Job Polarization and Structural Change

What is it about?

In "Job Polarization and Structural Change" we examined US census data between 1950 and 2007 to assess types of employment and average salaries and found that the labour market polarization started as far back as the 1950s. The research attributes this to the major structural economic changes that occurred at this time, as the service economy within the US began to evolve. Given that polarization is a long-run phenomenon and closely linked to the shift from manufacturing to services, we propose a structural change driven explanation, where we explicitly model the sectoral choice of workers. Our simple model does remarkably well not only in matching the evolution of sectoral employment, but also of relative wages over the past 50 years.

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Why is it important?

The findings could have an impact on how governments tackle the growing issue of wage inequality as it suggests that one of the causes of rising wage inequality is the decline of manufacturing relative to services. Since this structural change is inevitably linked to economic growth, reverting it would be very costly and lower average incomes.

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