1,000 trials for a P ! .003. Despite the small number of cases, there does appear to be a statistically reliable tendency for the wages at the very top of the distribution to have risen over this period. The jobs that account for this patternthose jobs that are the highest paid at both time pointsare the maintenance mechanics and maintenance electricians. These personnel are charged with repairing and maintaining the industrial machinery in the plant, and they are the recognized 301

American Journal of Sociology elite of the plants hourly workforce. They are highly trained, possess journeymen skills, and, as a consequence, are paid off the union scale at both time points. Thus far evidence has been shown that the wage distribution changed over time in precisely the way predicted by advocates of the skill-bias interpretation of growing wage inequality. One of the announced advantages of the case-study approach is the ability to open up the black box and observe the mechanisms by which these changes take place. How did these changes come about? Turnover plays a key role in these wage changes. Of the 195 production workers employed at the factory at time 1, 43 (22%) had left the by the time of the second wave of the study three years later.13 While this rate is in line with the historical pattern of turnover in this company,14 the shift in the composition of the company has had important effects on the wage distribution. These changes are seen clearly by comparing the wage data for the entire population of workers (table 8) with the wage data for those workers who stayed through the transition between 1991 and 1994 (table 10), which remove from consideration the data for the time 1 leavers and the time 2 new entrants.15 Comparing the time 1 data for both tables, neither measure of central tendency (the mean and the median) changes very much. Nor do the inequality measures (the standard deviation and the interquartile range), indicating that the people who are turning over are not concentrated in any particular part of the wage distribution, but instead are leaving from across the wage distribution. While the impact of the time 1 leavers on the wage distribution has been relatively even, their replacements (the
In keeping with the companys pledge, none of these terminations were due to layoffs; 9 occurred through retirement, 1 through death, 16 were quits, and 17 were red for cause. In addition to these 43, two cases were transferred to another facility within the company, and two cases were promoted out of the blue-collar ranks. These four cases are not terminations in the turnover analysis; nor are they included in the time 2 wage data. Including these four cases in the turnover and wage data does not change any of the substantive results. 14 The turnover rate for the three-year period between 1987 and 1990 (a period without marked technological changes) was 21.5%. A bootstrap test was performed to determine whether this rate is reliably different from the rate of 22.0% we observed between 1991 and 1994. This test showed that the difference in rates is not statistically trustworthy. In 1,000 trials of the 199194 data, we observed rates as low or lower than 21.5% 382 times (P ! .383). Treating the four cases of transfer or promotion as terminations raises the turnover rate to 24.1% but does not alter the substantive interpretations offered here. Bootstrap tests adding those four cases to the termination data showed turnover rates as low or lower than 21.5% 188 times (P ! .189). 15 New entrants consist of 34 hires from the external labor market and 11 transfers from another plant. Excluding the transfers from the analysis does not change the substantive results.
13

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Skill-Biased Change
TABLE 10 Hourly Wages for Stayers (in 1991 Dollars)
Before Retooling (1991) After Retooling (1994) %Increase (199194)

Minimum . . . . . . . . . . . . . Percentile: 5th . . . . . . . . . . . . . . . . . . 10th . . . . . . . . . . . . . . . . . 20th . . . . . . . . . . . . . . . . . 30th . . . . . . . . . . . . . . . . . 40th . . . . . . . . . . . . . . . . . 50th . . . . . . . . . . . . . . . . . 60th . . . . . . . . . . . . . . . . . 70th . . . . . . . . . . . . . . . . . 80th . . . . . . . . . . . . . . . . . 90th . . . . . . . . . . . . . . . . . 95th . . . . . . . . . . . . . . . . . Maximum . . . . . . . . . . . . . Mean . . . . . . . . . . . . . . . . . . Median . . . . . . . . . . . . . . . . SD . . . . . . . . . . . . . . . . . . . . . Interquartile range . . . Valid N of cases* . . . .

