The political economy of skills and inequality

Rising socio-economic inequality is a common trend across advanced industrial democracies and its causes and consequences are still poorly understood.Certainly, the recent economic crisis has exacerbated the trend, in particular in countries most affected by the crisis, but the increase set in much earlier in the 1980s and even before. Furthermore, the trend cannot simply be explained by a return to markets because there has not been large-scale retrenchment of established welfare states. A very prominent explanation in economics is that new technology shifts the demand away from low-skilled and towards high-educated workers, stretching the income distribution as a result. Yet, these shifts in the demand have to be compared with shifts in the supply of skills. In the influential 2010 book by Goldin and Katz on ‘The Race between Education and Technology’, they estimate this relationship empirically over long periods of time in the case of the USA. Their results are revealing.While the rate of skill-biased technological change after 1980s was virtually identical to the previous two decades, the rise in the supply of college educated slowed markedly. Decelerating supply of skills, not accelerating demand, is therefore the main factor behind the rise in inequality. Goldin and Katz reject the notion that the USA has reached an upper limit for educational attainment, and they cite the success of other advanced democracies in expanding educational opportunities well beyond the levels in the USA. At the same time they do not offer a comparative analysis, and they stay strictly within the economic supply– demand framework that dominates the economic literature on inequality. The purpose of this special issue is to move beyond and ‘contextualize’ this narrow economic perspective by bringing together cutting-edge research on the causes and consequences of inequality in the fields of comparative political economy and economic sociology. The contributions do so in several ways. First, they document differences in the rate of change in the supply of skills, and the effect these differences have on the wage distribution. This helps account for at least some of the cross-national variance in the rise of income inequality since the 1980s. Second, the contributions explain the role of socio-economic institutions, in particular skill formation and collective bargaining, influencing the quantity andqualityof skill supply, aswell as thedemand for skilledworkers. Bydoing so,