Wage Inequality in the Digital Economy: Disentangling the Impacts of Information Technology and Communication Technology

Abstract

Wage inequality grew rapidly from the 1980s, and information and communication technology has been blamed for this societal challenge. While information technology (IT) and communication technology (CT) have different roles in organizational design, few empirical studies consider their distinct impacts on wage structures. This study examines the distinct impacts of IT and CT on wage inequality for the period 2004-2014 in U.S. goods-producing industries. Our findings suggest that IT and CT contribute to rising wage inequality between nonproduction and production groups, although they have distinct effects on within-group inequality. Within the nonproduction group, CT shifts decision authority upward, deepening wage inequality between managers and managerial support workers. In contrast, within the production group, IT acts as a decentralizing force, whereas CT acts as a centralizing force increasing wage inequality between supervisors and production workers. The results are robust to endogeneity, and are not driven by chief executives and computer-producing sector.