6.96 8.32 8.32 9.31 9.56 9.81 10.06 10.17 10.47 10.86 11.72 14.70 16.48 10.28 10.06 1.69 1.18 148

8.02 8.02 8.16 8.30 8.99 9.23 10.07 10.44 10.62 10.83 11.13 15.67 18.59 10.13 10.07 1.97 1.76 145

15.2 3.6 1.9 10.8 6.0 5.9 .1 2.6 1.4 .3 7.7 6.3 12.8 1.5 .1 16.6 55.7

* Total N p 148; three cases are missing at time 2.

time 2 new entrants) have entered the wage distribution in a markedly uneven pattern (compare second cols. of tables 8 and 10). However, wage inequality clearly also grew among stayers over this period. The standard deviation and the interquartile range for stayers wages increased 16.6% and 55.7%, respectively (see col. 3 of table 10). While these changes are substantial and statistically reliable (P values ! .006 and .005), these increases are respectively only 54.8% and 67.6% of that which was observed for the population as a whole (compare tables 8 and 10). Consequently, a large portion of the increased wage inequality observed in this case occurs on the market margin. This is seen clearly in gure 2, which plots the wage distribution of 43 workers who terminated against the wage distribution of the 34 new hires. The pattern shows a strong departure from the 45-degree line, indicating that turnover accounts for a substantial portion of the increase in wage inequality observed over this period. However, gure 2 also suggests that the inux of new hires has not increased dispersion uniformly over the entire range of the wage distribution. In this unionized context, with a seniority-based pay scale, new hires came in at the bottom of the grade and thus pulled down the bottom of the wage distribution. While the turnover process contributed to this pattern, it does not wholly account for such changes. Below the median, 303

American Journal of Sociology

Fig. 2.Wage distribution of 1991 leavers versus 1994 new hires

only about 20% of the changes in wage dispersion can be attributed to new entrants. For stayers above the median, the wage distribution dropped an average of 4.7% (P ! .014),16 a gure that is 80% of that observed for the entire population (5.9%). This is despite the promise of a wage guarantee.17
16 There is one exception to this pattern: the minimum wages for stayers is higher at time 2 than at time 1 (cf. cols. 1 and 2 of table 10). This is due to the fact that the lowest wages are assigned to new hires that lack seniority. The fact that all of the people in the second column of table 10 have at least three years of tenure with the company explains this seeming increase in the oor of the wage distribution for stayers. 17 This pattern appears despite the company having in place a wage guarantee that workers would get at least their same pay as old job, irrespective of the job change. This puzzling result is due to the particular implementation of the wage guarantee that froze the wages of those workers who would earn less in the new than the old plant. While workers were allowed to bid for jobs in the new plant on the basis of seniority, very little information was available about the new jobs. The net result of this bidding process was, in the words of one human resources manager, a reshufed deck where many workers would land in jobs that would pay less than their previous jobs. These workers were paid a base rate on the new jobs lower scale, but a bonus was then added to bring to worker up to her previous pay level until such time as natural (contracted) pay increases eliminated the gap in pay. For example, if the worker had been paid $11.00 per hour, and the new job paid $10.00, the worker would be paid a bonus of $1.00 per hour. When the worker received her pay increase of 2.5%, it was only applied to base pay. This worker would then earn a base rate of

304

Skill-Biased Change Above the median, however, the inux of new hires explains threequarters of the rise of time 2 wages compared with time 1 wages. The average rise in wages above the median for the entire population was 3.0% (table 9), while for stayers the increase is 0.7%, a gure that is not statistically reliable in these data (P ! .247). Only at the very top of the wage distribution (i.e., the ninety-fth percentile and above) can it be said with condence that wages for stayers have risen. Despite there being only eight cases in this portion of the wage distribution for stayers, the increase for these workers is so large (on average, over 8.2%), that this increase is statistically reliable (P ! .021). Thus, new hires impact on the wage inequality has been concentrated on the very top of the income distribution. Close inspection of the data shows that the new hires that account for the rise in wages at the top of the wage distribution are all maintenance electricians and mechanics. Electricians wages rose a dramatic 18.7%, and mechanics wages held steady over this period. These workers stand as exceptions to the overall pattern of declining fortunes that characterize other workers at the company. I argue that these exceptions are a result of the technological changes introduced with the retooling. This demandside shift has not been skill neutral in this setting: the new technology has placed greater value on these workers skills than in the past. Before offering evidence in support of this specic interpretation, it is necessary to address the issue of the counterfactual against which the changes in the factory need to be compared. While the analyses thus far have documented that changes in the wage distribution t the S-shaped pattern predicted by advocates of the skill-biased technological change model, the argument here hinges on the idea that the changes were caused by the retooling. But wage inequality had been growing over this period in the economy at large, so it is possible that the companys wage distribution would have widened even in the absence of the retooling. Without some comparison group, it is difcult to give causal weight to the changing technology. Compared to What? The Counterfactual Evidence on Wages In order to understand these ndings in reference to the larger labor market, I compared the rms wage changes against a baseline of changes that were occurring in the local labor market over the period of the study. I relied on data collected by the local Area Wage Surveys, which collect
$10.25 per hour and a bonus of $0.75 per hour. Over time, the base rate would rise and the bonus diminish, but the net pay remains frozen at the original $11.00. While ination was low over this period, in real terms, these workers lost ground.

