Institute Working Paper 25

Skilled Tradable Services: The Transformation of U.S. High-Skill Labor Markets

Fabian Eckert | Opportunity & Inclusive Growth Visiting Scholar and Princeton University
Sharat Ganapati | Georgetown University
Conor Walsh | Yale University

Published September 13, 2019

We study a group of service industries that are skill-intensive, widely traded, and have recently seen explosive wage growth. Between 1980 and 2015, these “Skilled Tradable Services” accounted for a sharply increasing share of employment among the highest earning Americans. Unlike any other sector, their wage growth was strongly biased toward the densest local labor markets and the highest paying firms. These services alone explain 30% of the increase in inequality between the 50th and 90th percentiles of the wage distribution. We offer an explanation for these patterns that highlights the complementarity between the non-rivalry of knowledge and changes in communication costs.


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