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for Social Policy Studies in Israel TAUB CENTER Causes and Consequences of Inequality Herbert M. Singer Conference Series taubcenter.org.il Rising Inequality in


  1. for Social Policy Studies in Israel בואט זכרמ TAUB CENTER לארשיב תיתרבחה תוינידמה רקחל Causes and Consequences of Inequality Herbert M. Singer Conference Series taubcenter.org.il

  2. Rising Inequality in Industrialized Nations: Causes, Concerns, and Policy Responses David H. Autor MIT and NBER Taub Center for Social Policy Studies Jerusalem, 30 October 2013

  3. Rising Inequality in Industrialized Nations: Causes, Concerns, and Policy Responses Inequality – Causes 1. • Technological revolutions • International competition • The ‘education race’ Inequality – Concerns 2. • Inequality and economic mobility • Household structure and investments in children Inequality – Policy responses 3. • Education • Taxation • Labor standards • Macroeconomic policies Conclusions 4.

  4. Not One but Two Technological Revolutions: The Green Revolution and the Industrial Revolution 1840 1900 1950 2010 90% 78% 80% 68% 70% 60% 52% 50% 40% 40% 37% 33% 30% 27% 22% 20% 20% 11% 10% 10% 2% 0% Agriculture Industry Services Johnston 2012

  5. Automation of ‘Routine Tasks:’ Jacquard Loom ( 1801)

  6. Two Centuries of Productivity Growth in Computing: 2+ Trillion Fold Decline in Cost of Computing v. Labor Nordhaus 2007

  7. Information Technology Accounted for ~40% of Business Investment as of 2010 Informa4on#Processing#Equipment#+#SoBware#Share#of#All#Private#NonI Residen4al#Investment,#1959#I#2010#(Source:#BEA#NIPA)# 0.40# 0.36# 0.32# 0.28# 0.24# 0.20# 0.16# 0.12# 0.08# 0.04# 0.00# 1959# 1962# 1965# 1968# 1971# 1974# 1977# 1980# 1983# 1986# 1989# 1992# 1995# 1998# 2001# 2004# 2007# 2010#

  8. Substitution, Complementarity: Tasks and Technology Example Potential Impact of Task Occupations Computerization Description Routine Tasks • ‘Rules - based’ • Bookkeepers • Direct Substitution • Repetitive • Assembly line • Procedural workers Abstract Tasks • Abstract • Scientists • Strong Complementarity problem-solving • Attorneys • Mental • Managers flexibility • Doctors Manual Tasks • Environmental • Truck drivers • Limited Complementarity Adaptability • Security guards or Substitution • Interpersonal • Flight attendants Adaptability • Home health aides • Waiters • Cleaners

  9. U.S. Job Task Input by Education Group in 1980 College Grads 100% 90% Some College HS Graduates 80% HS Dropouts Some College HS Dropouts 70% HS Graduates HS Graduates 60% Some College College Grads College Grads 50% HS Dropouts 40% 30% 20% 10% 0% Manual Tasks Abstract Tasks Routine Tasks Autor, Levy and Murnane, 2003

  10. Employment Polarization, 1979 – 2010 Percent Growth in Employment by Occupation Percent Change in Employment by Occupation, 1979-2010 .6 .4 .2 0 -.2 Personal Care Food/Cleaning Service Protective Service Operators/Laborers Production Office/Admin Sales Technicians Professionals Managers 1979-1989 1989-1999 1999-2007 2007-2010

  11. Changes in Employment Share by Job Skill Tercile, 1993-2006 Comparison of U.S. and European Union Countries US v. EU EU Nations Ordered by Growth in High Skill 20 Averages Occupation Share 10 0 -10 -20 EU Average Ireland Finland Greece Sweden Spain Luxembourg France Austria USA Portugal Norway Netherlands UK Germany Belgium Denmark Italy Lower Third Middle Third Upper Third Source: Goos, Salomons and Manning (2009)

  12. Rising Inequality in Industrialized Nations: Causes, Concerns, and Policy Responses Inequality – Causes 1. • Technological revolutions • International competition • The ‘education race’ Inequality – Concerns 2. • Inequality and economic mobility • Household structure and investments in children Inequality – Policy responses 3. • Education • Taxation • Labor standards • Macroeconomic policies Conclusions 4.

