Thursday, October 11, 2007

The Polarizing Job Market

The job market in the US is polarizing. The demand is at the low end of the pay scale in various service sectors, for example, gardeners or day-care workers. On the other end of the pay scale the demand is also increasing (lawyers, accountants, etc.). In the middle, the jobs in factories or offices that require routine sorts of work such as a bookkeeper or assembly line worker are disappearing and the wages at that level are stagnating.

This article in the WSJ is worth a read. If you are young it gives you an indication about what you should do about school. If you are older it tells you where your job may be going or in what direction your children should go.

Want a job for sure? How many languages can you read and write? If your answer is more than one you stand a chance. If one of those languages is Asian your chances went up more.

The salaries of Wall Street's financial engineers are surging while wages in industrial companies stagnate. Manufacturers complain about "skill shortages" while cutting payrolls. The number of health-care jobs soars 45% over 15 years, outstripping the 25% increase in other jobs. Computers seem to have infiltrated every job, yet demand for unskilled, low-wage immigrants doesn't abate.

There is still strong demand for high-end workers -- the stars of finance, software, law, sports and entertainment -- as well as for the highest-skilled factory workers. The only news is the intensity of that demand, which is pushing up pay for those at the top.

But -- and here's the switch -- demand is increasing for some workers at the low end of the pay scale: the ones who wipe brows in hospitals, care for kids, clear tables at bistros and stand guard in office-building lobbies. In 1980, about 13% of workers without any college education were working in such personal-service jobs, according to calculations by David Autor, a Massachusetts Institute of Technology economist. In 2005, 20% of them were.

The losers? "The sagging middle," says Princeton University economist Alan Krueger.

As Harvard economists Lawrence Katz and Claudia Goldin put it recently, "U.S. employment has been polarizing into high-wage and low-wage jobs at the expense of traditional middle-class jobs."
Here's the hypothesis evolving among these and other academics. Technology and globalization are boosting demand for the most-educated workers, those prized for abstract or conceptual skills. Top hedge-fund managers aren't being replaced by computers; they're harnessing them, to their great profit.

By contrast, technology and globalization are eroding demand for workers who do routine tasks in factories and offices, many of whom are high-school or even college grads. The voice-mail system does away with switchboard operators; back-office software eliminates bookkeepers; robots replace assembly-line workers. Or the work is shipped overseas to a foreign factory or an office linked to the U.S. by fiber-optic cables.

But technology and globalization are not eroding demand for personal-service workers. Those tasks can't be done by computer or shipped offshore. The services have to be delivered here in the U.S. -- and in person -- either by natives or by immigrants.

Dissecting data on 741 American communities, MIT's Mr. Autor and colleague David Dorn examined places that were particularly heavy with easy-to-automate or easy-to-outsource jobs in 1980. By 2005, they discovered, wage inequality in those communities had widened more than elsewhere. The erosion of jobs and wages in the middle coincided with increasing employment and wages for personal-service workers at the bottom of the income ladder and highly educated workers at the top.

Some economists speculate that the same economic forces are at play in Europe, but are hidden because rules and customs that restrain incomes at the top also restrain demand for personal-service workers at the bottom. That means less inequality than in the U.S., but also fewer jobs overall and more people on the sidelines, the ones who would be service workers if there were jobs to be had.

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