Even today, the trend continues, though more slowly. What makes this shift interesting is that it cannot be explained by one simple factor. Instead, it reflects a mix of education growth, changing economic demand, and how technology adapts to the workforce.
Basic economics suggests that when supply rises, prices fall. In this case, the “price” is wages. So, as more graduates entered the labour market, their wage advantage naturally declined.
The hidden role of technology
But the story does not end there. The IMF study highlights an important and often ignored factor: technology responds to the workforce.
This creates a second effect. While more graduates reduce wages through competition, technology increases their productivity and pushes wages up. These two forces work in opposite directions.
Once this technological effect is taken into account, the role of demand becomes clearer. Traditionally, economists assumed that rising wages for skilled workers meant strong demand for them. But the new findings suggest that this demand was often overstated.
Several factors help explain this. The commodity boom created jobs in sectors that relied less on higher education. Growth in services also increased demand for medium- and low-skilled labour. At the same time, policies like minimum wage increases and greater formal employment helped lift incomes at the lower end.
Why inequality is falling more slowly now
Demand is no longer clearly favouring less educated workers. Instead, it has become more balanced. As a result, the wage gap is still shrinking, but at a slower pace than before.
What does it mean for the future
The findings carry an important message. Expanding education is essential, but it is not enough on its own to reduce inequality. What matters just as much is how economies use those skills.
In Latin America, much of the progress has come from rising wages among less educated workers. Protecting and strengthening that trend will be key.
Ultimately, the region’s experience shows that inequality is shaped not just by how many people go to school, but by how technology, policy, and economic demand evolve together.
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