Growing Wage Gap In Developed Economies, Not Just US: Skill Inequality From Workers' Education And Productivity Growth Differences Are Cause

From National Review, Capital Matters, The Economy, "Growing Wage Inequality Is Caused by Growing Skill Inequality" by Edward P. Lazear:

Is growing inequality the fault of capitalism, of a growing ability of American firms to exploit their workers, or of increasing greed? Both the international and domestic evidence is inconsistent with those explanations. In fact, the growing wage gap seen in the US is common to most developed economies. Top earners have enjoyed higher wage growth than the median worker throughout the OECD countries. A subset of institutionally and political diverse countries, including the United Kingdom, Germany, Denmark, Sweden, Norway, Finland, Switzerland, Australia, New Zealand and Canada among others, have all experienced growing wage inequality similar to that seen in the United States. If such varied countries — some of which are held out as examples of the social-democratic ideal — are all seeing growing wage dispersion, it is unlikely that capitalism, increased monopoly power, or growing greed is the cause.

If not capitalism per se, what is the explanation for growing wage inequality? The answer is increasing dispersion in labor-market productivity. In labor markets where firms must compete with one another to hire and retain workers, wages tend to reflect a worker’s productivity. The evidence supporting this linkage is strong. If wages at the bottom are not growing as rapidly as wages at the top, perhaps productivity among the least skilled workers is not growing as rapidly as productivity among the most skilled workers. In fact, that is exactly what appears to be happening.

Industries vary in their use of skilled workers. For example, in the Bureau of Labor Statistics’ “Apparel Manufacturing” industry, the average level of education is 11.7 years. In “Information Services and Data Processing Services,” it is 15.5 years. Those industries that have the most educated workers have the highest levels of productivity measured as total value added per hour worked. Those same industries also tend to have witnessed the greatest growth in productivity over the past two decades. In fact, the differences in productivity growth between educated and less-educated workers far outstrips the differences in wage growth between educated and less-educated workers. This evidence suggests that wages are lagging for the lowest half of American workers primarily because productivity growth is lagging for those workers.