FIGURE 2-1 Shifts in demand for skills and supply adjustments in the labor market.

The adjustment process could continue until the gap in earnings between the two groups is restored to its initial level. Alternatively, the initial gap might not be reached if (1) the demand for skills continues to increase and to outpace supply adjustments or (2) there are barriers or costs that limit the magnitudes of the supply adjustments. The second situation might, for instance, occur if too few students who graduate from high school have academic backgrounds that are strong enough for them to consider enrolling in college. Furthermore, the rising costs of attending college, combined with cuts in financial assistance for lower-



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