Wage Divergence and Unemployment: The Impact of Wage Setting Power and Training Costs

Technological change increases the training needs for all workers intending to work in skilled jobs. This paper identifies the related training costs as one of the driving forces for wage divergence and unemployment in the wake of skill-biased technological change. A theoretical model argues that higher and increasing skilled wage markups and lower incidence of rnismatch unemployment in the USA in comparison with Germany stems from higher wage setting power of workers in skilled jobs in the USA. US workers in skilled jobs can charge higher wages without the risk of losing their jobs because the costs needed for training the unskilled are higher than in Germany