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Labor market polarization over the business cycle

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  • Christopher L. Foote
  • Richard W. Ryan

Abstract

One of the most important long-run trends in the U.S. labor market is polarization, defined as the relative growth of employment in high-skill jobs (such as management and technical positions) and low-skill jobs (such as food-service and janitorial work) amid the concurrent decline in middle-skill jobs (such as clerical, construction, manufacturing, and retail occupations). Middle-skill job losses typically result from outsourcing labor to lower-wage countries or from substituting automated technologies for routine tasks. Economists are now beginning to study how long-run polarization might be related to short-run business cycles, but doing so requires the construction of quarterly datasets with consistent occupational data over long periods of time. The authors of this paper construct a new dataset of occupational employment and unemployment that extends from 1947:Q3 to 2013:Q4. Using this dataset, along with more-recent individual-level data from the Current Population Survey, the authors study how recessions typically affect employment in various occupations, what employment alternatives are available to middle-skill workers who become unemployed, and whether the ongoing erosion of middle-skill job opportunities is related to long-term declines in labor force participation among men.

Suggested Citation

  • Christopher L. Foote & Richard W. Ryan, 2014. "Labor market polarization over the business cycle," Working Papers 14-16, Federal Reserve Bank of Boston.
  • Handle: RePEc:fip:fedbwp:14-16
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    2. Verdugo, Gregory & Allègre, Guillaume, 2020. "Labour force participation and job polarization: Evidence from Europe during the Great Recession," Labour Economics, Elsevier, vol. 66(C).
    3. Yongseok Shin & Sang Yoon (Tim) Lee & Sangmin Aum, 2017. "Waxing Jobs and Waning Industries," 2017 Meeting Papers 1618, Society for Economic Dynamics.
    4. C. Y. Kelvin Yuen & Ping Wang, 2019. "Minimum Wage in a Multi-Tier Search and Wage-Posting Model with Cross-Market Substitutions," NBER Working Papers 26378, National Bureau of Economic Research, Inc.
    5. Brad Hershbein & Lisa B. Kahn, 2018. "Do Recessions Accelerate Routine-Biased Technological Change? Evidence from Vacancy Postings," American Economic Review, American Economic Association, vol. 108(7), pages 1737-1772, July.
    6. Stephanie Aaronson & Tomaz Cajner & Bruce Fallick & Felix Galbis-Reig & Christopher Smith & William Wascher, 2014. "Labor Force Participation: Recent Developments and Future Prospects," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 45(2 (Fall)), pages 197-275.
    7. Olivier Charlot & Idriss Fontaine & Thepthida Sopraseuth, 2019. "Employment Fluctuations, Job Polarization and Non-Standard Work: Evidence from France and the US," THEMA Working Papers 2019-14, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    8. Carrillo-Tudela, Carlos & Hobijn, Bart & She, Powen & Visschers, Ludo, 2016. "The extent and cyclicality of career changes: Evidence for the U.K," European Economic Review, Elsevier, vol. 84(C), pages 18-41.
    9. Díaz, Guillermo Arenas & Barge-Gil, Andrés & Heijs, Joost, 2020. "The effect of innovation on skilled and unskilled workers during bad times," Structural Change and Economic Dynamics, Elsevier, vol. 52(C), pages 141-158.
    10. Gaggl, Paul & Kaufmann, Sylvia, 2020. "The cyclical component of labor market polarization and jobless recoveries in the US," Journal of Monetary Economics, Elsevier, vol. 116(C), pages 334-347.
    11. Brian Nolan & Sarah Voitchovsky, 2016. "Job loss by wage level: lessons from the Great Recession in Ireland," IZA Journal of European Labor Studies, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-29, December.
    12. Alicia Sasser Modestino & Daniel Shoag & Joshua Ballance, 2020. "Upskilling: Do Employers Demand Greater Skill When Workers Are Plentiful?," The Review of Economics and Statistics, MIT Press, vol. 102(4), pages 793-805, October.
    13. Christian Bredemeier & Falko Juessen & Roland Winkler, 2020. "Fiscal Policy and Occupational Employment Dynamics," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 52(6), pages 1527-1563, September.
    14. Cortes, Guido Matias & Jaimovich, Nir & Nekarda, Christopher J. & Siu, Henry E., 2020. "The dynamics of disappearing routine jobs: A flows approach," Labour Economics, Elsevier, vol. 65(C).
    15. Maximiliano Dvorkin & Alexander Monge-Naranjo, 2019. "Occupation Mobility, Human Capital and the Aggregate Consequences of Task-Biased Innovations," Working Papers 2019-13, Federal Reserve Bank of St. Louis.
    16. Shim, Myungkyu & Yang, Hee-Seung, 2018. "Interindustry wage differentials, technology adoption, and job polarization," Journal of Economic Behavior & Organization, Elsevier, vol. 146(C), pages 141-160.
    17. Carlianne Patrick & Heather M. Stephens, 2020. "Incentivizing the Missing Middle: The Role of Economic Development Policy," Economic Development Quarterly, , vol. 34(2), pages 154-170, May.
    18. vom Lehn, Christian, 2020. "Labor market polarization, the decline of routine work, and technological change: A quantitative analysis," Journal of Monetary Economics, Elsevier, vol. 110(C), pages 62-80.
    19. Shim, Myungkyu & Yang, Hee-Seung, 2016. "New stylized facts on occupational employment and their implications: Evidence from consistent employment data," Economic Modelling, Elsevier, vol. 59(C), pages 402-415.
    20. Hee-Seung Yang & Myungkyu Shim, 2013. "Job Polarization : Market Responses to Interindustry Wage Differentials," 2013 Meeting Papers 1200, Society for Economic Dynamics.
    21. Valeria Cirillo & Mario Pianta & Leopoldo Nascia, 2018. "Technology and Occupations in Business Cycles," Sustainability, MDPI, Open Access Journal, vol. 10(2), pages 1-25, February.
    22. Achim Schmillen, 2019. "Vocational education, occupational choice and unemployment over the professional career," Empirical Economics, Springer, vol. 57(3), pages 805-838, September.
    23. Teimouri, Sheida & Zietz, Joachim, 2020. "Coping with deindustrialization: A panel study for early OECD countries," Structural Change and Economic Dynamics, Elsevier, vol. 54(C), pages 26-41.
    24. Gustavsson, Magnus, 2017. "Is Job Polarization a Recent Phenomenon? Evidence from Sweden, 1950–2013, and a Comparison to the United States," Working Paper Series 2017:14, Uppsala University, Department of Economics.

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    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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