Job polarization in aging economies

The progressive diffusion of ICT explains the raise in the number of highly paid jobs but has difficulties in justifying that of low-paid jobs. Classifying occupations according to their median wage in 1993, we analyze their employment growth until 2010, which is highest both in the top and in the bottom of the distribution, and lowest in the middle. Low-paid personnel services arise as the main factor responsible for the increase in the proportion of employment at the bottom of the wage distribution. We argue that population aging can explain the increased demand for personal services and thus the rise of employment in low-paid positions. Our argument goes as follows: goods and personal services are complementary for seniors. The decrease in the relative price of goods, induced by the progressive replacement of labor input in routine tasks by machines, is then associated with an increased demand for personal services if the proportion of seniors is increasing. We thus complement the existing literature on employment polarization by showing that demographic trends also play first order role.