Economist Maximiliano Dvorkin and Senior Research Associate Hannah Shell explored the issue of job polarization in a recent edition of The Regional Economist.
During recent decades, the U.S. labor market has shifted away from jobs involving routine tasks (such as manufacturing, construction and production jobs) toward those with nonroutine tasks (such as managerial, professional and service jobs). As routine occupations tend to hire middle-skill workers, the result of this shift has been job polarization.
To study the polarization of the labor market, Dvorkin and Shell broke down the U.S. government’s comprehensive list of occupations—called the Standard Occupational Classification—into four groups:
They then looked at the average employment growth and average real wages for these categories in both the overall U.S. and the District2, shown in the tables below.
Employment Growth among Types of Occupations, 2004-2014 | |||||
---|---|---|---|---|---|
All | Cognitive Nonroutine | Cognitive Routine | Manual Routine | Manual Nonroutine | |
Average Annual Percent Change from 2004-2014 | |||||
U.S. | 0.6% | 1.6% | 0.1% | -1.1% | 1.8% |
Eighth District | 0.3% | 1.4% | -0.3% | -0.9% | 1.3% |
SOURCES: Occupational Employment Statistics and authors' calculations. | |||||
Federal Reserve Bank of St. Louis |
Average Annual Wage among Types of Occupations, 2004-2014 | ||||
---|---|---|---|---|
Cognitive Nonroutine | Cognitive Routine | Manual Routine | Manual Nonroutine | |
U.S. | $70,630 | $41,970 | $37,980 | $26,070 |
Eighth District | $62,980 | $32,980 | $36,190 | $22,040 |
NOTE: In 2014 dollars. Figures have been rounded to nearest $10. | ||||
SOURCES: Occupational Employment Statistics and authors' calculations. |
The authors found that job polarization is as much an issue for the Eighth District as the nation.
“In both the District and the nation, employment in nonroutine occupations, either cognitive or manual, grew the fastest,” Dvorkin and Shell wrote. “Employment in cognitive routine occupations grew at a very modest pace in the nation and declined in the District; manual routine occupational employment decreased in the nation and the District.”
In terms of wages, routine occupations tended to be in the middle of the wage distribution, while cognitive nonroutine occupations had much higher wages and manual nonroutine occupations typically had the lowest wages.
“This wage difference highlights the polarization in the labor market, as employment grows the most at the polar opposites of the wage distribution,” they wrote.
The authors offered several reasons why job polarization occurred between 2004 and 2014:
For both the U.S. and the District, employment in routine-based occupations has been declining, while employment in nonroutine occupations has been increasing, the authors wrote.
“This shift results in a wage gap between the highly paid cognitive nonroutine occupations and the low-paying manual nonroutine jobs,” Dvorkin and Shell concluded. “This shift may be an important driver of increasing income inequality in both the District and the nation.”
1 Headquartered in St. Louis, the Eighth Federal Reserve District includes all of Arkansas and parts of Illinois, Indiana, Kentucky, Mississippi, Missouri and Tennessee.
2 The authors used state-level data for all Eighth District states except Illinois. They excluded data from Illinois because Chicago is the main driver of that state’s statistics and is outside the District.