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Resolution Foundation held an event on job polarisation with guest speakers Craig Holmes, Economist at Pembroke College, Oxford and Andrea Salvatori, Research Fellow at the University of Essex.
Transcript
  • 1. Looking through the hourglass: Hollowing out of the UK jobs market pre- and post-crisis LauraGardiner, Resolution Foundation Adam Corlett, Resolution Foundation Craig Holmes, Pembroke College,Oxford Andrea Salvatori, University of Essex MatthewWhittaker, Resolution Foundation (chair) Wifi: AvantaGuest // Passcode: LondonWorkspaces #futurejobs // @resfoundation
  • 2. Looking through the hourglass Hollowing out of the UK jobs market pre- and post-crisis Laura Gardiner & Adam Corlett March 2015 @resfoundation
  • 3. • A large and growing body of research details the ‘hollowing out’ of developed labour markets • Previous Resolution Foundation research has confirmed that these trends continued in the UK in the early years of the crisis • We update this picture to 2014, and discuss UK trends in the context of broader debates on polarisation 3 Has the UK’s job structure polarised pre- and post-crisis?
  • 4. Since the early 1990s, mid-skilled occupations have experienced falling employment shares Using initial wages as a proxy for skill levels, mid-skilled occupations have declined 1993-2014 and high-skilled occupations have grown, with smaller changes in low-skilled occupations.This leads to a ‘U-shaped’ graph The picture is similar when looking at hours or headcount Notes: The final quarter of 2014 is not included because data was not available at the time of analysis. See annex for other methodological details. Source: Resolution Foundation analysis of Labour Force Survey, ONS 4
  • 5. Since the early 1990s, mid-skilled occupations have experienced falling employment shares We summarise the trends in different parts of the occupational skill distribution by grouping together skill deciles 1 and 2 (low-skilled), 3 to 7 (mid-skilled), and 8 to 10 (high-skilled) 5 Low-skilled Mid-skilled High-skilled Notes: The final quarter of 2014 is not included because data was not available at the time of analysis. See annex for other methodological details. Source: Resolution Foundation analysis of Labour Force Survey, ONS
  • 6. Low-skilled occupations were growing in share in the mid-1990s, but then declined Low-skilled jobs declined in share through the late- 1990s and early 2000s, and have been broadly flat since 6 Notes: The first quarter of 2001 and the final quarter of 2014 are not included due to missing variables or because data was not available at the time of analysis. See annex for other methodological details. Source: Resolution Foundation analysis of Labour Force Survey, ONS
  • 7. The downturn may have ‘amplified’ polarising trends Updating our starting point to 2002 (to reflect a decade of changes to the occupational wage structure) gives a similar picture The crisis shows a potential return to the trends of the mid- 1990s, with growth in high-skilled jobs, slight growth in low- skilled jobs, and sharper relative decline in mid-skilled ones.These trends then slow 7 Notes: The final quarter of 2014 is not included because data was not available at the time of analysis. See annex for other methodological details. Source: Resolution Foundation analysis of Labour Force Survey, ONS
  • 8. The self-employed skew the picture slightly towards low-skilled jobs When including the self-employed, we find that low-skilled jobs expanded slightly, and high- skilled jobs grew slightly more slowly, between 2002 and 2014 8 Notes: The final quarter of 2014 is not included because data was not available at the time of analysis. See annex for other methodological details. Source: Resolution Foundation analysis of Labour Force Survey, ONS
  • 9. So what are these declining mid-skilled jobs? manual trades and mid-skilled office workers… The two occupations experiencing the largest decline in their share of employment since 1993 are ‘process, plant and machine operatives’ and ‘secretaries’ There has been strong growth in caring and service occupations across the occupational wage distribution, some of which may reflect demographic changes 9 Notes: The final quarter of 2014 is not included because data was not available at the time of analysis. Bubble size reflects the average labour share between 1993 and 2014. See annex for other methodological details. Source: Resolution Foundation analysis of Labour Force Survey, ONS
  • 10. With similar trends enduring during the crisis and recovery The employment share of construction occupations declined sharply after 2007 (in contrast to the longer- run view), likely reflecting the collapse in demand for these skills during the crisis 10 Notes: The final quarter of 2014 is not included because data was not available at the time of analysis. Bubble size reflects the average labour share between 2002 and 2014. See annex for other methodological details. Source: Resolution Foundation analysis of Labour Force Survey, ONS
  • 11. It is often assumed that a polarising labour market has been the main driver of rising wage inequality – with more low- and high- paid occupations increasing the gulf between the two However, research has demonstrated that while a shift in theUK’s job structure has played a role in lower wage growth for low- and middle-earners, this is only one part of the story 11 Notes: The final quarter of 2014 is not included because data was not available at the time of analysis. 1993 analysis based on SOC 1990 (3-digit); 2014 analysis based on SOC 2010 (4-digit).See annex for other methodological details. Source: Resolution Foundation analysis of Labour Force Survey, ONS But does this matter?There is limited evidence of job polarisation driving wage polarisation
