Causes of Rising Income Inequality
The causes of growing income inequality are actively debated among
economists, as are the appropriate policy responses by governments. In
this section we provide a brief outline of some of the possible underlying
causes identified by researchers. Undoubtedly, some combination of
these various forces, and interaction among them, is driving the current
trend in income inequality. In the next section we address why inequality
matters and how governments might be able to address the issue.
Technological Change
The pace and nature of recent technological change has changed the
pattern of the demand for different types of labour. Especially important
is the development of computer and robotics equipment that requires
high-skilled workers for their operation and, at the same time, automates
jobs that previously required middle-skilled “blue collar” workers. The
increasing use of these technologies implies an increase in demand for
highly skilled, highly educated workers, who benefit with higher wages.
The middle-skilled workers, however, find themselves displaced from
their once-secure jobs. Some are able to acquire the skills and education
needed to join the high-skilled group, but many are not so lucky and find
themselves competing for the economy’s lowest-skilled jobs.