Job Polarization and the Declining Wages of Young Female Workers in the United Kingdom*
| Published date | 01 December 2023 |
| Author | Era Dabla‐Norris,Carlo Pizzinelli,Jay Rappaport |
| Date | 01 December 2023 |
| DOI | http://doi.org/10.1111/obes.12557 |
OXFORD BULLETIN OF ECONOMICS AND STATISTICS, 85, 6 (2023) 0305-9049
doi: 10.1111/obes.12557
Job Polarization and the Declining Wages of Young
Female Workers in the United Kingdom*
ERA DABLA-NORRIS,† CARLO PIZZINELLI† and JAY RAPPAPORT‡
†International Monetary Fund, 700 19th St. NW Washington, DC 20431, USA
(e-mail: edablanorris@imf.org)
‡Georgetown University Law Center, 600 New Jersey Ave. NW Washington, DC 20001, USA
(e-mail: cpizzinelli@imf.org)
Abstract
We examine whether the decline of routine occupations contributed to rising wage
inequality between young and prime-age non-college educated women in the UK over
2001-2019. We estimate age, period, and cohort effects for the likelihood of employment
in different occupations and the wages earned therein. For recent generations, cohort
effects indicate a higher likelihood of employment in low-paying manual jobs relative
to high-paying abstract ones. Cohort effects also underpin falling wages for post-1980
cohorts across all occupations. We find that the latter channel, rather than job polarization,
has been the main driver of rising inter-age inequality among non-college females.
I. Introduction
Following the Great Recession, the UK labour market has been characterized by reduced
economic opportunities for young workers This was particularly pronounced among
female workers without a postsecondary degree (i.e. non-college), a demographic group
already facing worse labour market outcomes and higher socio-economic vulnerability
compared to the wider labour force. Furthermore, this development came on the back
of a longer-term shift in the occupational composition of UK employment away from
routine-intensive occupations towards low-paying non-routine manual and high-paying
non-routine abstract jobs. As progression into higher-paid occupations underpins wage
growth, this structural shift may have exacerbated earnings differences between young
and more experienced workers and may have persistent consequences for the earnings
prospects of recent labour market entrants. These concerns are especially relevant for
non-college women, as they already experience low earnings and limited career growth.
JEL Classification numbers: J21, J24, J31.
*We thank the editor and two anonymous referees for their valuable comments and suggestions. We also thank
Cristian Alonso, Vitor Gaspar, Klaus Hellwig, Rachel Ngai, Myrto Oikonomou, and participants in various IMF
seminars and at the University of Sussex for their comments. This research did not receive any specific grant
from funding agencies in the public, commercial, or not-for-profit sectors. An earlier version of this work was
previously circulated as the IMF Working Paper 19/216 ‘Job Polarization and the Declining Fortunes of the
Young: Evidence from the United Kingdom.’ The views expressed in this paper are those of the authors and do
not necessarily represent the views of the IMF, its Executive Board, or IMF management.
1185
©2023 Oxford University and John Wiley & Sons Ltd.
1186 Bulletin
In this paper, we investigate whether the disappearance of routine occupations has
been a significant driver of wage inequality between young and older non-college women
in the UK between 2001 and 2019. To answer this question, we use a life-cycle framework
to assess the relative importance of employment shifts across occupations and changes
in expected wages within occupations in explaining the widening wage gap between
young and prime-age non-college women. By estimating age, period, and cohort effects,
we also decompose the increase in the age wage premium over time into aggregate
and cohort-specific factors, quantifying their compounded effect on lifetime earnings for
different cohorts.
Non-college women, who accounted for a third of the labour force in the early 2000s
and approximately a quarter in 2019, have historically experienced poor labour market
outcomes. For decades, non-college females have had the lowest labour force participation,
the highest unemployment rate, the lowest average hours worked and hourly wages of all
demographic groups by gender and education.1Moreover, not only is the gender earnings
gap higher for this group than for college-educated workers, it also has not decreased
over the past 30 years (Andrew et al.,2021). Women with lower levels of schooling
also face higher rates of other forms of vulnerability with respect to health (e.g. obesity,
pregnancy complications) (El-Sayed, Scarborough, and Galea, 2012; Booth, Charlton,
and Gulliford, 2017; Rayment-Jones et al.,2019) and psychological well-being (e.g. low
self-esteem, depression) (Theodossiou, 1998; Carrino, Glaser, and Avendano, 2020).2
Young workers have also faced worsening trends of economic well-being, with
stagnant wages and low wealth accumulation (Resolution Foundation, 2018). Hence,
young non-college women stand out as one of the most vulnerable groups in the labour
market and society at large. Adverse socioeconomic outcomes in the first years of their
adulthood and professional careers also have the potential to persist throughout the rest of
their lives, with significant macro-level consequences for inequality and productivity.
In this context, the long-term decline of routine occupations and the consequent shift
towards low-paying non-routine manual and high-paying non-routine abstract jobs, termed
‘‘job polarization’’ (Acemoglu and Autor, 2011), can be interpreted as an additional factor
of vulnerability for non-college females.3Overall, the link between job polarization and
the economic prospects of recent cohorts over the course of their full careers is yet to
be quantitatively assessed. The disappearance of routine occupations entails insecurity,
higher chances of layoffs, and the need to switch occupations and sectors for affected
workers. While this may provide a chance to transition into jobs requiring high levels of
abstract tasks, it is more likely that workers without advanced skills move to lower-paying
non-routine manual jobs. This long-term trend could impact individual workers at any
point in their careers, partially altering their lifetime earnings. Alternatively, it could affect
1Figure S1 reports the time series of the employment rate, the labour force participation rate, mean hourly wages,
and average weekly hours worked by gender and education. Non-college females experience the lowest level of all
these labour market outcomes. Figure S2 further shows that non-college females are more predominantly employed
in lower-paying industries and occupations relative to the labour force at large.
2More recently Blundell et al. (2020) show that being female, young, having low-levels of education, and being in a
low-paying job were all factors correlated with exposure to the labour market disruptions caused by the COVID-19
pandemic.
3Henceforth, we refer to non-routine manual and non-routine abstract occupations as simply manual and abstract
occupations.
©2023 Oxford University and John Wiley & Sons Ltd.
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