Pethokoukis, Economics, U.S. Economy

How Asia and Robotland have dramatically changed the US labor market

Credit: New York Fed

Credit: New York Fed

For the past three decades, routine jobs — those following explicit instructions and obeying well-defined rules — have been disappearing, as the stunning above chart from the New York Fed shows. These are the jobs most easily outsourced either to Asia or to Robotland (automation). Even cognitive, as opposed to manual, routine jobs have declined. Technology and globalization have allowed workers to move up the value and brain chain. A greater share of jobs are now non-routine in nature — they involve flexibility, problem solving, or creativity. Talk about creative destruction. Since 1975, the US has added more than 50 million net new jobs amid this changeover.

Credit: New York Fed

Credit: New York Fed

Market message: Good luck finding a routine job vs. a cognitive, nonroutine job. But has this job polarization played a major role during the slow employment recovery from the Great Recession? Not so, says the New York Fed:

Our findings show that while job polarization is an important ongoing trend in the labor market, it’s not a key contributor to the sluggish labor market recovery. Our analysis suggests that the weakness in the labor market is broad based and not limited to a certain segment of the market.

Fed researchers find the duration of unemployment and job finding rate aren’t much different for routine jobs versus nonroutine jobs (though a bit worse for the former). Moreover, if job polarization was depressing the prospects of the unemployed, there should be more occupational transitions from routine to nonroutine jobs after the recession. But in both the pre-recession and recession periods, only 22% and 23%, respectively, of unemployed workers moved from routine to nonroutine jobs. Overall, this is more evidence that the problem with the labor market is growth driven rather than skills driven

More interesting, I find, is that first chart showing the dramatic change in the US labor market. That’s your “Race Against the Machine” chart. And that’s why we need a smarter public policy agenda – from education to entrepreneurship to asset building – to better deal with this phenomenon as it accelerates.

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