Pain isn't over for those stuck in the middle
One class in particular will miss out on jobs when the recession is over, says Chrystia Freeland
Weekly Business Digest Newsletter
More bad news for the middle-class: when the economy recovers, jobs in the middle won't. That is the conclusion of an important new study that connects a long-term trend in the labour market with the business cycle of recession and rebound.
Nir Jaimovich, an economist at Duke University in the US, and Henry E Siu, an economist at the University of British Columbia, take as their starting point one of the most important continuing changes in western developed societies. That shift is what economists, most notably David Autor of the Massachusetts Institute of Technology, have called the "polarisation'' of the job market.
Maarten Goos and Alan Manning, extending the research to Britain, have more colourfully dubbed it the dual rise of "lousy and lovely'' jobs.
Their point is that, thanks to technology, more and more "routine'' tasks can be done by machines. The most familiar example is the increasing automation of manufacturing. But machines can now do "routine'' white-collar jobs, too - things like the work that used to be performed by travel agents.
The jobs that are left are the "lovely'' ones, at the top of income distribution - white-collar jobs that cannot be done by machines, like designing computer software or structuring complex financial transactions. A lot of "lousy'' jobs are not affected by the technology revolution, either - non-routine, manual tasks like collecting the garbage.
An extensive body of economic research has shown that job polarisation is happening throughout the western developed world. It accounts for many of the social and political strains we have experienced over the past three decades, particularly the growing divide between the people at the top and at the bottom of the economic heap, and the disappearance of those in the middle.
What's new about Jaimovich and Siu's work is that they have found that job polarisation isn't a slow, evolutionary process. Instead, it happens in short, sharp bursts. The middle-class frog isn't being gradually boiled - it is being periodically grilled at a high heat. Those spurts of change are economic downturns. Mr Jaimovich and Mr Siu have found that in the US since the mid-1980s, 92% of job loss in middle-skill occupations has happened within 12 months of a recession.
The Jaimovich-Siu paper concludes that "jobless recoveries are evident in only the three most recent recessions, and they are due entirely to jobless recoveries in routine occupations. In this group, employment never recovers beyond its trough level, nor does it come anywhere close to its pre-recession peak.''
Mr Siu urged me not to be too gloomy. "In the broad sweep of history, technology is good,'' he reminded me. "We've been wrestling with this for 200 years. Remember the Luddites.''
All of us, even the hollowed-out middle-class, would be much worse off if the Luddites had won the day and the Industrial Revolution, whose latest wave is the past three-and-a-half decades of technological change, had never taken hold.
But it is also true that every seismic shift, including the current one, has winners and losers. And for the losers, adapting to today's world of lousy and lovely jobs may be even harder than it was for the artisans of the Luddite era to thrive in the Machine Age.
"What might be different today is two factors,'' Siu said. "The pace of technological change is so much faster, and we live in such a complex society, that it is harder than ever to switch to a new occupation.''
All of us are awaiting an economic recovery. We should be braced for one that offers scant comfort to the middle class.
Chrystia Freeland is editor of Thomson Reuters Digital