This paper examines why new technologies tend to complement skilled labor rather than unskilled labor, focusing on directed technical change and its impact on wage inequality. The author argues that the direction of technical change is influenced by the relative supply of skilled workers. When the proportion of skilled workers increases, the market for skill-complementary technologies expands, leading to more investment in technologies that enhance the productivity of skilled labor. This results in a short-term decrease in the skill premium, followed by a long-term increase as the direction of technical change shifts. The paper suggests that the rapid increase in the proportion of college graduates in the U.S. labor force during the 1970s may have contributed to both the decline in the college premium and the rise in wage inequality during the 1980s. It also highlights that directed technical change can lead to residual wage inequality, as technologies become more complementary to skilled labor. The analysis shows that ignoring the change in the direction of technical progress when assessing the impact of international trade on wage inequality can lead to misleading conclusions. The paper also discusses the implications of directed technical change for wage inequality, showing that an increase in the relative supply of skilled workers can lead to a rise in the skill premium over time. The model is consistent with empirical evidence on wage inequality and the changes in the structure of wages in the U.S. over the past two decades. The paper concludes that the directed technical change model provides a more comprehensive explanation for the observed patterns of wage inequality and the evolution of the college premium.This paper examines why new technologies tend to complement skilled labor rather than unskilled labor, focusing on directed technical change and its impact on wage inequality. The author argues that the direction of technical change is influenced by the relative supply of skilled workers. When the proportion of skilled workers increases, the market for skill-complementary technologies expands, leading to more investment in technologies that enhance the productivity of skilled labor. This results in a short-term decrease in the skill premium, followed by a long-term increase as the direction of technical change shifts. The paper suggests that the rapid increase in the proportion of college graduates in the U.S. labor force during the 1970s may have contributed to both the decline in the college premium and the rise in wage inequality during the 1980s. It also highlights that directed technical change can lead to residual wage inequality, as technologies become more complementary to skilled labor. The analysis shows that ignoring the change in the direction of technical progress when assessing the impact of international trade on wage inequality can lead to misleading conclusions. The paper also discusses the implications of directed technical change for wage inequality, showing that an increase in the relative supply of skilled workers can lead to a rise in the skill premium over time. The model is consistent with empirical evidence on wage inequality and the changes in the structure of wages in the U.S. over the past two decades. The paper concludes that the directed technical change model provides a more comprehensive explanation for the observed patterns of wage inequality and the evolution of the college premium.