a review of the evidence Maarten Goos The past, present and future - - PowerPoint PPT Presentation

How the world of work is changing: a review of the evidence

Maarten Goos

The past, present and future

• The past (1820-1980): Industrial Revolution

results in skill-upgrading and decreasing inequality.

• The present (after 1980):Computer Revolution

is leading to job polarization and increasing inequality.

• But optimistic about future computerization if

skills are supplied to support such changes.

The past, present and future

• The past (1820-1980): Industrial Revolution

results in skill-upgrading and decreasing inequality.

• The present (after 1980):Computer Revolution

is leading to job polarization and increasing inequality.

• But optimistic about future computerization if

skills are supplied to support such changes.

What explains skill-upgrading?

• Introduction of purpose-built machinery (e.g.

assembly line) and the rise of large factories resulted in farm laborers  machine operatives.

• In manufacturing, increased demand for clerks;

supervisors; managerial, technical and professional occupations.

• In services, increased demand for unskilled

service workers (e.g. travel), medium-skilled services (e.g. sales) and skilled services (e.g. managers).

28.8 16.8 11.8 16.9 21.2 1.5 3.9 35.5 33.9 5.5 7.7

5 10 15 20 25 30 35 40 1850 1860 1870 1880

Share of total employment (in %)

Skill-upgrading in the US occupational distribution, 1850-1880

Unskilled farm laborers Unskilled service workers Medium-skilled blue-collar (operatives, laborers in manufacturing) Medium-skilled white-collar (clerical,sales) Skilled blue-collar (supervisors (and craft)) Skilled white-collar (managerial, technical, professional)

Shift away from farm laborers towards machine

• peratives.

Increased demand for clerks, sales; supervisors (and craft); managerial, technical and professional Increased demand for clerks, sales, foremen, engineers and managers Increased demand for clerks, sales; supervisors (and craft), engineers and managers

Source: Katz and Margo (2013)

/

s u

W W

/

s u

N N

C B A

Inequality decreased before 1980

1%

• 1.9% -0.6%

E.g. Goldin and Katz (2008) decomposing % annualized change in the US skill premium, 1915-1940. Industrialization shifted

• ut the relative demand

for (medium-) skilled workers which would increase the skill premium. But rapid expansion of the education system shifted

• ut the relative supply of

(medium) skills by more such that the skill premium decreased.

The past: conclusions

• Industrial Revolution lead to skill-upgrading in

the occupational composition of the labor force and decreasing inequality due to rapid expansion of the education system.

• Skill-upgrading (the “human capital century”)

and decreasing inequality (the “great compression”) resulted in strong economic growth.

The past, present and future

• The past (1820-1980): Industrial Revolution

results in skill-upgrading and decreasing inequality.

• The present (after 1980):Computer Revolution

is leading to job polarization and increasing inequality.

• But optimistic about future computerization if

skills are supplied to support such changes.

What explains job polarization?

• Introduction of robotic/computer equipment

doing codifiable/routine tasks decreases relative demand for machine operatives and clerks

• Increased relative demand for managerial,

technical and professional occupations doing non-routine tasks (e.g. writing software).

• Computers cannot do the non-routine tasks in

unskilled service jobs (e.g. cleaning a room).

13.1 25.9 23.1 27.3 19.2 12.6 0.9 0.7 8.2 12.9 15.7 27.9 39.4 30.4 8.5

5 10 15 20 25 30 35 40 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010

Share of total employment (in %)

Job polarization in the US occupational distribution after 1980

Medium-skilled white-collar (clerical,sales) Medium-skilled blue-collar (operatives, laborers in manufacturing) Unskilled farm laborers Unskilled service workers Skilled white-collar (managerial, technical, professional) Skilled blue-collar (supervisors (and craft))

Source: Katz and Margo (2013)

3.65

• 9.27

5.62

• 10
• 8
• 6
• 4
• 2

2 4 6 8 10

Low-paying occupations Middling occupations High-paying occupations Percentage point change in employment share

Job polarization in 16 European countries, 1993-2010

Source: Goos, Manning and Salomons (2013)

• 20
• 15
• 10
• 5

5 10 15 20

Austria Belgium Denmark Finland France Germany Greece Ireland Italy Lux. Neth. Norway Portugal Spain Sweden UK Percentage point changes in employment shares, 1993-2010 Middling occupations Low-paying occupations High-paying occupations

Source: Goos, Manning and Salomons (2013)

/

s u

W W

/

s u

N N

B A

Evidence on computerization

Computerization increases the relative demand for non-routine and, on net, skilled labor. E.g. Autor, Levy and Murnane (2003) find an annualized % increase in relative demand for skilled workers of 3.81% between 1980 and 1998 in the US

3.81%

• f which 1.39 ppt is

explained by the shift away from routine towards non- routine tasks due to computerization alone.

1.39%

/

s u

W W

/

s u

N N

B A

Inequality increased after 1980

C

1.8%

• 1%

0.5%

E.g. Goldin and Katz (2008) decompose % annualized change in the US skill premium, 1990-2005. Computerization (among

• ther drivers) shifts out the

relative demand for skills which increases the skill premium. Expansion of the education system shifts out the relative supply of skills which would decrease the skill premium but this shift

• ut has been smaller.

The present: conclusions

• Computer Revolution leads to skill-upgrading
• n net but also to job polarization and

increasing inequality due to slowdown in educational expansion.

• This is very different from the past and, so far,

economic growth has been less strong (“We see computers everywhere except in the productivity statistics”).

The past, present and future

• The past (1820-1980): Industrial Revolution

results in skill-upgrading and decreasing inequality.

• The present (after 1980):Computer Revolution

is leading to job polarization and increasing inequality.

• But optimistic about future computerization if

skills are supplied to support such changes.

/

s u

W W

/

s u

N N

B A

What the future should look like in a supply-demand framework

C D It is most likely that the relative demand for skilled workers will continue to increase. To benefit from this, continued/more rapid investment in education and on-the-job training is needed to provide the necessary skills to support such changes.

How the world of work is changing: a review of the evidence

Maarten Goos