305

American Journal of Sociology wage data over time on four jobs that closely match jobs in our factory. The four jobs are industrial cleaners, forklift operators, maintenance mechanics, and maintenance electricians. The factorys wages for these jobs sample a broad range of the companys wage distribution. The workers in these four jobs account for 24.1% of the companys production workforce in 1991 and 32.5% in 1994. Industrial cleaners fall at the thirtieth percentile of the 1991 distribution, while forklift operators are concentrated at the ftieth percentile. The maintenance mechanics and electricians respectively capture the ninety-fth and ninety-ninth percentiles. Table 11 shows the average factory and local labor market wages for these jobs over time. In real terms, wages in the local labor market for industrial cleaners and forklift operators had fallen dramatically since 1987, the earliest year for which I could get Area Wage Survey data. Prior to this study (198791), wages fell 14.3% for cleaners and 16.2% for forklift operators. These dramatic drops continued over the period of the study (199194), with cleaners and forklift operators wages falling an additional 8.9% and 14.8%, respectively. Market wages for maintenance mechanics also declined but at a considerably slower pace. During 198791, mechanics experienced a drop of 6.6%; over the time period we studied (199194), their wages declined 4.0%.18 The story for electricians is somewhat different, however. From 1987 to 1991, electricians too suffered a substantial loss of wages (8.6%). However, in marked contrast to the pattern for the other three jobs, market wages for maintenance electricians slowly rose over the period 199194 (4.4%).19 Taken together, the data for market wages shows that the cautions expressed above with respect to the comparison group were justied. Taking these four jobs as the counterfactual for the factory, the wage distribution for the comparison group also appears to be following a mild S-shaped pattern of change over the period of our study (see g. 3). Turning to the comparable data on wages in the factory shows that cleaners and forklift operators at the plant have not suffered a dramatic decline in the market. Compared with their plummeting wages in the open labor market, over this period cleaners gained slightly (1.4%) and forklift operators lost ground at a much slower pace ( 4.9%). The reason for cleaners and forklift operators comparative success lies in the fact that all of the cleaners and forklift operators beneted from the companys wage guarantee, which cushioned their wages against the fall in the open
18 Consistent with these patterns, the Area Wage Survey data also show that the numbers of cleaners, forklift operators, and maintenance mechanics declined respectively 16%, 46%, and 14% between 1991 and 1994. 19 This corresponds to an increase of 8% in the number of maintenance electricians in the local market between 1991 and 1994.

306

TABLE 11 Local Market and Factory Wages (in 1991 Dollars) for Four Jobs by Year 199194 (t1t2) 1987 Industrial cleaners: Market . . . . . . . . . . . . . . . . . Factory . . . . . . . . . . . . . . . . Forklift operators: Market . . . . . . . . . . . . . . . . . Factory . . . . . . . . . . . . . . . . Maintenance mechanics: Market . . . . . . . . . . . . . . . . . Factory . . . . . . . . . . . . . . . . Maintenance electricians: Market . . . . . . . . . . . . . . . . . Factory . . . . . . . . . . . . . . . . 11.66 ... 1988 11.24 1989 11.18 1990 10.41 1991 (t1) 9.99 9.37 (17) 12.19 10.48 (9) 14.50 14.69 (18) 16.98 14.38 (3) 1992 9.82 1993 10.04 1994 (t2) 8.98 9.50 (16) 10.62 9.97 (16) 13.94 14.74 (24) 17.76 17.64 (6) 1995 8.87 Dollars 1.01 .13 % 8.9 1.4

14.55 ...

14.02

13.31

12.93

12.74

11.14

11.42

1.57 .51

14.8 4.9

15.52 ...

14.90

14.84

14.80

14.35

14.08

14.31

.56 .06

40 .3

18.57 ...

18.29

18.08

17.74

17.21

17.47

17.95

.78 3.26

4.4 22.7

Note.Ns are given in parentheses.

