LOUSY and LOVELY JOBS: the RISING POLARIZATION of WORK in BRITAIN Maarten Goos and Alan Manning*

LOUSY AND LOVELY JOBS: THE RISING POLARIZATION OF WORK IN BRITAIN Maarten Goos and Alan Manning* Abstract—This paper shows that the United Kingdom since 1975 has The basic idea is the following. The SBTC hypothesis exhibited a pattern of job polarization with rises in employment shares in the highest- and lowest-wage occupations. This is not entirely consistent predicts that demand for “skilled” jobs is rising relative to with the idea of skill-biased technical change as a hypothesis about the that for “unskilled” jobs, while the ALM hypothesis sug- impact of technology on the labor market. We argue that the “routiniza- gests a more subtle impact of technology on the demand for tion” hypothesis recently proposed by Autor, Levy, and Murnane (2003) is a better explanation of job polarization, though other factors may also be labor of different skills. The routine tasks in which technol- important. We show that job polarization can explain one-third of the rise ogy can substitute for human labor include jobs like craft in the log(50/10) wage differential and one-half of the rise in the log(90/ manual jobs and bookkeeping jobs that require precision 50). and, hence, were never the least-paid jobs in the labor market. The nonroutine tasks which are complementary to I. Introduction technology include skilled professional and managerial jobs that tend to be in the upper part of the wage distribution. The CONOMISTS writing about the impact of technology nonroutine manual tasks that make up many of the most Eon the labor market in recent years have tended to unskilled jobs such as cleaning are not directly affected by emphasize the role played by skill-biased technical change technology, but the impact of technology in other parts of (SBTC), the idea that technology is biased in favor of the economy is likely to lead to a rise in employment in skilled workers and against unskilled workers. The idea of these unskilled jobs. If this is true, then the impact of SBTC has primarily been used to explain rising wage technology will be to lead to rising relative demand in inequality (see Katz and Autor (1999) for a survey of a very well-paid skilled jobs (that typically require nonroutine large literature). But a recent paper by Autor, Levy, and cognitive skills) and in low-paid least-skilled jobs (that Murnane (ALM) (2003) has argued for a more nuanced way typically require nonroutine manual skills) and falling rel- of understanding the impact of technology in general (and ative demand in the “middling” jobs that have typically computers in particular) on the labor market.1 They argue required routine manual and cognitive skills—a process we persuasively that technology can replace human labor in call job polarization. This paper documents that the pattern routine tasks—tasks that can be expressed in step-by-step of employment changes in Britain over the period 1975– procedures or rules—but (as yet) cannot replace human 1999 does show job polarization. labor in nonroutine tasks.2 A literature related to the idea of job polarization already The ALM hypothesis is intuitively plausible and they exists—the “job-quality” debate in the United States. Some provide evidence that industries in which routine skills were heavily used have seen the most adoption of computers, and of the early papers on the rise in U.S. wage inequality (for this has reduced the usage of routine skills in those indus- example, Bluestone & Harrison, 1988) argued that there tries (see Spitz (2006) for similar evidence for Germany). was an increasing number of low-wage jobs and a shrinking But, if the ALM routinization hypothesis is correct, then we number of middling jobs. This argument was controversial might expect to see evidence for it in other areas: this is the even at the time (for example, see Kosters & Ross, 1988) aim of this paper. and most labor economists came to the conclusion that the problem for low-skill workers was a declining number of Received for publication January 22, 2004. Revision accepted for jobs for them rather than an increasing number (see Burt- publication January 23, 2006. less, 1990). But, one can still find a number of papers from * Department of Economics, Catholic University Leuven and Erasmus the 1990s continuing to address the major themes of the University, and Centre for Economic Performance, London School of Economics, respectively. job-quality debate (see, for example, Costrell, 1990; Howell We would like to thank David Autor, Francis Green, Frank Levy, Coen & Wolff, 1991; Levy & Murnane, 1992; Juhn, Murphy, & Teulings, and two referees for comments on this paper, and David Autor and Francis Green for making their data available. Pierce, 1993; Murphy & Welch, 1993; Gittleman & Howell, 1 See also Card and DiNardo (2002) for the argument that SBTC is not 1995; Ilg, 1996; Farber, 1997; Acemoglu, 1999, 2001; Juhn, as successful in explaining wage inequality as commonly thought. 