Economic recovery leaving middle class behind

Chrystia Freeland article

Economics professors Nir Jaimovich of Duke University and Henry Siu of the University of British Columbia take as their starting point one of the most important changes in Western developed societies. That shift is what economists have called the “polarization” 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 – such as work that used to be performed by travel agents and much of the legal “discovery” that was done by relatively well-paid associates with expensive law degrees [..].

Job polarization 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 increasing divide between the people at the top and at the bottom of the economic heap, and the disappearance of those in the middle who were once both the compass and the backbone of our societies.

What’s new about the Jaimovich-Siu work is that they have found that job polarization isn’t a slow, evolutionary process. It happens in short, sharp bursts – economic downturns. The researchers found that in the United States since the mid-1980s, 92 per cent of job loss in middle-skill occupations has happened within 12 months of a recession.

“We think of recessions as temporary, but they lead to these permanent changes,” Prof. Siu told me. “The big puzzle about business cycles is, Why have we had these jobless recoveries over the past three recessions? These jobless recoveries are because you have these middle-skilled jobs that are being wiped off the table.”