American Journal of Sociology

Fig. 3.Change in wages for four jobs from 1991 to 1994. From left to right: (1) cleaners, (2) forklift operators, (3) mechanics, and (4) electricians.

labor market. Indeed, there had been no turnover of either cleaners or forklift operators, so none of the workers in these jobs in 1994 were new hires. In light of the reality of rapidly falling wages in the open market for these jobs, such reluctance to leave the company is understandable.20
20 While the companys wage guarantee cushioned the fall for these workers, it is important to remember that skill requirements were increased over this period. As discussed above, the job tasks for forklift operators in the new plant were expanded to include what were formally clerical tasks in the old plant. The task of entering shipping information directly into the companys inventory control system supported the companys move toward a just-in-time warehouse. The cleaners also showed interesting changes. Cleaning was the only job in the old plant that did not require the use of any on-the-job forms. Where a few workers would mix chemicals for others in the old plant, in the new plant, all workers were required to mix their own chemicals. The manager of the department required everyone to be able to pass a series of ad hoc tests that he developed himself, where these same workers were required to read labels and mixing instructions for cleaning chemicals. The racheting up of the requirements for these jobs can be interpreted as a way of taking the above-market wages back in trade. The question remains whether the additional inference should be made that the above-market wages for these jobs is evidence of skill-biased change, that they were caused by the technological changes at the factory. While such an argument can be constructed plausibly for the forklift operators (e.g., just-in-time warehouses naturally complement advanced manufacturing systems), it is much harder to draw the technology link to account for the task changes evident among the cleaners. The exibility to have everyone cross-trained to mix chemicals does not strike me as being required by the new technology. As I see it, whatever advantages there are to the new set of requirements, this change would have been just as benecial in the old plant.

308

Skill-Biased Change Looking above the median shows that overall mechanics in the factory stayed even with ination between 1991 and 1994. However, this seeming stability hides a set of heterogeneous experiences. In 1994, maintenance mechanics include a substantial number of new hires (nine of 24) that came in at wages that were slightly below the going market rate ($13.69 vs. $13.94), but substantially below the 1991 factory rate of $14.69. The remaining 15 maintenance mechanics had been employed at the old plant, and these workers had average wages of $15.57. The 6.0% increase for these workers is especially noteworthy when judged against the reality of falling market wages for mechanics over this period. Turning to the electricians, although small in number (three at time 1, six at time 2), this elite group received a large increase in wages over this period (22.7%). Electricians factory wages had lagged substantially behind the going market rate in 1991 ($14.38 vs. $16.98). The 1991 factory wage of $14.38 fell in the sixteenth percentile of the local labor market according to Area Wage Survey data. But by 1994, the factory wage had climbed to the forty-second percentile and approached the average for the market ($17.64 vs. $17.76). I argue that the increases at the very top of the factorys wage distribution are too extreme to be simply coincidental with the retooling. A big, discrete wage jump is what would be expected for a rm undergoing technological changes that would place a premium on electricians.21 While the wage adjustment would be sudden for every rm as they made the transition to the new technologies, the changes would be expected to appear much more gradually in data, such as the Area Wage Survey, that are aggregated across rms. Thus, the mild increase in electricians wages (or the slow decline for mechanics) in the local labor market might also be due to technological changes.22 The fact that the numbers of both electricians and mechanics increased over this period is suggestive of the skill-bias argument. The number of electricians doubled (from three to six), and the number of mechanics
21 Although I will concentrate on the electricians here, a similar argument can be made for mechanics in relative terms. Because their wages stayed levelor rose for the continuing workersagainst a falling market wage, mechanics can also be considered winners in this story. 22 Indeed, some independent support was found for this interpretation. I reasoned that the companies that produce smart manufacturing hardware (e.g., programmable logic controllers and computerized motor starters) would be able to report whether retoolings were increasing in the local labor market during the period of this study. I learned from representatives of the three largest suppliers of such technology that there had been a pause in the upgrading of manufacturing facilities during a mild recession in the area during 198790. Consistent with the interpretation that retoolings drive the need for highly qualied maintenance personnel, all these suppliers reported increases in sales of advanced manufacturing technology over the period of the study.

