Automation and Job Polarization: On the Decline of Middling Occupations in Europe
| DOI | http://doi.org/10.1111/obes.12298 |
| Date | 01 October 2019 |
| Author | Vahagn Jerbashian |
| Published date | 01 October 2019 |
1095
©2019 The Department of Economics, University of Oxford and JohnWiley & Sons Ltd.
OXFORD BULLETIN OF ECONOMICSAND STATISTICS, 81, 5 (2019) 0305–9049
doi: 10.1111/obes.12298
Automation and Job Polarization: On the Decline of
Middling Occupations in Europe*
Vahagn Jerbashian
University of Barcelona, BEAT, and CERGE-EI, Av. Diagonal 696, 08034, Barcelona, Spain
(e-mail: vahagn.jerbashian@ub.edu)
Abstract
Using data from 10 Western European countries, I provide evidence that the fall in prices
of information technologies (IT) is associated with a lowershare of employment in middle-
wage occupations and a higher share of employmentin high wage occupations in industries
which depend more on IT relative to industries which depend less. Similar results hold
within gender and age groups, with notable differences in these groups. For instance, the
share of employment in high wageoccupations among males has increased less than among
females with the fall in IT prices.
I. Introduction
For quite some time, the consensus has been that most of the recent technological changes
have been skill-biased, complementing high-skill workers and substituting for low-skill
workers (see, e.g. Katz andAutor, 1999). However, skill-biased technologicalchange alone
cannot explain a prominent and relatively recent phenomenon: the decline in the share of
middle-wage occupations relative to high- and low-wage occupations. Goos and Manning
(2007) call this phenomenon ‘job polarization’.
One of the main hypotheses put forward for job polarization is that recent technologies,
such as computers, substitute for routine tasks. These tasks tend to be readily automatable
and are usually performed by middle-wage occupations, such as stationary plant operators.
They complement non-routine cognitive tasks, which are usually performed by high-wage
JEL Classification numbers: J23; J24; O33.
*I thank two anonymous referees, the editor, JonathanTemple, as well as Matias Cortes, John S. Earle, Randall K.
Filer, DavidGomtsyan, ˇ
Stˇep´an Jurajda,Anna Kochanova, TobiasKretschmer, Anna Salomons, and participants at the
AEA Meetings in Philadelphia (2018), the IBS Jobs Conference in Warsaw (2017), the IAW Conference inTubingen
(2017), the WPEG Conference in Sheffield (2017), the 31st ESPE Conference in Glasgow (2017), the 1st CES
Conference in Barcelona (2017), the Workshopon Labour Economics in Trier (2017), the IZA BB Seminar in Bonn
(2016), and the Armenian Economic Association Meetings inYerevan(2016) for thoughtful comments. I g ratefully
acknowledge financial support from the Spanish Ministry of Education and Science through grant ECO2015-66701-
R, from the Generalitat of Catalonia through grant 2014SGR493, and from the Grant Agency of the Czech Republic
through project P402/12/G097. All errors remain my own.
CERGE-EI is a joint workplace of the Center for Economic Research and Graduate Education, Charles University
in Prague, and the Economics Institute of Academy of Sciences of the Czech Republic.
1096 Bulletin
occupations, such as managers. In turn, the rise of employment in highly paid occupations
increases the demand for non-routine manual tasks, which are usually performed by low-
wage occupations, such as personal services (see, e.g. Autor, Levy and Murnane, 2003;
Autor and Dorn, 2013; Mazzolari and Ragusa, 2013).
In this paper, I empirically investigatethe effect of the rapid fall in prices of information
technologies (IT) on industries’demand for high, middle- and low-wage occupations using
a difference-in-differences framework in the spirit of Rajan and Zingales (1998). More
specifically, I ask whether the fall in prices of information technologies has affected the
demand for high, middle- and low-wage occupations more in industries which depend
more on IT compared to industries which depend less. I use industry- and country-level
data from 10 Western European countries for 1993–2007 to establish the results.
I find that the share of employment in middling occupations has declined and the
share of employment in high-wage occupations has increased with the fall in IT prices in
industries with high dependence on IT relative to industries with low dependence on IT. I
find no systematic evidence that the fall in IT prices affects the share of employment in the
lowest paid occupations. Similar results hold within gender and age groups.These findings
provide support for the hypothesis put forward for explaining job polarization. They are
broadly in line with and complement the results ofAutor et al. (2003), Acemoglu and Autor
(2011), Autor and Dorn (2013), and Goos, Manning and Salomons (2014), among others.
I also find that there are differences among gender and age groups, which is a novelty
relative to these papers. The fall in IT prices has increased the share of employment in
high-wage occupations and reduced the share of employmentin medium-wage occupations
among males less than among females in industries which depend more on IT relative to
industries which depend less. It has also increased the share of employment in high-wage
occupations and reduced the share of employment in medium-wage occupations among
old workers less than among young and medium-age workers in industries which depend
more on IT relative to industries which depend less. These results are robust to a wide
range of specification checks and alternative identifying assumptions.
A possible common explanation for these results is that the efficiency (comparative
advantage) of performing tasks in medium and high-wage occupations varies with gender
and age. For example, males tend to be more endowed with hard motor skills (brawn) than
females, and these skills are usually important in many of the medium-wage manufacturing
occupations. In turn, a number of papers argue that females have better communication
and social skills, which have a growing importance in the labour market and tend to be
more important in leadership in high-wage occupations (e.g. Beaudry and Lewis, 2014;
Borghans, Weel and Weinberg, 2014; Deming, 2017). The adoption and use of information
technologies would then reduce employment in medium-wage occupations and increase
employment in high-wage occupations among males less than among females. In turn,
information technologies will have a lower effect on the share of employment in medium-
and high-wage occupations among old if workers accumulate routine skills more than
other types of skills as they age (see, for arguments supporting this conjecture, Autor and
Dorn, 2009). I do not attempt to test these hypotheses in this paper given its scope and the
available data. All in all, these results highlight the role of gender and age group in job
polarization and suggest a need for a more nuanced view on the labour market effects of
recent technological changes.
©2019 The Department of Economics, University of Oxford and JohnWiley & Sons Ltd
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