Election Day Research on ‘Job Polarization’

So there was an election the other day, and some Demmers won while some Pubsies lost. Florida is still undecided, which is pretty funny. I’m pleased the Pubsies lost, but the biggest problem I have with the winning Demmers is that I still can’t tell if they have a thought-out, long-term understanding of the planet’s and our trans-continental superstate’s problems. It’s like they’re winging it. A bellwether of what I mean is an article that popped up on Election Day on economist Mark Thoma’s Web site, Economist’s View.

Henry Siu, Nir Jaimovich, “Jobless Recoveries and the Disappearance of Routine Occupations,” Vox EU.

It’s some good social science: The authors project the job recoveries from the 1991, 2001, and 2009 recessions as if they included routine jobs’ bounce back in prior recessions. It’s pretty stark stuff.

It may be that there are fundamental differences between 70′s-ish recessions and the ones I remember, but I think the authors’ findings are otherwise sound.

Structural change in the labour market is clearly manifesting itself in the business cycle. The long-term decline in routine occupations is occurring in spurts – employment in these jobs is lost during recessions …

The loss of routine jobs in recent recessions has given rise to jobless recoveries. Aggregate employment struggles to rebound following recessions since middle-wage, routine occupations no longer recover. Moreover, employment growth following recent recessions has been unevenly distributed across pay, concentrated in high- and low-wage occupations. A recent report by the National Employment Law Project (2012 [PDF]) indicates that the recovery from the Great Recession has been particularly lopsided, with the majority of jobs added being low-paying jobs.

Here’s what the National Employment Law Project is talking about:

Job polarization is going to be a growing issue in the coming years. Already, we’ve seen economists essentially saying that the solution to the problem of Morlok Material Movers is training them to be Eloi Lawyers. It won’t work (Siu and Jaimovich are wise enough not to comment either way), and the result will be more credential inflation, i.e. Morlock Material Movers who are also lawyers but are on IBR, unlike their colleagues who have more discretionary income but diminished understanding of Privileges and Immunities Clause precedent.

(Incidentally, I’m not using lawyers as an example here because I research legal education; rather, theirs is the best non-routine occupation to alliterate with ‘Eloi’. Lawyers are actually an exception to job polarization in that one would expect them to have higher wages after a recession because you (probably) can’t build a robot that can attend status conferences, but law practice is a non-Eloi-ish occupation for reasons you can find on just about every other post on this blog.)

Thus, the problem for the Demmers (I doubt the Pubsies will ever care about job polarization) is addressing their pessimism towards the low-wage workers’ lots. Instead of overeducating them, it’s a lot wiser to think of ways to ensure their jobs pay better. We can’t all be “entrepreneurs” who “innovate” by founding the next Twitter, which only employs 200 people.

I fear Demmers will try to solve the problem by taxing capital, which would disrupt the productivity that drives the polarization and gives us new Twitts. This is why I prefer taxing land values instead. Speaking of which, here’s the trailer to the upcoming Henry George documentary.

4 Responses

  1. Dremmers, Pubsies, Morlocks and Elois, Oh My!

  2. A few observations:

    1) Not sure why the authors gamed it a little bit (to soften things for Obama?) but in the top three charts (illustrating the slow/non-existent job recoveries) look at the y axis below zero – the scale is different on all three charts, creating a misleading visual impression (a very old social science trick).

    2) Your anti-”up-training” point of view is borne out by the BLS job #’s for the Silicon Valley metro (San Jose, etc.) – it has been a while since I checked the data but I believe that SV’s total employment *is still* below where it was in the late *90′s*.

    And that is the “beating heart” of America’s technology/innovation efforts.

    As you allude to, the whole point of technological innovation is usually to employ *fewer* people to do a task.

    3) To see just how macro-economically disasterous things *really are* (which neither party wants to publicize, for want of any real ideas on how to fix things) Google “25 to 54 employment to population ratio” or take a look at the graphical data over at the St. Louis Fed’s FRED engine.

    Bottom line, since 1999 or so, the ratio has fallen from about 82% to 76% with each percentage point representing about 1.2 million jobs that have disappeared between 1999 and 2012.

    7.2 million fewer working 25-to-54 year olds than *13 years ago*.

    “American normal” was to *grow* by 1.5 to 2 million jobs per year.

    So the 21st century has seen a “trend shortfall” of 25 to 31 *million* jobs.

    Mull that over for a while.

    Today we have about 130 million jobs I think.

    A “traditionally growing” America would have had 155 to 160 million.

    That is ruinous for the economy and every social program that ultimately relies upon it.

    4) What the f*ck has happened over the last 13 years? Two hunches:

    A) The rise and expansion of the internet has wrung a *lot* of inefficiency out of the system – unfortunately, a lot of that “inefficiency” was people’s jobs and the benefits accruing from the productivity gains has been captured by a comparatively small number of players.

    B) China has risen and has been thoroughly kicking our ass competitively. In 2000 they were exporting $100 billion per year to the US – by 2012 it is up to about $400 billion per year.

    The “China Price” has kept the lid on US inflation (which otherwise would be wildfire utterly-out-of-control due to the Fed’s QE1 – QE3 money printing operations) but that unprecedented-in-human-history export surge to the US has permanently eliminated a lot of US production for US consumption and probably beat-the-sh*t out of US exporters who now have a competitor with 25% (at most) of the labor costs.

    Chinese foreign-exchange “sterilization” practices (more-or-less compelled savings of Chinese export proceeds into US treasury securities) have been a major cause – otherwise soaring Yuan-to-Dollar prices would have made US exporters relatively more competitive again.

    But both parties really have *no ideas* and *no political courage* to deal with such causes.

    Basically, the American way of life was lost over the past 10 years (perhaps for good) and neither party has the moral authority to try and rally the nation.

    • cas, here are my responses:

      (1) The scale of the y-axis is immaterial to the authors’ point, except that I pointed out that Fed-caused recessions aren’t the same bubble-pop recessions.

      (2) There is less going on in Silicon Valley than in the past, but overall software investment is back to where it was precession, so it looks like your observation is spot on.
      Silicon Valley Jobs
      Real Software Investment

      (3) The thing with college graduates, though, is that they can find themselves in jobs that can performed well into old age. Last month, Krugman came up with the employment-population ratio based on “constant demography.” It’s only mildly improved since four years ago.
      Constant Demography
      Here’s Non-farm Payrolls:
      Nonfarms

      (4) Pretty much in agreement.

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