Technological change and wage premiums: Historical evidence from linked employer-employee data

This study analyses the impacts of a technological change (the steam engine) on wage premiums. Using historical employer-employee panel data, we found that steam technology had both new skill-demanding and skill-replacing aspects. The former manifested itself as an increase in the demand for high-skilled engineers, the latter in a decline in the demand for intermediate-skilled, able-bodied seamen and an increase in the demand for unskilled engine room operators. Our panel data analysis, which controls for unobserved heterogeneity, implies that high-skilled labourers in abstract tasks and unskilled labourers in manual tasks improved their wage positions relative to intermediate-skilled labourers in routine tasks. These findings are compatible with the hypothesis of technology-based polarisation.