Large American cities are experiencing labor market polarization, characterized by a simultaneous increase in the employment share of both high-skilled and low-skilled jobs. Economists Fabio Cerina, Elisa Dienesch, Alessio Moro, and Michelle Rendal propose that this phenomenon can be attributed to technology shocks that enhance the productivity of highly skilled workers. As these skilled workers increase their participation in the labor market, they also intensify their consumption of personal services, thus generating greater demand for low-skilled jobs.
It's 9pm, you leave your office in New York's business district, ask the babysitter to pick up an Amazon package before you arrive, then order a bo-bun to be delivered right on time for your return home. Although fictional, this story describes an increasingly common scenario in major urban metropolises that economists Fabio Cerina, Elisa Dienesch, Alessio Moro and Michelle Rendall call "spatial polarization". In large American cities where technological advances are more rapid than anywhere else,, there is an increasing number highly-skilled workers, but also a considerable increase in jobs requiring no qualifications carried out by low-skilled workers.
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Technical progress, a generator of inequality?
The polarization of jobs reflects two phenomena: the decline of the "middle classe" and the rise of extreme inequalities. On the labour market, we observe a distribution of skills which represents the distribution of jobs by qualification levels, ranging from the least qualified to the most qualified. The market becomes polarized when there is a simultaneous increase in the proportion of highly-skilled workers (such as managers, engineers, intellectual professions) and the proportion of low-skilled workers (like employees in personal services), at the expense of medium-skilled jobs (such that technicians, intermediate or administrative professions).
The question arises: what are the sources of this phenomenon? Initially, economic research focused on the decline of medium-skilled jobs, mainly in the industrial sector, often associated with routine tasks. The initial explanation centered around the automation of tasks, where capital replaced routine work.
Article originally published in Dialogues Economiques on March 27, 2024.
Reference : Cerina F., Dienesch E., Moro A., Rendall M., 2023, "Spatial Polarisation". The Economic Journal, 133(649), 30-69.
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