  • 12. What lies behind hollowing out? Strong links to the automation (or offshoring) of routine jobs What do mid-skill jobs have in common? ‘Routineness’ and ‘offshorability’ scores assigned to each broad occupation group are a good predictor of changes in employment share The strongest relative declines in manual trades and some office jobs attest to this – these are the roles most at threat from computerisation 12 Notes: The final quarter of 2014 is not included because data was not available at the time of analysis. See annex for other methodological details. Source: Resolution Foundation analysis of Labour Force Survey, ONS
  • 13. But how do ‘routineness’ and hollowing out relate? Low-/ mid-skill jobs are more routine... As a mirror image of falling employment shares, jobs of above- average ‘routineness’ are concentrated in the middle and bottom of the pay distribution 13 Notes: The final quarter of 2014 is not included because data was not available at the time of analysis. See annex for other methodological details. Source: Resolution Foundation analysis of Labour Force Survey, ONS
  • 14. …And it is these routine jobs which have been lost, particularly from the middle And the employment share of these routine jobs has fallen over time, with the largest absolute falls in the middle, helping explain the earlier ‘U- shape’ 14 Notes: The final quarter of 2014 is not included because data was not available at the time of analysis. See annex for other methodological details. Source: Resolution Foundation analysis of Labour Force Survey, ONS
  • 15. However, there is some evidence that higher paying routine jobs are the most at risk But there is some very tentative evidence that middle to high paying routine jobs are most at risk Low paying routine jobs will – all else equal – be less profitable to automate, though this theory requires further exploration 15 Notes: The final quarter of 2014 is not included because data was not available at the time of analysis. See annex for other methodological details. Source: Resolution Foundation analysis of Labour Force Survey, ONS
  • 16. • The ‘rise of the robots’ hasn’t yet harmed overall employment • And if ‘routine-biased technological change’ was the only factor behind polarisation we would expect to see corresponding wage polarisation (wages changing in line with employment shares) – which we don’t • Supply-side factors are also likely to be important – including upskilling of the workforce, as explored by others • As well as other more localised factors – such as demographic changes and the cyclical collapse in the construction industry 16 Don’t just blame the robots – technology is not the only factor in occupational polarisation
  • 17. • An expanded slide pack and blog will be available on our website following this event • Further work to explore the real-world implications and what the near future may hold • Using the latest data, and potentially new ways of measuring routineness • A report later this year as part of our New Labour Market research programme 17 Next steps
  • 18. The anatomy of job polarisation in the UK Andrea Salvatori University of Essex 23 March 2015 Resolution Foundation London @iseressex @andysalvatori
  • 19. @andysalvatori @iseressex The (mostly US-focused) literature supports a demand-centred story: - Middling “routine” jobs easier to automate - All education groups have lost shares in middling jobs - Polarisation of occupational wages in 1990s - Over time, stronger growth at the bottom - No growth at the top the 2000s  Is polarisation in the UK different? Among employees, since 1980:  % graduates triplicated  % immigrants doubled  Is there a role for these supply-side changes? Polarisation and computerisation
  • 20. @andysalvatori @iseressex Job polarisation in each decade, 1979-2012 -20 -15 -10 -5 0 5 10 15 20 1980s 1990s 2000s 1979-2012 Changeinemploymentshare Bottom deciles (1-2) Middle deciles (3-8) Top deciles (9-10) Occupational deciles based on the 1979 ocucpational median wage. Growth at the top always larger than at the bottom: Top has gained 16pp of the 19pp lost by middle
  • 21. @andysalvatori @iseressex Polarisation is a non-graduate phenomenon (1979-2012) 3.9 9 15 3.1 8.3 16.6 0.8 0.7 -1.5 Graduates Total contribution (1)+(2) Explained by change in relative size of group (1) Explained by reallocation across occupations (2) -0.4 -28.3 0.7 -12 -15.5 -0.4 11.6 -12.7 1.2 Bottom Middle Top Non-Graduates Compositional changes: - >50% non-graduate decline in middle - 100% graduate increase at the top Changes within groups: - Non-grads moved to the bottom At the bottom: - Net growth is grads - But reallocation of non-grads offsets decline from educational improvement
  • 22. @andysalvatori @iseressex 2000s: graduates and immigrants more important Bottom occupations: • Education upgrading continues while • Reallocation of non-grads slows down • Graduates shift towards the bottom • Number of immigrants increases  Native graduates and immigrants are main contributors to growth of bottom occupations  Overall contribution of natives is negative: in the aggregate, educational upgrading stronger than reallocation to bottom. Contribution of immigrants not limited to bottom occupations: • (Graduate) immigrants account for 35% of growth at the top (up from 16% in 1990s)
  • 23. @andysalvatori @iseressex Occupational wages have not polarised in any decade  No evidence of decline in wages in middling occupations in any decade  Performance of median wages in top occupations deteriorates over time – and it is worst in the 2000s.  Points to importance of supply at the top
  • 24. @andysalvatori @iseressex So, polarisation in the UK is different from the US The findings on 1) importance of educational upgrading 2) occupational wages are not consistent with a simple demand-based story and suggest that supply-side changes played an important role in the UK.  particularly in the 2000s when growth at the top stalled in US Impact of technology on labour market more complex than often suggested. Technology is certainly important, but it is its interaction with the skill structure of the workforce that determines what happens to the quality and quantity of jobs.
