Trends that will shape the job market of the future: Beware of the middle?

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How will the job market of the future look? There is a lot of talk about ‘the future of work’ with often contradictory predictions ranging from a world with no jobs at all (that is -for humans) to a world with only nice and creative jobs (all the rest done by clever machines). It is difficult to predict the future. But when we talk about the future job market, what is clear now is that there are several trends that are already shaping the job market of the future. And one of them is the disappearance or ‘’hollowing out’’ of middle-income and middle-skill jobs. It is also called sometimes as a polarisation of jobs in high paying and low paying categories. What does it mean for future jobs? Let’s have a closer look at this phenomenon.

What is happening in the job market? What we see now is that the proportion of people in the traditional “middle” of the workforce — permanent staffers, such as accountants, or manufacturing staff — has declined. In 1979[1], in the US the four middle-skill occupations (sales; office and administrative workers; production workers; and operatives) accounted for 60 percent of employment. In 2007, this number was 49 percent, and in 2012, it was 46 percent.

Such polarisation of jobs is happening throughout the Western developed world. Between 1995 and 2010, the share of people working in the middle skill spectrum fell from 53% to 41% of the workforce in OECD countries (the club of developed countries). But the share of people working at the two ends of the skills spectrum — high-skill workers like designers and lower-skill workers like drivers — has increased. Why is it happening? Several factors are at play.

I. Rise of services leads to increase of lower-skill jobs? Apparently, job[2] markets in the advanced countries started to polarise as far back as the 1950s as they became more dominated by the service sector. The arrival of IT in the 1980s merely accentuated a process already underway.

As people grew richer they wanted to buy more services[3], including services like hairdressing, beauty services, leisure and entertainment with cinemas, concerts, travel, sports clubs, fitness studios, video games. We also saw a dramatic growth in eating out with restaurants and fast food shops expanding everywhere. The problem is that many (but clearly not all) jobs created in the service sector require little education and are the lowest paid categories of employment. So, the rise in services is partially to blame for the ongoing polarisation of jobs into high paid and low paid jobs.

II. Automation and computerisation of work related tasks: Automation and computerisation are also clearly behind the polarisation of jobs. But, contrary to how we perceive it intuitively, the technology is not killing manual jobs while increasing ‘thinking’ (often called — cognitive jobs), but rather splitting the job market along the ‘routine’ or non-routine jobs.

Indeed, thanks to technology, more and more ‘routine’ tasks can be done by machines. But these are not only the jobs in manufacturing. Machines can now do routine white-collar and ‘thinking’ jobs, too — for example, legal ‘discovery’ tasks that were done by relatively well-paid associates with expensive law degrees[4]. What is the most difficult work to automate is the work that is non-routine or unpredictable. It does not matter if the job is a ‘’thinking’’ job or a manual job. What matters if it is routine or not.

Thus, we are starting to see that the workforce is starting to split into two groups doing non-routine work: highly paid, highly skilled workers (such as architects and managers) on the one hand and low-paid, unskilled workers (such as cleaners and burger-flippers) on the other. In America[5], employment in non-routine cognitive or ‘thinking’ and non-routine manual jobs has grown steadily since the 1980s, whereas employment in routine jobs has been broadly flat. At the end of the blog I have added some examples of routine and non-routine jobs:

III. Did off-shoring play a role in the hollowing out of middle-income jobs? Globalisation and off-shoring of certain work tasks and jobs clearly also played some role in the reduction of middle-income jobs (think of IT specialists and manufacturing jobs). But only some role. Off-shoring as such is not a main reason behind the hollowing out of middle-income and middle-skill jobs. Most of the jobs affected by off-shoring are probably in the low-income and low-skill categories.

Ok, these are the trends that lead to the ongoing polarisation of jobs. But what about the future?

Is Polarization likely or unlikely to continue? A rise of new ‘middle’ skills jobs? Views on what is going to happen with middle-income and middle-skill jobs in the future job market are strongly divergent. Many argue that the middle will continue hollowing out as a result of digital technologies and globalization. But others say that the traditional middle-income jobs are indeed disappearing while the new ‘middle’ skills jobs are emerging[6]. But what are those new middle skills jobs? Well, they seem to be the jobs that we might have considered a higher skills jobs in the past. They often:

- require more postsecondary education or training than before

- and they often (but not always) contain a more significant STEM component (or Science, Technology, Engineering and Math)

Indeed, a divergence seem to have emerged in the job market — between newer middle skill jobs that are growing and where more skilled workers are increasingly in demand, and traditional middle pay jobs that are declining.

The newer middle[7] that is growing is in areas such as medical support and health technology jobs (e.g. radiology technicians, etc), advanced manufacturing, information technology (computer support specialists, web developers, and engineering technicians), and a range of higher-end service jobs that require more post-secondary education or training than in the past (chefs and managers of eating/drinking establishments, retail managers, etc).

But even if the new middle skill jobs are indeed emerging, it is not yet clear if they will be able to stop or reverse the ongoing hollowing out of the middle-income jobs.

So what does it all mean for the future job market for us as individuals?

- It is not yet clear if the hollowing out of the middle income and middle skill jobs will be stopped or reversed. So, it is better to beware of the middle.

- High end jobs are moving higher: the future ‘high skills’ jobs will be even more high skill than today. The middle moves higher as well: the future ‘middle-income and middle skill’ jobs will be more and more complex, requiring more education and training as well as often more and more STEM skills.

- Education, education and more education, along the life and not only in the beginning is the answer. And, do not forget to learn the ‘new’ skills. As Andy Haldane[8] (chief economist of the Bank of England) just said that the UK (and all the rest) will need a skills revolution to avoid “large swathes” of people becoming “technologically unemployed” as artificial intelligence makes many jobs obsolete.

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And here is a list of non-routine and routine jobs:

· Non-routine ‘’thinking’’ jobs include managerial, professional and technical workers, such as surgeons, construction managers, financial analysts, computer programmers, and economists. Non-routine manual jobs are service jobs, including gardeners, bartenders, and home health aides.

· Routine ‘’thinking’’ jobs are those in sales, and office and administrative support; examples include cashiers, bank tellers, mail clerks, and data entry operators. Routine manual jobs are “blue collar” jobs, such as machine operators, mechanics, and processing workers.

[1] https://economics.mit.edu/files/11563

[2] Job Polarization and Structural Change, 21 September 2015, Christian Siegelz, Zsofia L.Barany

[3] http://www.ddorn.net/papers/Autor-Dorn-LowSkillServices-Polarization.pdf

[4] https://www.oecd.org/els/emp/Policy%20brief%20-%20Automation%20and%20Independent%20Work%20in%20a%20Digital%20Economy.pdf

[5] https://www.economist.com/news/special-report/21700758-will-smarter-machines-cause-mass-unemployment-automation-and-anxiety

[6] https://economics.mit.edu/files/11563

[7] Holzer, a professor of public policy at Georgetown University[7], in “Job Market Polarization and U.S. Worker Skills: A Tale of Two Middles.” https://www.brookings.edu/wp-content/uploads/2016/06/TheHiddenSTEMEconomy610.pdf

[8] https://www.bbc.com/news/business-45240758

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