1999; Ilg & Haugen, 2000; Wright & Dwyer, 2003). Al- 2 The idea of jobs as a set of tasks that differ in how easily machines can displace human labor is not new and goes back to at least Herbert Simon though these studies do differ slightly in their conclusions, (1960). Unlike more expansive computer scientists of that time, Simon common themes do emerge, most notably that, in the last 30 had a clear sense of what computers would and would not be able to do, years, there has been a very big increase in the number of and his predictions are broadly consistent with both the ALM hypothesis and the ideas advanced in this paper. Simon starts from the prediction that high-paid jobs and (probably) an increase in the number of complex information-processing programs will supplant labor in routine low-paid service jobs—this is broadly consistent with the jobs intense in many relatively simple and repetitive eye-brain-hand sequences. Consequently, workers will sort into nonroutine jobs requiring job polarization prediction of the ALM hypothesis, although the flexible use of the brain, eyes, hands, and legs. few of these papers offer this interpretation. The Review of Economics and Statistics, February 2007, 89(1): 118–133 © 2007 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology Downloaded from http://www.mitpressjournals.org/doi/pdf/10.1162/rest.89.1.118 by guest on 24 September 2021 LOUSY AND LOVELY JOBS 119 The plan of the paper is as follows. In section II, we use ized, some educated workers are forced into the low-skill the U.S. data from Autor, Levy, and Murnane (2003) to jobs at the bottom end of the distribution. The attraction of show that the jobs that require nonroutine tasks tend to be at this view is that it can explain why there has been a the top and bottom of the wage distribution, while the jobs simultaneous rise in the returns to education (the demand that require routine tasks tend to be in the middle, thus for educated workers has increased as the number of good leading to the job polarization prediction. Section III de- jobs has increased) and in the level of overeducation as scribes the data used for the United Kingdom. Section IV some have claimed. Distinguishing between these hypoth- then documents how job polarization can be observed in the eses requires evidence on changing skill requirements United Kingdom between 1975 and 1999 when the quality within jobs that is hard to find. We review two pieces of of jobs is defined by their median wage. There has been a evidence that might shed light on these questions, although growth in lousy jobs (mainly in low-paying service occu- they are somewhat contradictory in their implications. pations) together with a (much larger) growth in lovely jobs Section VIII considers the extent to which the observed (mainly in professional and managerial occupations in fi- job polarization can explain the rise in wage inequality nance and business services) and a decline in the number of between the 1970s and 1990s. We find that a modest part of middling jobs (mainly clerical jobs and skilled manual jobs the rise in wage inequality can be explained by the polar- in manufacturing). We document that one sees these trends ization of jobs alone, but that once one includes the fact that using all measures of employment, for men and women wage growth seems to be monotonically positively related together or separately and for all definitions of “jobs” that to the quality of jobs, one can explain most of the evolution we use. We also show that a method used by Juhn, Murphy, of wage inequality. The implication is that the rise in and Pierce (1993) and Juhn (1999) to predict employment “within-group” wage inequality that others have empha- growth at each percentile of the wage distribution also sized is more a product of a restricted definition of a supports the hypothesis of job polarization. And although “group,” and that if one includes job controls then it largely the pattern of changes in the occupational structure of disappears. However, the finding that the wages in the lousy employment is broadly consistent with the ALM hypothesis, jobs are falling relative to those in the middling jobs other factors may be important and section V considers presents something of a problem for the ALM hypothesis, as some of them. We discuss the potential importance of one might expect the opposite if relative demand is rising in changes in the composition of the labor force (e.g., from the the lousy relative to the middling jobs.

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