309

American Journal of Sociology increased by 33% (24 vs. 18). Considered alone, such increases suggest that maintenance personnel are a complement to the new technology. In addition to the numbers of such workers increasing, however, electricians wages (price) went up simultaneously. This too suggests that the value of their contribution to the new factory has increased over that of the old factory. An increase in both price and quantity of such labor (i.e., an outward shift in the demand curve) is what one would expect under a technological change that was biased in the direction of their skills. The case offers vital clues as to why industrial transformation drives up the demand for maintenance workers. While the evidence for the forklift operators and cleaners is ambiguous (see n. 20, above), it is clear that, at least in this case, these increases were a direct result of the investment in the new technology. Having invested in higher-speed production lines, management wanted to run the new plant at its capacity in order to recoup their $90 million investment as quickly as possible. This led management to try to minimize machine downtime. But increasing return on investment was not the only reason for this policy. In addition to speeding up the ow of products through the plant, the new system chained together what were previously stand-alone processing units. In the old system, production could work around a stand-alone unit that was in need of repair. The integration of these units meant that the new production process had much less of a buffer against an out-of-service machine. For both these reasons, managements tolerance for machine downtime decreased in the new plant, and more maintenance personnel were required to tackle this new problem. The eldwork provided some further clues about the nature of the changes for these jobs. The work of maintaining and repairing out-ofservice machinery was technically sophisticated and highly skilled in the old plant. In the old plant, the maintenance department workers would move from job to job pushing large carts containing the necessary tools and equipment. However, in the new plant, new pieces of equipment appeared on these tool cartslaptop computers. In taking a machine down for service in the new plant, maintenance workers would need to plug the laptop into a computer port on the machine in question and take the machine off-line before beginning mechanical repairs. Maintenance workers would use the laptop to run computer programs to test the machine. Information gathered by running the program could be used to diagnose the problem and identify the faulty part that needed replacing. Thus, in addition to the advanced knowledge of machine repair (e.g., principles of wiring and electrical circuits) required in the old plant, the production system in the new factory also required maintenance workers to understand and use computer programs as part of their daily work activities. 310

Skill-Biased Change While computers were introduced throughout the new plant, the change experienced by the maintenance department was the most profound of all the workers. In addition to the repair activities being affected by the informated nature of the new production machinery, maintenance electricians were required to use four separate computer systemsthe most of any of the production workers in the new plant.23 Where work orders were given out on slips of paper in the old plant, in the new plant work orders were distributed via E-mail. The procedures for ordering spare parts also changed dramatically with the introduction of computers. In the old plant, maintenance workers had considerable autonomy in ordering spare parts; in the new plant, workers were required to search an inventory control system and to place such orders through that system. I do not see these changes as being required by the new plants production technology in the same way as the ability to deal with laptops during repairs. The benets of E-mail (better tracking of assignments) and inventory control (avoidance of overstocking spare parts) systems would have been apparent in the old plant as well. To the extent that the ability to deal with these computer systems has been associated with the building of the new plant, I think that it is because it is easier to make these changes on the blank slate that the new plant presented than to introduce them into the old plant. Irrespective of whether the change in production technology required the introduction of these systems as well, these changes do seem to support the notion that the company had substantially raised its expectations of maintenance workers computer literacy. Changes by Race and Gender One of the reasons there has been keen interest in the skill-biased technological change argument in policy circles is that such processes are posited to account for the declining fortunes of minorities since the 1980s (see Wilson 1987, 1996; Kasarda 1988). The company in this study is well suited to addressing these issues. The manufacturing jobs studied here are precisely those at stake in discussions of skills mismatches. These are the jobs that are disappearing from the U.S. economy: they require relatively little education, yet pay enough to support a family (Commission on the Skills of the American Workforce 1990). In this nal empirical section of the article, I seek to assess the racial and gender impacts of the retooling on the companys workforce.
23 Of course, computer literacy requirements were raised for others as well. Of the 23 jobs in the new plant, 19 jobs involved being able to log on to at least one computer system. (This is compared to zero of 23 jobs in the old plant).

311

American Journal of Sociology Part of the motivation for choosing this case is the companys demographic mix. The third column of table 12 shows that minorities constitute a clear majority (56.4%) of the workers at the old plant. Comparing the racial distribution over time (cf. cols. 3 and 6) shows little change in racial composition: non-Hispanic whites constitute 43.6% of the workforce at time 1 versus 46.2% at time 2. This pattern of stability is also apparent for gender: the proportion of women among minorities is 39.3%, while 19.0% of non-Hispanic whites are women. Thus, the retooling had no effect on the aggregate racial distribution. This goes against the simplest of the skill-mismatch predictions, that is, that technological change would lead to a signicantly whiter workforce. The wage effects are another matter. Table 13 shows that the gap in average wages between minorities and nonminorities grew 48.5% between 1991 and 1994. In 1991, the gap was $1.32; this had grown to $1.96 by 1994. The gender gap in wages also grew by a similar magnitude (48.8%).24 Similar to the pattern for the growth in overall wage inequality, these race and gender wage gaps are considerably smaller among stayers: the minority/nonminority gap in wages grew 19.1%, and the gender gap increased 33.0% between 1991 and 1994 (see the top half of table 14). However, dramatic differences can be found among those who turned over (bottom half of table 14). The minority/nonminority and gender gaps for those who left from time 1 are much greater than those among stayers (race: $2.29 vs. $1.10; gender: $1.57 vs. $1.12). The pattern is even more extreme for new hires: race and gender differences among the time 2 replacements are nearly double those of the leavers (95.6% for race, and 90.4% for gender). Although racial and gender wage inequality grew even among stayers, the market turnover process clearly exacerbates this trend. Among minorities, 1991 leavers earned less than 1991 stayers ($9.38 vs. $9.73) and were replaced by people in 1994 that earned even less ($8.49). The opposite pattern holds for nonminorities. Among them, leavers tend to be drawn from the top of the wage scale for nonminorities (1991 stayers p $10.83 vs. 1991 leavers p $11.67) and tend to be replaced by people earning considerably more than them ($12.97). Thus, both the leaving and replacement processes work together to bifurcate wages by race. For gender, a similar, but less pronounced pattern is evident. Females tend to leave from the bottom of the female wage scale and are replaced by lower-paid women (table 14, col. 5). Male replacements tend to be higher paid than

