# skill premium ## Summary Skill premium refers to the wage difference attributed to higher skill levels, often due to education, experience, or technical competence. ## Definition In economics, the *skill premium* is the additional income earned by workers with higher levels of education or specialized abilities, especially in knowledge or tech-driven sectors. This premium fluctuates based on labor market dynamics, globalization, and technological change—especially automation and AI. ## Properties - Amplified by demand for cognitive and digital skills. - Can widen income inequality as low-skill wages stagnate. - Often used to explain diverging economic outcomes across demographic groups. ## Related Ideas - Human capital theory - Wage inequality - Technological unemployment - Winner-take-all dynamics