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LABOR TOPICS Nick Bloom Polarization and inequality

LABOR TOPICS Nick Bloom Polarization and inequality. Polarization. Top 1%. ALM (2003) predicts labor market polarization. Goos and Manning (2008, RESTAT) point out in the paper “Lousy and lovely jobs” that routine tasks are most substitutable by computers

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LABOR TOPICS Nick Bloom Polarization and inequality

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  1. LABOR TOPICSNick BloomPolarization and inequality

  2. Polarization Top 1%

  3. ALM (2003) predicts labor market polarization Goos and Manning (2008, RESTAT) point out in the paper “Lousy and lovely jobs” that routine tasks are most substitutable by computers Hence, occupations with a high input of routine tasks should expect to see the largest falls in employment and income from computerization They test this using both US and UK data and find supportive evidence

  4. First they establish that routine tasks are most concentrated in median paid jobs Source: Goos and Manning (2008, RESTAT)

  5. They then show median jobs have shrunk, with a J-curve across all jobs Source: Goos and Manning (2008, RESTAT)

  6. The jobs that have expanded are either non-routine manual or non-routine cognitive Source: Goos and Manning (2008, RESTAT)

  7. And in fact many low skilled jobs have grown And that’s despite relabelling(i.e. “cleaners” now being called “sanitation consultants” or some other ridiculous name) Source: Goos and Manning (2008, RESTAT)

  8. These changes are within and between industries Source: Goos and Manning (2008, RESTAT)

  9. And as mentioned last lecture this polarization is international in scope Source: Acemoglu and Autor (2010, HLE)

  10. Recent Autor and Dorn paper argues clear service/non-service difference in low skill Source: Autor and Dorn (2013, AER)

  11. Polarization Top 1%

  12. Related topic is the change in inequality over time • Well known paper by Piketty and Saez (2003, QJE) looks at income inequality over time, focusing on top 1% • They do this by assembling a variety of IRS related sources on income and estate taxes paid, plus some other supportive data on CEO pay etc. (administrative data) • While this is not closely related to SBTC, there are some parallels (and I think it’s another important topic)

  13. First result is incomes are very very skewed! Source: July 2010 Update to Piketty and Saez (2003)

  14. Cross sectional income distribution

  15. Second, this inequality (at least for top income shares) has a U-shape over 20th Century Source: July 2010 Update to Piketty and Saez (2003)

  16. Particularly striking changes for very top income shares (super rich people like me…) Source: July 2010 Update to Piketty and Saez (2003)

  17. Reason fall in capital incomes from WWII onwards, with rebound only via wage income Early 20th century super rich collected dividends, probably from fortunes accumulated in 19th Century. By end 20th century more wage incomes Source: July 2010 Update to Piketty and Saez (2003)

  18. The UK pattern is similar to the US Source: Atkinson (2003)

  19. As always the French have to be different Source: Atkinson (2003)

  20. So what explains these long-run moves in income inequality? • Piketty and Saez (2003) speculate one factor is much higher levels of wage and capital income tax since WWII • Slows down the accrual of multi-generational fortunes • Another factor could be regulation of top pay (e.g. particularly during WWII) combined with social-norms (e.g. after WWI greater power of unions and left wing). • SBTC may also be a factor, although hard to square with different French experience (which had no wage income recovery in late 20th Century).

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