24 The change in the gender gap is not independent of race. The gender gap increased 31.6% among minorities between 1991 and 1994 (1991 p $0.76; 1994 p $1.00). The corresponding increase for nonminorities is 73.2% (from $1.38 in 1991 to $2.39 in 1994).

312

Skill-Biased Change
TABLE 12 Percentage Distribution of Race by Gender and Time
1991 Workforce Male Female All Male 1994 Workforce Female All

Non-Hispanic white . . . Non-Hispanic black . . . Hispanic . . . . . . . . . . . . . . . . Other minority* . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . Total N of cases . . . . .

51.1 (69) 37.0 (50) 11.8 (16) ... 99.9 135

26.7 (16) 56.7 (34) 11.7 (7) 5.0 (3) 100.1 60

43.6 (85) 43.1 (84) 11.8 (23) 1.5 (3) 100 195

54.4 (68) 33.6 (42) 12.0 (15) ... 100 125

28.1 (16) 61.4 (35) 8.8 (5) 1.8 (1) 100.1 57

46.2 (84) 42.3 (77) 11.0 (20) .5 (1) 100 182

Note.Individual Ns are given in parentheses. * Other minorities include American Indians and Asian Americans. Because of rounding error, totals do not necessarily sum to 100%. The total number of cases for time 2 is 193; 11 cases did not respond to the item on race.

TABLE 13 Average Hourly Wages (in 1991 Dollars) for Production Workers by Demographic Subgroup
Group Difference Gender Difference

Minorities

Nonminorities

Female

Male

1991 . . . . . . . . . 1994 . . . . . . . . . Difference . . . %change . . . .

9.64 (110) 9.39 (97) .25 2.6

11.16 (85) 11.38 (81) .22 2.0

1.52 1.99 .47 30.9

9.37 (62) 8.99 (57) .38 4.0

10.74 (133) 10.80 (128) .06 1.9

1.37 1.81 .44 32.1

Note.Ns are given in parentheses.

are the leavers, but leavers are paid similar wages to male stayers ($10.56 vs. $10.59).25 Close scrutiny of the data show that the racial and gender bifurcation of wages over this period is a result of the technological change in the company. As argued above, the expansion of the maintenance electricians and mechanics were directly in response to problems introduced by the new technology. The expansion of these two jobs was a white, male phe25 In analyses not shown here, I examined whether race and gender interact in the turnover process. For nonminorities, men leave from the top of the wage distribution and are replaced by males earning even more. However, male minorities follow the dominant pattern for minorities overall, i.e., male leavers earn less than stayers and are replaced by men earning even less.

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TABLE 14 Average Hourly Wages (in 1991 Dollars) for Production Workers by Demographic Subgroup and Turnover Status
Nonminorities Group Difference Gender Difference

Total

Minorities

Female

Male

10.29 (146) 1994 . . . . . . . . . . . . 10.14 (143) Difference . . . . . .15 %change . . . . . . . 1.4 Changers: 1991 leavers . . . 10.35 (47) 1994 new hires . . . . . . . . . 10.57 (31) Difference . . . . . .22 %change . . . . . . . 2.1

Stayers: 1991 . . . . . . . . . . . .

