The Polarization of the U.S. Labor Market

Abstract

This paper analyzes a marked change in the evolution of the U.S. wage structure over the past fifteen years: divergent trends in upper-tail (90/50) and lower-tail (50/10) wage inequality. We document that wage inequality in the top half of distribution has displayed an unchecked and rather smooth secular rise for the last 25 years (since 1980). Wage inequality in the bottom half of the distribution also grew rapidly from 1979 to 1987, but it has ceased growing (and for some measures actually narrowed) since the late 1980s. Furthermore we find that occupational employment growth shifted from monotonically increasing in wages (education) in the 1980s to a pattern of more rapid growth in jobs at the top and bottom relative to the middles of the wage (education) distribution in the 1990s. We characterize these patterns as the "polarization" of the U.S. labor market, with employment polarizing into high-wage and low-wage jobs at the expense of middle-wage work. We show how a model of computerization in which computers most strongly complement the nonroutine (abstract) cognitive tasks of high-wage jobs, directly substitute for the routine tasks found in many traditional middle-wage jobs, and may have little direct impact on non-routine manual tasks in relatively low-wage jobs can help explain the observed polarization of the U.S. labor market.

The Routine Content Of Occupations

“…The literature on employment in OECD economies has recently devoted a lot of attention to the polarisation of employment (Autor et al, 2006;Goos et al, 2009). The latter refers to the changes occurring in employment patterns whereby the share of occupations at both ends of the skill distribution (low-skilled and high-skilled jobs) increases, while employment in the middle of the distribution (midskilled jobs) declines.…”

“…This same classification was adopted as such in a number of later studies, or further elaborated in a tripartite classification (e.g. Autor et al, 2006 andAutor et al, 2013a andAutor and Dorn, 2013;Goos et al, 2009 and2014).…”

The changing face of youth employment in Europe

“…Nolan and Slater (2010) have shown that growth in employment in higher level professional and technical occupations in the UK has coincided with an expansion of manual service occupations requiring low or intermediate skills, resulting in an 'hour-glass' economy. Similarly, analyses of the UK, US, West Germany and other OECD countries (see Autor et al, 2006;Goos and Manning, 2007;Goos et al, 2009Goos et al, , 2014Spitz-Oener, 2006) have found that a 'polarisation' of work has occurred. Goos and Manning (pace Autor et al, 2003) note that the scope for capital substitution that is key to the 'skill-biased technological change' thesis is limited in respect of low-paid non-routine manual work (such as cleaning) and more likely to affect routine administrative work in the middle of the earnings distribution (e.g.…”

Equity, Growth, and Community: What the Nation Can Learn from America's Metro Areas

“…Some analysts suggest that this experience of "jobless recovery" since the 1990s is the result of the increased diffusion of information technology throughout the economy, as higher levels of productivity have enabled companies to produce more goods and services with fewer people and more machinery, robots, and computers (Autor, Katz, and Kearney 2006;Brynjolfsson and McAfee 2011). This argument, however, ignores the widespread evidence, both in the United States and abroad, that the overall impact of technology on job and wage levels is indeterminate-that it depends on a variety of other factors, including trade patterns, exchange rates, and education policies, that shape the overall relationship between technology diffusion and job creation (Bogliacino and Vivarelli 2010;C.…”