The diagram below shows what happened to the relative wage and relative demand for skilled labor in the U.S. manufacturing sector during the 1990s. These points are plotted using the data from Figures 7-5 and 7-6.

a. What must have happened to the demand and supply curves to explain this change in relative wage and relative employment?
b. Why do you think the demand and supply curves shifted this way? (Hint: Think about where the workers who leave manufacturing might be going.)

Transcribed Image Text:

Nonproduction/ Production Wage 1.80 - 1.78 1.76 1.74 1.72 1.70 1.68 1.6아 1.64 1.62 О 2000 1999 0 2001 1998 1997 01996 o 1995 o1994 1993001992 199101990 0.2 0.25 0.3 0.35 0.4 0.45 0.5 0.55 0.6 Nonproduction/Production Labor