9.74 (82) 9.56 (81) .18 1.8 9.35 (28) 8.24 (13) 1.11 11.9

10.98 (64) 10.89 (62) .09 .8 11.81 (19) 13.50 (14) 1.69 14.3

1.14 1.33 .19 16.7 2.46

9.45 10.71 (49) (97) 9.13 10.63 (47) (96) .32 .08 3.4 .7 9.04 10.84 (13) (34) 7.73 11.40 (7) (24) 1.31 .56 14.5 5.2

1.26 1.50 .24 19.0 1.80

5.26 2.80 114.0

3.67 1.87 103.9

Note.Ns are given in parentheses.

nomenon. All of the 14 new hires into the highly paid electrician and mechanic jobs were nonminority males. Women and minorities were also underrepresented among the ranks of the mechanics and electricians (i.e., one women and two minorities out of 16 continuing workers), who also received substantial pay increases over this period. In contrast, women and minorities were most likely to be found in jobs whose wages were eroding over this period, even as they beneted from the companys wage guarantee. At least in this case, skill-biased technological change has served to erode minorities and females wages relative to nonminorities and males.

SUMMARY AND CONCLUSION

I have used the case of a retooling of a food processing plant to study the phenomenon of skill-biased technological change. Using a unique, longitudinal, multimethod design, I have probed the previously unexamined processes of technological change, which are supposed to be major factors underlying the growing dispersion of wages. Through this empirically grounded case-study approach, I have documented the nature of the technological change, traced the effect of these changes on job requirements, and drawn out the mechanisms by which these changes affect the wage distribution for hourly production workers. Because the 314

Skill-Biased Change retooling constitutes an exogenous demand-side shift in the labor market for this companys workers, this natural-experiment design solves the selfselection problem that plagued past skill-bias studies. This study found that job requirements increased with the retooling across a broad and comprehensive set of skill dimensions. However, contrary to the conventional economic wisdom, wages did not rise in a corresponding fashion. This study also found that the retooling resulted in greater wage dispersion of the form predicted by the proponents of the skill-biased technological change argument. Although wages in the local labor market were growing increasingly unequal over the period studied, these changes do not account for the rms changing wage distribution since the wage shifts in the company were more extreme than the changes that occurred in the local labor market over the same period. In contrast to past research that treats such changes as a residual, I have presented direct evidence of changes in the wage distribution within the same rm. Finally, consistent with Wilsons (1987, 1996) and Kasardas (1988) hypotheses, I have demonstrated that these changes in production technology have also resulted in greater racial and gender inequality in wages. Although strong and convincing evidence has been found that the retooling resulted in skill-biased changes that increase inequality, it is important to note that organizational and human resources factors strongly mediated the impact of the changing technology in this case. The company adopted a high road strategy for implementing its new manufacturing technology, offering workers no-layoff and wage guarantees through the transition to the new system. Given the ndings above that turnover accounts for a substantial portion of the increases in race, gender, and overall wage inequality, I suggest that the no-layoff policy attenuatedalthough it did not totally eliminatethe growth in inequality in this company. Absent the no-layoff pledge, the change in wages would have been decidedly more unequal. Increasing turnover is likely to have made the wage changes look more like gure 2 and less like gure 1. At least in this setting, relying on internal labor markets lessens workers exposure to the open labor market and has served as a cushion against the reality of plummeting wages for blue-collar work. In a similar manner, the likely impact of managements decision to offer workers a wage guarantee was to slow the growth of inequality. Without such a guarantee, wages could only have drifted further downward, even among stayers. Thus, decisions taken at the level of the company can signicantly temper technologically driven demand-side shocks to the labor market. In making the no-layoff and wage-guarantee pledges, the rms actions are consistent with the arguments of several scholars (Osterman 1988; Flynn 1988) that employment security is a key feature of successful technological changes. Put simply: workers fretting for their jobs or wages 315

American Journal of Sociology can undo many of the benets expected from new technology. However, many rms have chosen not to heed this line of argument. For policy purposes, it is important to consider the factors that helped steer this company toward high road implementation of its new technology. There appear to be two important factors that guided top managements thinking in this instance. First, the company beneted from policies designed to attract and keep rms in the state. Perhaps the single most important policy initiative for this case was the states provision of matching funds to support worker retraining. In this respect, the state appears to illustrate the strengths of a common policy prescription about retraining. Although I do not have a clear sense of what other states were offering the company to relocate, top management told me that having matching funds available to retrain workers was an important factor contributing to their decision to attempt the technological transition with the same workers. While the track record of second chance training for adult workers has been mixed (Bassi 1994), from the perspective of protecting the eroding labor market position of blue-collar workers in this setting, the states subsidization of the company training efforts was money well spent.26 The other major factor that can be pointed to in this case was the union. As the companys president told me: The union do[es] not run this company; yet, we have a good working relationship with them. While this acceptance of the union may well have been contingent on the unions relatively weak position (Wellin 1997), the union did play a constructive role in the difcult transition from the old to the new plant. In return for the no-layoff and wage guarantees, the union made several important concessions by relaxing seniority and work rule requirements and supporting the companys retraining efforts. Without these signs of cooperation on the part of the union, the company would have been much more likely to back away from its commitments to stay on the high road. At the end of the journey, this study provides strong evidence for the importance of skill-biased technological change as an explanation of rising wage inequality. While rms like the one studied here may not be commonplace, the circumstances of this case have made for a conservative test of the skill-biased technological change theory. Evidence has been found to support the skill-biased change argument in a best case setting, where management took afrmative steps to soften the impacts of the new technology on its workforce. If racial, gender, and overall wage inequality grew within this relatively enlightened company, one would have
26 Note that most of this training was in general and not rm-specic skills. This is contrary to the economic theory that says that rms will only pay for rm-specic training (Bassi 1994).

