Routinization‐biased Technical Change and Globalization: Understanding Labor Market Polarization

Abstract

There is now ample evidence that jobs and wages have been polarizing at the extremes of the skill distribution since the early 1990s. Possible explanations include, among others, routinization-biased technical change (technical progress substituting more easily for labor in performing routine rather than nonroutine tasks) and globalization (more specifically, offshore outsourcing by multinational firms). In this article, we develop a unified theoretical general equilibrium model and examine the implications of each competing hypotheses for labor market polarization. (JEL J21, J23, J24, F66)

Within Occupation Wage Dispersion and the Task Content of Jobs

“…The function t (z) is bounded from below at zero. Jung and Mercenier (2014) characterize the productivity functions, such that the following criteria are met: 2 The exact relation between the wage and skill inequality depends on whether the measure of dispersion used is scale invariant. Ratios of percentiles are invariant, and thus wage inequality would be equal to skill inequality.…”

“…Then, following demand increases, the quality of the marginal match progressively degrades. Some assumptions employed by Jung and Mercenier (2014) might seem too strict; in particular, the positive correlation between skill levels in different tasks might raise some concerns. However, a similar relation between task content and wage inequality also emerges in other models.…”

“…Autor et al (2003) discuss a model where workers have different, not necessarily related, productivity levels: one for routine tasks and another for non-routine tasks. As in Jung and Mercenier (2014), one can define the marginal worker as one who is indifferent between working in each sector. In short, the following equality should hold for this marginal worker: w r r = w nr nr, where w i indicates the wage rate for performing i tasks.…”

Occupational Shifts in Poland Till 2022 -Towards Labour Market Polarisation?

“…However, it appeared recent trends in demand for skills in developed economies have not been consistent with SBTC hypothesis, and many research studies argued that we witnessed labour market polarisation in terms of labour demand and wages (see Autor et al 2006, Goos, Manning 2007, Goos et al 2009, Cedefop 2011) -employment has been polarising in favour of high and low-skilled jobs (Jung, Mercenier, 2014).…”

High-Skilled Immigration, STEM Employment, and Non-Routine-Biased Technical Change

“…The fixed factor is included simply for technical reasons, namely, to ensure that production of Y is homogenous of degree one in factor inputs LM , LR,F , and xi for all i ∈ [0, n].15 See, for example,Jung and Mercenier (2014) andAcemoglu and Restrepo (2015), as well as Caselli (2015) who studies the effects of experience-biased technical change.…”