Polarized Labor Market

Context:
- It can be due to an increase in Middle-Wage Job Requirements (Aaronson et al., 2014).
- It can result in a Middle Class Hollowing-Out Outcome.
Example(s):
- the present Developed World Labor Market.
- …
Counter-Example(s):
- a Healthy Labor Market.
- a Failed Labor Market.
See: Wage-Productivity Gap, Deskilling, Jobless Economic Recovery.

References

(Cortes et al., 2014) ⇒ Guido Matias Cortes, Nir Jaimovich, Christopher J. Nekarda, and Henry E. Siu. (2014). “The Micro and Macro of Disappearing Routine Jobs: A Flows Approach.” In: Proceedings of NBER Working Paper No. 20307.
- QUOTE: The U.S. labor market has become increasingly polarized since the 1980s, with the share of employment in middle-wage occupations shrinking over time. ...

(Aaronson et al., 2014) ⇒ Stephanie Aaronson, Tomaz Cajner, Bruce Fallick, Felix Galbis-Reig, Christopher L Smith, and William Wascher. (2014). “Labor Force Participation: Recent Developments and Future Prospects." FRB of Cleveland Working Paper.
- QUOTE: Polarization in labor demand, driven by exogenous technological changes and globalization, seems at least a plausible candidate explanation for some of the secular decline in participation among less-educated individuals. The idea is that polarization, while increasing demand for better-educated workers, displaces some less-educated (non-college) workers who were employed in middle-type jobs. Of these, some are able to transition to high-type jobs, some transition into the lower-paying service sector (perhaps displacing lower-skilled workers), and some may temporarily or permanently drop out of the labor force, as the decline in demand for their labor pushes their offer wages below their reservation level. (Displacement out of the labor force from middle-type jobs due to these forces may also have been exacerbated by the concurrent liberalization of disability insurance (DI), which lowered the costs of dropping out of the labor force by raising the likelihood of DI benefit receipt and providing more generous benefits to those on disability rolls (Autor and Duggan, 2006; Duggan and Imberman, 2009).)

(Beaudry et al., 2013) ⇒ Paul Beaudry, David A. Green, and Benjamin M. Sand. (2013). “The Great Reversal in the Demand for Skill and Cognitive Tasks." National Bureau of Economic Research, No. w18901.
- ABSTRACT: … we argue that in about the year 2000, the demand for skill (or, more specifically, for cognitive tasks often associated with high educational skill) underwent a reversal. ...

(Jaimovich & Siu, 2012) ⇒ Nir Jaimovich, and Henry E. Siu. (2012). “The Trend is the Cycle: Job Polarization and Jobless Recoveries." National Bureau of Economic Research, No. 18334.
- QUOTE: Job polarization refers to the recent disappearance of employment in occupations in the middle of the skill distribution. Jobless recoveries refers to the slow rebound in aggregate employment following recent recessions, despite recoveries in aggregate output. We show how these two phenomena are related. First, job polarization is not a gradual process; essentially all of the job loss in middle-skill occupations occurs in economic downturns. Second, jobless recoveries in the aggregate are accounted for by jobless recoveries in the middle-skill occupations that are disappearing.

(Dustmann et al., 2009) ⇒ Christian Dustmann, Johannes Ludsteck, and Uta Schönberg. (2009). “Revisiting the German Wage Structure.” In: The Quarterly Journal of Economics, 124(2). doi:10.1162/qjec.2009.124.2.843
- QUOTE: Can the polarization of work alone account for the divergent path of lower and upper tail inequality in the US as well as Germany, and in particular for the finding that lower tail inequality increased in the 80s in the US, but in the 90s in Germany? We believe that the widening of the wage distribution at the bottom may be better explained by episodic events, such as changes in labor market institutions and supply shocks. The hypothesis we put forward here is that these episodic events happened in the 80s in the US, but in the 90s in Germany.