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Skill-Biased Change to conclude that similar disruptions in less paternalistic rms can only be expected to be more severe than those documented here.
APPENDIX

Special Methodological Issues While the in-depth approach used here to study skill-biased technological change offers advantages over past research in this area, the case-study approach does introduce a few special methodological issues that need to be considered. The most important methodological issue is the question of generalizability. Within the limits of the case-study approach, care has been taken so that threats to external validity are minimized. I used substantive judgment to identify a case that would reect the various processes that were being cited in the emerging literature on racial inequality and skillbiased technological change. This led me to focus on manufacturing (as opposed to services) rms with a reasonably large representation of minority workers, which I could observe going through the transition to the new manufacturing model. The case presented here ts this prole nicely. While recognizing that this cannot eliminate concerns about generalizability, I note that many of the patterns in this case (e.g., patterns of wage dispersion) look unremarkable when compared with nationallevel U.S. data. The main methodological argument for the case-study approach lies in the theoretical signicance of the case. I conceive of the rm retooling as a best-case study. From this perspective, the study should not be used to make inferences about other rms and workers in different settings. Rather, the purpose is to ask whether technological change processes affect the skill and wage distributions in a context in which the employer is trying to keep its workforce. While such rms might be empirically rare, in this case, I am happy to trade external validity for internal validity, that is, sacrice generalizability for the ability to get detailed information on factors that are usually black boxed in other empirical analyses in this area. To put the issue a little differently, I argue that the unique circumstances surrounding the rm retooling provide an exceptional opportunity to mount an unbiased test of the skills mismatch explanation of growing wage inequality. Finally, these issues about the logical status of the case have implications for statistical signicance testing. The traditional aim of statistical signicance testing is to assess the inferential risks associated with using a probability sample to generalize to the population from which the sample has been drawn. This use of statistical testing, however, is not appropriate 317

American Journal of Sociology for this study. Since I did not employ probability sampling techniques to choose this company or its employees for study, statistical tests cannot be used to draw inferences about the population of such rms, and I do not attempt to make such claims here. As is always true in case-study research, arguments for generalizing from this case study must rest on theoretical grounds. I develop statistical tests in order to assess whether the patterns observed in these data can be accounted for by random uctuations in the measures. As such, I am seeking to convince myself that the patterns observed in this case are robust to chance variations such as those that might be caused by random measurement error or random exclusion of a few cases due to nonresponse. Given the special nature of the sample and the procedures used to develop measures for a number of these variables (e.g., the coding of the participant observation eldwork), I think this is the appropriate statistical baseline against which to compare the observed data. For the job skill measures, I use a sign test to compare the pattern of the observed results to those that would have occurred by chance. This is a very simple, conservative (i.e., very few assumptions) statistical test of whether the qualitative pattern of changes (positive or negative) over time is observed at rates that are greater than one would expect on the basis of random draws from a binomial distribution. While the sign test discards quantitative information about how much change has occurred for each measure, the sign test nicely complements the triangulation strategy, and it is appropriate for assessing whether the patterns of results observed across multiple data sources can be accounted for by chance. My approach to assessing statistical signicance for the analysis of changes in the wage distribution is to use bootstrap procedures (Efron and Tibshirani 1986). The basic idea behind the bootstrap is to produce random samples from the observed data (where each case is sampled with replacement) and examine how often these random perturbations produce results that are inconsistent with the pattern observed in the original data. I develop a set of null models for various measures of wage changes and use these procedures to determine how common it would be to nd results that are consistent with the null model in random resamplings of the data. If the results for the bootstrap replications do not include the pattern associated with the null model very often, then one may conclude that the observed result is robust and is not sensitive to the random inclusion or exclusion of a few cases.

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