U.S. Earnings Inequality
The late 1970s marked the beginning for earning inequalities among the US workers with due disregard to the prevailing economic conditions. It has been in the interest of the policy makers to establish whether the earning inequality is as a cause of declining living standards of the poor or the preferred scenario of increased earnings by the rich (CEA, 1997, p. 163). The major component of earnings by the US households is from labor which largely differs from one person to the other. The earning inequality is seen to be mainly influenced by supply and demand of qualified and experienced workers as well as institutional factors that place earning differences on the basis of workers relative position (p. 165).
Domestic Labor Market Analysis
In a typical US labor market the skilled and experienced workers are compensated higher than the unskilled. Any shift caused by either an increasedecrease in the skilledunskilled workforce tends to widen the earning inequality gap by affecting the compensation rates (p. 170). The shifts have been brought about by the influx of large numbers of immigrants, the increasing involvement of women baby boomers in the labor market and technological advancements which have favored skilled labor force (p. 171). I addition, many occupations in the labor markets exercise the winner takes it all approach that offers great awards to top achievers creating a big earning variation from those slightly below them. The effect of globalization has expanded international trade that has consequently caused shifts in labor demand as US companies resulted in outsourcing lesser skilled labor. Finally the reduction in the minimum wages for the least paid workers compounded by the declined activities by the labor union has also contributed to earnings inequality (p. 174).
Conclusion
Technological advancement has been cited as the major cause of the US earnings inequality for it has been favoring the more skilled labor force (p. 174). However as the lesser skilled workers continue to adopt more and more to the requirements of the modern technology, brighter prospects can be expected in positive demand shifts. Once the less skilled workers are acceptable in the technology intensive working environment a demand shift for the skilled workers will lower and reduce the earnings inequality gap.