Job polarisation in the uk an assessment and implications for skills policy
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Job polarisation in the UK: An assessment and implications for skills policy. Ken Mayhew and Craig Holmes ESRC Centre on Skills, Knowledge and Organisational Performance, University of Oxford. SKOPE research programme on segmentation. Labour market segmentation:

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Job polarisation in the uk an assessment and implications for skills policy l.jpg

Job polarisation in the UK: An assessment and implications for skills policy

Ken Mayhew and Craig Holmes

ESRC Centre on Skills, Knowledge and Organisational Performance,

University of Oxford


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SKOPE research programme on segmentation for skills policy

  • Labour market segmentation:

    • the division of the labour market into submarkets between which mobility is severely limited.

    • Most commonly seen as a dual market

    • Individuals may become trapped in the ‘wrong segment’.

    • Initial literature in 1960s and 1970s found only limited empirical support

  • Polarisation:

    • the alleged growth in employment at the top and bottom of labour market, and hollowing-out of the middle

    • Could lead to a form of segmentation


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Directions of research for skills policy

  • Assessment of polarisation evidence

    • Existing approaches and methodological criticism

    • New approaches – explaining changing wage distributions

  • Wage and occupational mobility resulting from routinisation

    • Destinations of displaced routine occupation workers

    • Experience of new entrants compared to existing workers – are new entrants more polarised?

    • Role of skills in both cases

  • Implications for a updated theory of labour market segmentation


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Directions of research for skills policy

  • Assessment of polarisation evidence

    • Existing approaches and methodological criticism

    • New approaches – explaining changing wage distributions

  • Wage and occupational mobility resulting from routinisation

    • Destinations of displaced routine occupation workers

    • Experience of new entrants compared to existing workers – are new entrants more polarised?

    • Role of skills in both cases

  • Implications for a updated theory of labour market segmentation


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Directions of research for skills policy

  • Assessment of polarisation evidence

    • Existing approaches and methodological criticism

    • New approaches – explaining changing wage distributions

  • Holmes (2010), SKOPE research paper

  • Looking at wage distributions reveals little hollowing-out

  • However, evidence of routinisation-led employment changes exists

  • Explanation: existing evidence make strong assumptions about wage structure over last thirty years, linking employment effects to polarisation


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Job polarisation in the UK for skills policy

  • Polarisation hypothesis (Goos and Manning 2007):

    • Price of computer capital has fallen since late 1970s

    • Computer capital replaces labour engaged in routine tasks

    • Non-routine tasks may be complementary to computer capital (e.g. management, skilled professionals)

    • Result: growth in non-routine occupations due to changes in demand (complementarities) and supply (displaced routine workers)

    • Routine occupations found in middle of income distribution

    • Non-routine occupations found at top and bottom of distribution

      • Managers, skilled professionals at the top

      • Non-routine ‘service’ occupations at the bottom e.g. hairdressers, cleaners


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Job polarisation in the UK for skills policy

  • Existing evidence of polarisation:

    • UK: Goos and Manning – increased employment share in lowest and highest job quality deciles, decrease in middle quality deciles

    • Similar results found for US (Autor, Katz and Kearney; 2006) and Germany (Spitz-Oener; 2006)

  • Deciles determined by initial median wage (UK, USA) or median skill index (Germany)

  • Key assumption: wage or skill structure of occupations has remained reasonably static.


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Assessment of polarisation: data for skills policy

  • National Child Development Survey

    • All participants born in a single week in March 1958

    • Waves four (1981, aged 23) and seven (2004, aged 46) used

  • KOS occupational codes in 1981 converted to SOC2000

    • Conversion based on descriptions

    • In some cases a category in SOC2000 could apply to several categories under KOS – these were omitted

    • Omissions account for 12.4% of data at 3-digit level (occupational minor group, 70 categories)


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Assessment of polarisation: issues for skills policy

  • Longitudinal study rather than cross sectional data

    • Interested in effect on mobility of polarisation – need to find evidence of polarisation within a single cohort

    • Replication of wage distribution analysis for cross sectional data:

      • Family Expenditure Survey (1981-2000) – annexe to Holmes (2010)

      • New Earnings Survey (1986-2009)

    • Longitudinal study exhibits evidence of routinisation-led employment shifts  Why does this not lead to polarising wage distributions?

