Long‐Run Patterns of Labour Market Polarization: Evidence from German Micro Data
| Author | Colin Green,Merve Cim,Ronald Bachmann |
| Date | 01 June 2019 |
| Published date | 01 June 2019 |
| DOI | http://doi.org/10.1111/bjir.12419 |
British Journal of Industrial Relations doi: 10.1111/bjir.12419
57:2 June 2019 0007–1080 pp. 350–376
Long-Run Patterns of Labour Market
Polarization: Evidence from German
Micro Data
Ronald Bachmann, Merve Cim and Colin Green
Abstract
The past four decades have witnessed dramatic changes in the structure of
employment. In particular, the rapid increase in computational power has led to
large-scale reductions in employment in jobs that can be described as intensive
in routine tasks. These jobs have been shown to be concentrated in middle-
skill occupations. A large literature on labour market polarization characterizes
and measures these processes at an aggregate level. However, to date, there is
little information regarding the individual worker adjustment processes related
to routine-biased technological change. Using an administrative panel dataset
for Germany, we follow workers over an extended period of time and provide
evidence of both the short-term adjustment process and medium-run eects of
routine task-intensive job loss at an individual level. We initially demonstrate
a marked, and steady, shift in employment away from routine, middle-skill,
occupations. In subsequent analysis, we demonstrate how exposure to jobs with
higher routine task content is associated with a reduced likelihood of being in
employment in both the short term (after one year) and medium term (five
years). This employment penalty to routineness of work has increased over the
past four decades. More generally, we demonstrate that routine task work is
associated with reduced job stability and more likelihoodof experiencing periods
of unemployment. However, these negative eects of routine work appear to
be concentrated in increased employment to employment, and employment to
unemployment transitions rather than longer periods of unemployment.
RonaldBachmann is with RWI — Leibniz Institute for Economic Researchand DICE/Heinrich-
Heine-University Duesseldorf. Merve Cim is with RWI — Leibniz Institute and the RGS.Colin
Green is with the Department of Economics, Norwegian University of Science and Technology.
C
2018 John Wiley & Sons Ltd.
Long-Run Patterns of Labour Market Polarization 351
1. Introduction
The past four decades have seen dramatic changes in the structure of
employment. As documented by Autor et al. (1998), the United States
witnessed a large reduction in the employment of middle-skill workers. At the
same time, there have been increases in the employment of high-skill, and to
some extent, low-skill workers. This pattern of employment polarization has
also been demonstrated for the UK by Goos and Manning (2007) and across
Europe by Goos et al. (2009), and is likely to continue in the future (Autor
2015).
These changes have been ascribed to the fact that these middle-skill jobs
involved tasks that were intensively routine in nature. As a result, they were
most readily substituted with capital as computer technology became cheaper
(Autor et al. 2003). This same technology is factor augmenting to high-skilled
workers which, in turn, leads to a growth of complementary, high-skill, non-
routine intensive jobs. Along these lines, Autor et al. (1998) demonstrate that
increased employment of high-skill labour largely occurred within computer-
intensive industries. The growth in low-skill employment that has occurred
has also been concentrated in jobs that are not routine-intensive (e.g. personal
services). One argument is that this reflects a compositional change in
consumption due to the increase in high-skill workers(Mazzolari and Ragusa
2013).
This literatureprovides a compelling view of the impact of structural change
on the labour market over the past four decades. With this said, the existing
empirical evidence largely takes the form of comparisons of decade upon
decade employment numbers and shares at aggregated levels of occupational
detail. Until relatively recently, the dynamics of employment transitions
implicit in the process of polarization have been inferred from comparisons of
these cross-sectional changes. An almost wholly US literature has developed
that uses micro data to examine the contribution of dierent flows to the
evolution of employment polarization. For instance, both Jaimovich and Siu
(2012) and Smith (2013) highlight the decline in inflows to routine work
particularly from unemployment. The latter paper in addition provides some
evidence of increases in inflows into high- and low-skilled employment, and
more generally, that overall job finding rates into non-routine jobs have been
rising. Along similar lines, Cortes et al. (2014) examine which specific labour
market flows can account for rising job market polarization. They find that
the disappearance of routine jobs is mainly due to falling worker flows from
both unemployment and non-participation to routine employment, and to
rising worker flows from routine employment to non-participation. Cortes
et al. (2017) find that most of the fall in routine employment in the United
States during the last 35 years can be accounted for by the sharp drop in
the propensity for routinemanual employment among young and prime-aged
men with low levels of education. A similar pattern is observed for routine
cognitive jobs of prime-aged women with medium levels of education. These
groups also experience an increase in the propensity for non-employment and
C
2018 John Wiley& Sons Ltd.
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