Transcript
Looking through the hourglass: Hollowing out of the UK jobs market pre- and post-crisis
Laura Gardiner, Resolution Foundation
Adam Corlett, Resolution FoundationCraig Holmes, Pembroke College, Oxford
Andrea Salvatori, University of Essex
Matthew Whittaker, Resolution Foundation (chair)
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Looking through the hourglassHollowing out of the UK jobs market
pre- and post-crisis
Laura Gardiner & Adam Corlett
March 2015
@resfoundation
• 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?
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 headcountNotes: 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
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
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
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
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
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
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
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 the UK’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
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
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
…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
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
• 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
• 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
The anatomy of job
polarisation in the UK
Andrea Salvatori
University of Essex
23 March 2015
Resolution Foundation
London@iseressex
@andysalvatori
@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
@andysalvatori
@iseressex
Job polarisation in each decade, 1979-2012
-20
-15
-10
-5
0
5
10
15
20
1980s 1990s 2000s 1979-2012
Ch
an
ge in
em
plo
ym
en
t s
ha
re
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
@andysalvatori
@iseressex
Polarisation is a non-graduate phenomenon (1979-2012)
3.99
15
3.18.3
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
@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)
@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
@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.
HAVE UK EARNINGS DISTRIBUTIONS POLARISED?
Dr Craig HolmesResearch Fellow, Employment, Equity and Growth Programme, Institute for New Economic Thinking at the Oxford Martin School
March 23rd 2015Resolution Foundation
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
Wag
e g
row
th
Percentile
1987-2001 1994-2007 2006-2013
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%
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
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
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
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
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
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
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
Ch
ange
in e
mp
loym
en
t sh
are
, 19
94
-2
00
7
Professionals
Managerial
Intermediate
Manual routine
Admin routine
Service
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
Ch
ange
in e
mp
loym
en
t sh
are
, 19
94
-2
00
7
Professionals
Managerial
Intermediate
Manual routine
Admin routine
Service
Gender and hollowing outWomen, 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 wagegrowth
Compositioneffects
Wage returns
-15%
-10%
-5%
0%
5%
10%
15%
0 0.2 0.4 0.6 0.8 1
Overall wagegrowth
Compositionaleffects
Wage returns
THANK YOU
For more information please see www.inet.ox.ac.uk
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