    • Main criticism is methodological and is not specific to a single cohort dataset


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Results: occupational structure for skills policy

  • Change in employment share of each of the ten wage deciles.

  • It shows that the initially highest and lowest paid occupations grew more than the middle earning occupations.

  • Replicates the Goos and Manning methodology for our NCDS dataset. This is consistent with routinisation.


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Results: wage distributions for skills policy

  • Resulting wage distributions are important

  • Absent of other effects, a polarising labour force should be observed as in the diagram below


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Results: wage distributions for skills policy

  • Changing distributions from NCDS cohort (hourly and weekly, full-time workers):


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Results: wage distributions for skills policy

  • Econometric methods for analysing changes accurately

  • Descriptive method (see Holmes, 2010) – change in employment at each (log) wage percentile

  • Polarisation illustrative example:


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Results: wage distributions for skills policy


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Results: wage distributions for skills policy

  • Possible explanation: wage structure of occupations has changed significantly

    • Complicated relationship of supply and demand for occupations

    • If routine workers were middle skill as well as middle income, those moving to ‘good’ non-routine occupations may earn lower wages than existing averages.

    • Similarly, those moving ‘down’ may be more productive than existing employees, and earn higher wages

    • Some declining occupations may have earned a higher than middling wage (e.g. craftsmen) – these workers may move closer to the middle of the earning spectrum

    •  Creation of a new type of middling job


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Results: wages and occupational structure for skills policy

  • Shows that many low-wage growing occupations moved upwards. Displaced routine workers maintain wage position?

  • Change in employment share of each of the ten wage deciles – average two wave wage (red) and 1981 wave wage (blue)

  • Consistent wage structure  U-shaped relationship of Goos and Manning


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Conclusions for skills policy

  • A hollowed-out labour market has

    • Fewer middle jobs for low wage workers to move into

    • Increasing competition for those that remain.

    • Significant upward mobility may either be slower, or require much more difficult and sizeable leaps.

  • Before embarking on a study of mobility using longitudinal analysis, it is important to understand the ways the polarisation phenomena has or has not manifested within a datasetthat can be used for analysing working life mobility


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Conclusions for skills policy

  • Within the NCDS cohort, employment has risen in occupations with the highest and lowest wages in 1981

  • However, wage distributions show little obvious evidence of polarisation

  • Existing evidence relies on a strong assumption that wage structures have remained constant over the past three decades

  • Changing wage structures, due to the associated changes in supply and demand of different workers, may have led to a different type of middling occupation


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Conclusions: further directions for skills policy

  • Education and skills policy

    • The UK government places great emphasis on workplace skill acquisition as a way to improve welfare of bottom end e.g. Train to Gain.

    • Clearly, evaluations of such a policy is dependent upon understanding the determinants of occupational mobility and the constraints faced by those looking to progress upwards.

  • Implication for segmentation

    • Polarisation now seems a less likely mechanism for creating segmented labour markets than we may have though.

    • However, this process may have created some barriers to mobility


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Conclusions: further directions for skills policy

  • The longitudinal dataset can be used to look at mobility in a labour market affected by routinisation.

  • Questions:

    • Who remains in declining occupations?

    • Where have displaced routine workers moved to?

    • What are the wage or job quality outcomes of both groups?

  • There may be a difference across cohorts

    • Declining occupations are getting older (Autor and Dorn; 2009)

    • Cohorts differ in skills or qualifications e.g. expansion of HE

    • Compare findings to later longitudinal studies or cross-sectional data


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