The Lost Race between Schooling and Technology∗

This paper analyzes the relation between education and the distribu-tion of income. We study the evolution of wage inequality between skilled and unskilled workers in the Netherlands during the years 2000-2020. Analyses are based on projections of the relative supply of skilled workers and projections regarding shifts in relative demand for skilled workers. Wage inequality will increase under plausible assump-tions because relative demand for skilled workers will increase more rapidly than the relative supply for skilled workers. We study the potential of education subsidies to higher education in order to stim-ulate the supply of skilled workers thereby off-setting the increase in projected wage inequality. Our findings suggest that education sub-sidies are not very effective in combatting increases in wage inequality. Key words: wage inequality, education, technological change, edu-cation policy