The Korean Economic Forum
Increase in Wage Dispersion and Mismatch in Labor Demand and Supply
Dae Il Kim (Seoul National University)Year 2020Vol. 13No. 1
Abstract
This paper uses the changes in labor demand and supply to explain the recentchanges in wage dispersion. Labor demand has shown the typical “hollowing inthe middle,” in which labor demand increases relatively at the top and bottom ofthe skill distribution. Labor supply appears to have increased quantitatively at thetop of skill distribution, but in fact, a shortage in supply is apparent qualitativelyat the top of skill distribution, which is accountable for the increase in wagedispersion. This qualitative mismatch in labor supply appears to have arisen fromthe standardized education system that has suppressed the diversity in studentsand force them to be rather “uniform.”}