Are computers driving real wages down?

The annual growth in mean employee compensation plummeted from 2.6% in 1947-73 to 0.4% in 1973-2003. Using both time-series regression and pooled, cross-section, time-series regression analysis for 44 industries over the period 1953-2000, we find that earnings growth is positively related to overall productivity growth, capital investment excluding computers, and the unionization rate. We find also that computerization has a significant negative effect on earnings growth, but no evidence that the growth of skills or educational attainment has any statistically significant effect on earnings growth. The dominant factors explaining the slowdown in wage growth are decline in the unionization rate, slowdown in both TFP growth and overall capital investment, and acceleration in computer investment.