Academic journal article Economic Review - Federal Reserve Bank of Kansas City

The Vanishing Middle: Job Polarization and Workers' Response to the Decline in Middle-Skill Jobs

Academic journal article Economic Review - Federal Reserve Bank of Kansas City

The Vanishing Middle: Job Polarization and Workers' Response to the Decline in Middle-Skill Jobs

Article excerpt

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Over the past three decades, the share of middle-skill jobs in the United States has fallen sharply. Middle-skill jobs are those in which workers primarily perform routine tasks that are procedural and repetitive. The decline in the employment share of middle-skill jobs has been associated with a number of sweeping changes affecting the economy, including advancement of technology, outsourcing of jobs overseas, and contractions that have occurred in manufacturing. As the share of middle-skill jobs has shrunk, the share of high-skill jobs has grown, and that trend has drawn considerable attention. Less well known is the fact that the share of low-skill jobs has also risen. This employment phenomenon where job opportunities have shifted away from middle-skill jobs toward high- and low-skill jobs is called "job polarization."

The impact of job polarization is not well understood. Researchers have offered various theories to explain job polarization and its relation to the business cycle, but there have been only limited studies on the impact of job polarization across industries and across various segments of the population. The knowledge gap to be resolved is how job polarization has affected the structure of the labor market. Understanding this changing structure of the labor market can help policy makers prescribe policies that will best promote sustainable economic growth.

This article examines three decades of data from the Current Population Survey to characterize structural changes in the labor market due to job polarization. One common assumption is that job polarization has been driven mainly by contraction in a few sectors, such as manufacturing, where a large share of jobs are in the middle-skill category. However, the analysis shows that job polarization has stemmed less from a shiftaway from any one sector than from shifts in the skillcomposition of jobs within each sector. Related to the business cycle, job polarization has occurred consistently over the last three decades, but the pace of job polarization has accelerated during recessions.

The article also finds that workers' response to job polarization has differed depending on their gender, education, and age. Women have obtained more education and moved disproportionately into high-skill jobs, while men have shifted in roughly equal numbers to high- and low-skill jobs. Workers age 55 and older have shifted strongly toward high-skill jobs, as workers in high-skill occupations have delayed retirement. For the youngest segment of the labor market, workers ages 16 to 24 have shifted toward low-skill jobs as a growing segment of this population have delayed entry into the labor market while remaining in school.

Section I describes the course of job polarization over the past three decades in the United States and reviews various theories offered to explain the pattern. Section II shows how job polarization occurred across different sectors of the economy, focusing on the demand side of the labor market. Section III focuses on the supply side of the labor market, finding differences across workers based on gender, education, and age. Section IV explores the relationship between job polarization and the business cycle.

I. JOB POLARIZATION IN THE U.S. LABOR MARKET

The term "job polarization" has been used in studies about both British employment (Goos and Manning) and U.S. employment (Autor and others, 2006) to describe the shiftof the workforce toward low- and high-skill occupations. A variety of explanations have been offered for the pattern, including the impact of technology, the rise in international trade, and the shrinking and weakening of labor unions. These factors have affected the demand side of the labor market, influencing the types of jobs that are in demand at a given time. However, job polarization has also been reflected in the response of workers, corresponding to the supply side of the labor market. …

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