Employment inequality: Why do the low-skilled work less now?

Low-skilled prime-age men are less likely to be employed than high-skilled prime-age men, and the differential has increased since the 1970s. I build a search model encompassing three explanations: (1) factors increasing the value of leisure, such as welfare and recreational gaming/computer technology, reduced the supply of low-skilled workers; (2) automation and trade reduced the demand for low-skilled workers; and (3) factors affecting job search, such as online job boards, reduced frictions for high-skilled workers. I find a supply shift had little effect, while a demand shift away from low-skilled workers was the leading cause, and search frictions actually reduced employment inequality.