Technology and Labor Markets


Good Tim Hartford article on the implications of technology and labor markets. These paragraphs in particular seemed interesting:

What is sobering is that we have already seen convincing evidence of the impact of technology on the job market. Alan Manning of the London School of Economics coined the term “job polarisation” a decade ago, when he discovered that employment in the UK had been rising for people at the top and the bottom of the income scale. There was more demand for lawyers and burger flippers. It was middle-skill jobs that were disappearing. The same trend is true in the US, and is having the predictable effect on wages: strong gains at the top, some gains at the bottom, stagnation in the middle.


The leading explanation is that technological change has favoured certain skills and displaced others. Typists, clerks, travel agents and bank tellers find their skills less valued. Mechanisation now dominates agriculture, large-scale construction and manufacturing. We tend to imagine that manufacturing jobs have disappeared to China; in fact, manufacturing employment in China has been falling. Even the Chinese must fear the robots.

This is the same general topic of the book Average is Over by Tyler Cowen. The more I read about this thesis, the stronger I think the argument of job polarization is.

The implications are particularly interesting. Cowen argues that regions will be reorganized by skills, with the highest skills concentrating in knowledge hubs and high quality of life places (think San Francisco, New York, and West LA). The less skilled will gradually relocate to strong back office / service cities like Phoenix or Dallas, as seen by the recent trend of strong growth in low paying jobs. Nationally and super regionally there will be more inequality. But on a metropolitan, basis there will be much more equality.


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