Pethokoukis, Economics, U.S. Economy

The econ chart every GOP policymaker should look at

Job polarisation and the decline of middle-class workers’ wages - Michael Boehm, via VoxEU

Job polarisation and the decline of middle-class workers’ wages - Michael Boehm, via VoxEU

Republicans have focused a lot on Obamacare, Dodd-Frank, and the sharp increase in federal debt as reasons for the slow recovery. Or to put it more broadly: tax, spending, and regulation. But that analysis fails to incorporate (a) the role of tight money and (b) the aftermath of a recession which saw both a financial shock and housing collapse.

What’s more, obsessing about Obamanomics can also mean missing some of the big macro trends affecting the US economy. The above chart shows one: Employment in traditional middle-class jobs has fallen sharply over the last few decades. Economists call this “job polarization.” It has been driven by technology replacing — whether directly or by enabling offshoring – middle-skilled manufacturing, clerical, and other occupations. characterized by procedural, rule-based or “routine” activities. Here is a key bit from “Job polarisation and the decline of middle-class workers’ wages”  by Michael Boehm:

… what emerges unambiguously from my work is that routinisation has not only replaced middle-skill workers’ jobs but also strongly decreased their relative wages. Policymakers who intend to counteract these developments may want to consider the supply side: if there are investments in education and training that help low and middle earners to catch up with high earners in terms of skills, this will also slow down or even reverse the increasing divergence of wages between those groups. In my view, the rising number of programs that try to tackle early inequalities in skill formation are therefore well-motivated from a routinisation-perspective.

It is this phenomenon that has led some economists to gloomily predict a smaller and smaller slice of the population working in high-wage jobs. Such forecasts assume that between dysfunctional schools and families, we don’t have the institutions capable of transmitting social and educational capital need to allow vast numbers of workers to prosper in age of accelerating automation. Creating more winners and helping the losers should be a key focus of the Washington policy debate.

Follow James Pethokoukis on Twitter at @JimPethokoukis, and AEIdeas at @AEIdeas.

3 thoughts on “The econ chart every GOP policymaker should look at

  1. Thoughtful blogging…but not sure about role of government, even if we accept the premise…
    social engineering seems ineffective…and with crime rates plummeting, who says families (okay, mine but others) are dysfunctional? Or e

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