  • 25. HAVE UK EARNINGS DISTRIBUTIONS POLARISED? Dr Craig Holmes Research Fellow, Employment, Equity and Growth Programme, Institute for New Economic Thinking at the Oxford Martin School March 23rd 2015 Resolution Foundation
  • 26. Introduction • Polarisation towards high wage and low-wage work implies increasing inequality -15% -10% -5% 0% 5% 10% 15% 20% 25% 30% 35% 40% 0 0.2 0.4 0.6 0.8 1 Wagegrowth Percentile 1987-2001 1994-2007 2006-2013
  • 27. Introduction • To put this in a different way: – Low wage work: hourly wage < 2/3 median hourly wage – High wage work: hourly wage > 1.5x median hourly wage Low wage work High wage work 1987 20.2% 23.4% 2001 23.0% 25.6% 1994 22.6% 25.2% 2006 21.4% 25.6% 2013 22.3% 26.3%
  • 28. Introduction • Questions: 1. How important has the change in the occupational structure – “hollowing out” - played in these trends? 2. Why has “hollowing out” not always accompanied increased pay dispersion? • In both cases, the structure of wages within occupations is key
  • 29. Overview of approach • Typical (OLS) regression predicts the mean of a variable (say, wt), conditional on the explanatory variables, Xt: • From this, we can calculate the unconditional mean of the whole distribution: • Changes in the mean wage over time can be broken down into ‘compositional effects’ and ‘wage effects’: tttt Xw   ttt Xw      10101001 XXXww  
  • 30. Overview of approach • Here, essentially doing the same thing except looking at changes in wages at different points of the distribution instead of the mean • The approach I follow is that of Firpo, Fortin and Lemieux (2009). • Three time periods • Real hourly wages • Explanatory variables: occupational groups, education levels, union membership, gender, part-time status
  • 31. Hollowing out and earnings 1987-2001: 1994-2007: 2006-2013: -5.0% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 0 0.5 1 Hollowing out Overall -5.0% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 0 0.5 1 Hollowing out Overall -10% -8% -6% -4% -2% 0% 2% 4% 0 0.2 0.4 0.6 0.8 1 Hollowing out Overall
  • 32. Compositional and wage effects Overall composition: Overall wage: -15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 0 0.2 0.4 0.6 0.8 1 1987-2001 1994-2007 2006-2013 -15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 0 0.2 0.4 0.6 0.8 1 1987-2001 1994-2007 2006-2013
  • 33. Returns to education: 1994-2007 • Not the result of education pulling the middle up -4.0% -3.0% -2.0% -1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 1.00 All education wage effects Degree wage effect
  • 34. Occupational wage dispersion: 1994- 2007 • Wages within higher occupations becomes more dispersed… -5.00% -4.00% -3.00% -2.00% -1.00% 0.00% 1.00% 2.00% 3.00% Low pay Middle pay High pay Changeinemploymentshare,1994- 2007 Professionals Managerial Intermediate Manual routine Admin routine Service
  • 35. Occupational wage dispersion • … which is experienced almost entirely by graduates. -5.00% -4.00% -3.00% -2.00% -1.00% 0.00% 1.00% 2.00% 3.00% Low pay Middle pay High pay Changeinemploymentshare,1994- 2007 Professionals Managerial Intermediate Manual routine Admin routine Service
  • 36. Gender and hollowing out Women, 2006-13: Men, 2006-13: Source: Holmes (2014), Turning over the 'hourglass' labour market argument, Policy Network -15% -10% -5% 0% 5% 10% 15% 0 0.2 0.4 0.6 0.8 1 Overall wage growth Composition effects Wage returns -15% -10% -5% 0% 5% 10% 15% 0 0.2 0.4 0.6 0.8 1 Overall wage growth Compositional effects Wage returns
  • 37. THANK YOU For more information please see www.inet.ox.ac.uk
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