Occupation employment trends and wage inequality: What the long view tells us
This post is the third in a short series that assesses the role of technological change and job polarization in wage inequality trends.
The discussion of job polarization—the expansion of high and low-wage occupations while middle-wage occupations decline—and its role in driving wage inequality would benefit from a longer examination of occupational change and technology’s impact.
“Occupational upgrading” has been going on for 60 years or more. By occupational upgrading, we mean the erosion of employment in blue-collar and, more recently, pink-collar (administrative/clerical) occupations and the corresponding employment expansion of high wage, professional and managerial white-collar occupations. The share of employment in low-wage, service occupations (food preparation, janitorial/cleaning services, personal care and services) has actually been relatively stable for many decades and remained a small—roughly 15 percent—share of total employment.
The bottom line for the discussion of the role that technologically-driven occupation trends have played in generating wage inequality is that occupational upgrading has been occurring for decades, through periods of both rising and falling wage inequality and through both rising and falling median real wage growth. In our view, this makes occupational employment shifts a poor candidate for explaining the rise in wage inequality since 1979.
In our forthcoming paper, John Schmitt, Heidi Shierholz and I document these employment trends using data over the 1959 to 2007 period drawn from a Daron Acemoglu and David Autor (2011) paper and supplemented by our analysis of Current Population Survey data from 1979 onwards. These data are based on occupation shares of total employment but the trends are the same if one examines shares of total hours worked.
Figure 1 shows the declining share of middle-wage occupations (production, craft and repair; operators, fabricators and laborers; sales; office and administrative) since 1959, based on Acemoglu and Autor’s analysis of decennial census data. A similar trend is apparent in the CPS data from 1979, with the middle-wage occupations ‘share of total employment declining at roughly the same pace in the 1980s, 1990s and 2000s, with the decline in the 1980s a bit faster.
Figure 2 shows the trends for high-wage occupations’ and low-wage occupations’ share of total employment. As noted in a previous blog post, the employment share in low-wage (i.e., service) occupations was stable and remained at a low level—roughly 15 percent of total employment—over the last few decades. The trends in the 2000s differ in the CPS and the Acemoglu and Autor data because changes in occupational coding in 2003 artificially inflated their estimates of service occupation employment growth while we adjusted for that inconsistency. Taken together, the data in Figure 2 indicate that technological change and globalization did not materially affect the relative importance of service occupations in the economy between 1959 and 1999, though these occupations did expand modestly in the 2000s.
Meanwhile, the same figure shows that high-wage occupations (professional, managerial, and technical) have been expanding since 1959, though that expansion was faster in the 1980s and 1990s than it was from 1959 to 1979; the expansion, however, has slowed considerably in the 2000s.