  13. Chinese Imports Surge Following its 2001 WTO Accession — U.S. Manufacturing Employment Declines Simultaneously .05 .14 .04 Manufacturing emp/pop .12 Import penetration .03 .02 .1 .01 .08 0 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 Year China import penetration ratio Manufacturing employment/Population

  14. Many High Income Countries Experience a “China Shock” in the Last Two Decades ⇿ Australia, Denmark, Finland, Germany, Japan, United States New Zealand, Spain, and Switzerland

  15. Defining Local Labor Markets: “Commuting Zones”

  16. Impact of China Exposure on U.S. Manufacturing Employment per Adult: Commuting Zone Level Estimates

  17. Imports on U.S. Manufacturing Employment per Capita for a $1,000/Worker Increase in Exposure Imports&From&China&and&Change&of&Manufacturing&Employment&in& CommuRng&Zones,&1970L2007&& & Effect&of&an&$1000&Per&Worker&Increase&in&Imports&from&China&during&1990=2007&on&the& Change&in&Manufacturing&Employment&as&a&Percentage&of&the&Working&age&PopulaCon & 1990L2000& 2000L2007& 0.2% 0.0% !0.2%%% Percentage&Points& !0.4%%% !0.6%%% L0.7&%& !0.8%%% L0.9&%& !1.0%%%

  18. Negative Impacts Begin with China’s Rise in the 1990s Imports&From&China&and&Change&of&Manufacturing&Employment&in& CommuRng&Zones,&1970L2007&& & Effect&of&an&$1000&Per&Worker&Increase&in&Imports&from&China&during&1990=2007&on&the& Change&in&Manufacturing&Employment&as&a&Percentage&of&the&Working&age&PopulaCon & 1970L1980& 1980L1990& 1990L2000& 2000L2007& 0.60&%& 0.4&%& 0.40&%& 0.20&%& 0.00&%& Percentage&Points& L0.1&%& L0.20&%& L0.40&%& L0.60&%& L0.7&%& L0.80&%& L0.9&%& L1.00&%&

  19. Impacts on Manufacturing Emp, Non-Manufacturing Emp, Unemployment, Non-Participation Imports&from&China&and&Employment&Status&of&Working&Age&PopulaRon& within&CommuRng&Zones&(1990L2007)&& & Effect&of&an&$1000&Per&Worker&Increase&in&Imports&from&China&during&1990=2007&on&Share& of&PopulaCon&in&Employment&Categories&& Manufacturing& NonLManufacturing& Unemployment& Not&in&Labor&Force& All&EducaRon&Levels& College&EducaRon& No&College&EducaRon& 0.8& 0.6& 0.4& 0.3&%& 0.2&%& 0.2&%& 0.2& 0.1&%& 0.0& L0.2&%& L0.2&%& L0.4&%& L0.6&%& L0.5&%& L0.6&%& L0.6&%& L0.6&%& L0.8&%&

  20. Rising Inequality in Industrialized Nations: Causes, Concerns, and Policy Responses Inequality – Causes 1. • Technological revolutions • International competition • The ‘education race’ Inequality – Concerns 2. • Inequality and economic mobility • Household structure and investments in children Inequality – Policy responses 3. • Education • Taxation • Labor standards • Macroeconomic policies Conclusions 4.

  21. Composition Adjusted College/High-School Weekly Wage Ratio, 1963-2008 !

  22. Composition Adjusted College/High-School Relative Labor Supply, 1963-2008 ! ) *$% +& ,' - . % +/' 01) ' 2. 3 . ' 4 *% ' & . % 5" 5#6' 7& . % 6' 89: ; < ( ==>? ' @ . A*% ' 6$BBC 7' " 6' +. C +$C . 3 & 2' $6" 5#' . C C ' B& % 6*56' . #& 6' 8: < : D' E /*

  23. Predicted and Actual College/High-School Wage Gap, 1963 - 2008 ! *+% & , ' -!. /& , 0!12*!3/4 /!5 +& !' /& 6# 6$7!8' /& 7!( ) 9: ;<==>? !@ +$!A' ' BC 8!A /$' 7!5 +& !5 % C C ;4 # D ' E !5 % C C ;8' /& !A+& B' & 7!/& ' !& ' $& ' 77' 3!#

  24. Gains in Post-Secondary Education over 30 Years: Fraction of Adults with ‘Tertiary’ Education in 2009 Source: OECD 2011

  25. Educational Attainment by Sex: Supply of Young College v. High School Workers, 1963-2008 !

  26. Rising Inequality in Industrialized Nations: Causes, Concerns, and Policy Responses Inequality – Causes 1. • Technological revolutions • International competition • The ‘education race’ Inequality – Concerns 2. • Inequality and economic mobility • Household structure and investments in children Inequality – Policy responses 3. • Education • Taxation • Labor standards • Macroeconomic policies Conclusions 4.

  27. Changes in Real Hourly Wage Levels 1979-2010, by Education and Sex (Ages 25 – 39) Source: Autor and Wasserman, 2013

  28. D Real Earnings and D Emp/Pop, 1979 – 2008: U.S. Males by Education and Race (Ages 25-39) Source: Autor and Wasserman, 2013

  29. Top 1% Income Share: English-Speaking Countries Atkinson, Piketty, Saez 2011

  30. Top 1% Income Share: Nordic Countries and Southern Europe Atkinson, Piketty, Saez 2011

  31. Top 1% Income Share: Middle Europe and Japan Atkinson, Piketty, Saez 2011

  32. Top 1 % Income Share: ‘Developing Countries’ Atkinson, Piketty, Saez 2011

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