Abstract:

Firms hire workers to undertake tasks and activities associated with particular occupations, which makes occupa-
tions a fundamental unit in economic analyses of the labor market. Using a unique dataset on pay in identically
defined occupations in developing and advanced countries, we find that in most countries occupational skill pre-
mia narrowed substantially from the 1950s to the 1980s, then widened through the 2000s, creating a U-shaped
pattern of change. The narrowing was due in part to the huge worldwide increase in the supply of educated
workers. The subsequent widening was due in part to the weakening of trade unions and a shift in demand to
more skilled workers associated with rising trade. The data indicate that supply, demand, and institutional forces
are all drivers of occupational skill premia, ruling out simple single factor explanations of change. The paper
concludes with a call for improving the collection of occupational wage data to understand future changes in the
world of work.

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