Working Paper: CEPR ID: DP13851
Authors: Jennifer Hunt; Ryan Nunn
Abstract: Equating a job with an individual rather than an occupation, we re-examine whether U.S. workers are increasingly concentrated in low and high-wage jobs relative to middle-wage jobs, a phenomenon known as employment polarization. By assigning workers in the CPS to real hourly wage bins with time-invariant thresholds and tracking over time the shares of workers in each, we do find a decline since 1973 in the share of workers earning middle wages. However, we find that a strong increase in the share of workers in the top bin is accompanied by a slight decline in the share in the bottom bin, inconsistent with employment polarization. Turning to occupation-based analysis, we show that the share of employment in low-wage occupations is trending up only from 2002-2012, and that the apparent earlier growth and therefore polarization found in the literature is an artefact of occupation code redefinitions. This new timing rules out the hypothesis that computerization and automation lie behind both rising wage inequality and occupation-based employment polarization in the United States.
Keywords: employment polarization; wage inequality
JEL Codes: J31; J62
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| steady decline in the share of workers earning middle wages since 1973 (J31) | decline in middle wage shares (D33) |
| increase in the share of workers in the top wage bin from 0.25 in 1979 to 0.35 in 2018 (D33) | bifurcation in the labor market (J79) |
| decrease in the share of workers in the bottom wage bin from 0.25 to 0.18 (J31) | bifurcation in the labor market (J79) |
| apparent earlier growth in low-wage occupations is an artifact of changes in occupation codes (J39) | complicates causal link between computerization, automation, and wage inequality (F66) |
| most of the increase in wage inequality is due to variations within occupations (J31) | challenges narrative that occupational shifts alone can explain observed changes in wage distribution (E25) |
| shifts in wage shares are influenced by upward mobility, especially among women (J62) | challenges straightforward employment polarization (F66) |