Job Polarization and Jobless Recoveries

By Clive Crook

At a recent meeting organized by Pew's Economic Mobility Project, I took part in a discussion with Harry Holzer, a professor at Georgetown University and an expert on the low-wage labor market. The subject of the disappearing middle came up--the idea, developed by David Autor and others, that the middle-wage part of the income distribution is being hollowed out.

Many low-wage jobs that have to be done on the spot--cleaning, gardening, and so on--can't be automated away. Not yet. The same goes for non-routine high-wage jobs requiring initiative as well as mere computing power. But in the middle are routine tasks (manual and non-manual) which are susceptible to automation. These, and the wages they command, are under attack.

Holzer said Autor was clearly on to something, but he expressed some skepticism about the force of this change. He thought there was plenty of scope for new middle-wage jobs in service industries with room to grow--health care, for instance, where some of the work that doctors do at great expense could be moved to nursing staff with additional training. That sounded right to me.

But job polarization keeps coming up. A new paper by Nir Jaimovich and Henry Siu--The Trend is the Cycle: Job Polarization and Jobless Recoveries--links the shrinking middle to the slow recovery of employment after recessions. After last Friday's jobs numbers, that connection is topical. Here's the abstract:

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 due to jobless recoveries in the middle-skill occupations that are disappearing.

David Andolfatto of the St Louis Fed calls this a very interesting finding, and I agree. Interesting and worrying. Dave Altig's Macroblog, which first guided me to the paper, connects the new work to the debate over how much room the Fed has for additional stimulus.

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