www.skope.ox.ac.uk

Are the winners winning in the hourglass labour market?

Craig Holmes and Ken Mayhew

30th International Labour Process Conference, Stockholm University, March 28th 2012

www.skope.ox.ac.uk

Introduction

• Routinisation hypothesis (Autor, Levy and Murnane, 2003):– Computer capital replaces tasks, not skills– Labour employed in routine tasks can be swapped for technology– Non-routine tasks may be complementary to this technology

increase demand– Low skill non-routine jobs will also increase in employment share

increased suppy

• Polarisation hypothesis (Goos and Manning, 2007)– Routine occupations found in middle of UK income distribution– Non-routine occupations found at top and bottom of distribution

• Similar patterns found in US and across Europe

www.skope.ox.ac.uk

Introduction

• The idea that there has been a growth in high-wage, high-skill jobs in the UK has been an attractive one for policymakers:

“There is…evidence that the demand for skilled workers is currently outstripping supply, which suggests there is 'room at the top' for highly qualified graduates from all backgrounds.” (HM Government, 2011, p. 11)

• There will be “winners” providing the labour force has sufficiently high skills– Existing workers: more opportunities for upward mobility– New entrants: better initial employment opportunities

www.skope.ox.ac.uk

Key points

• Wages in growing higher skill non-routine occupational groups increasingly spread out:– 1995-2002: distribution shifted upwards, with long tail– 2002-2008: increased employment in lower wage jobs in these

categories

• Upward mobility from routine jobs lower earnings, even after accounting for education/experience differences

• New, more qualified labour market entrants not entering these jobs as often as might be expected– Suggests supply of qualified labour has more than met extra demand– Potentially also that routine jobs act as an important entry route

www.skope.ox.ac.uk

Room at the bottom, too?

• The full implications of a polarised (or ‘hourglass’) labour market for mobility have generally been ignored:– Focus is on the ‘room at the top’.– Little said about the inevitable ‘room at the bottom’

• Decline in routine occupations creates additional downward mobility (Holmes and Mayhew, 2011)

• Upward mobility from low-wage jobs more difficult“attempting to move individuals from the bottom to the middle of the skill/income distribution may be harder, as there are fewer jobs in the middle” Crawford et al (2011):

Solution: increase skills of these workers, so that firms are encouraged to upskill low-wage jobs

www.skope.ox.ac.uk

Wages at the top

• Evidence that polarisation is more obvious in occupations than in wages in the UK– Top earners moving rapidly away from rest of good non-routine jobs– Many of those in these jobs become relatively closer to the middle

than the top

• Holmes and Mayhew (2012): – Differentiated patterns of occupational wage premia across

distribution– Higher returns to education at top end– Untangling all of the potential interactions between composition and

wage premia at the aggregate level is difficult

www.skope.ox.ac.uk

Wages at the top

• Gross weekly earnings data from UK Labour Force Survey• 1990s:

– Increased employment in higher wage jobs across all good, non-routine occupations

– Long tail: some of growth occurred a long way from the median

• 2000s:– Some increase in low wage employment – despite increasing

graduatisation– Some increase in very high wage employment A hollowing out of the

middle of the distribution– Differences by sector of employment (manufacturing, retail, financial

intermediation and real estate/business activity)

www.skope.ox.ac.uk

Wages at the top

• Managerial occupations:

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%100

200

300

400

500

600

700

800

900

1000

1100

1200

1300

1400

1500

1600

1700

1800

1900

2000

% c

hang

e in

em

plo

yment s

hare

belo

w t

hre

shold

wag

e

Threshold gross weekly earning, £

1995-2002 2002-2008

www.skope.ox.ac.uk

Wages at the top

• Professional occupations:

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

100

200

300

400

500

600

700

800

900

100

0

110

0

120

0

130

0

140

0

150

0

160

0

170

0

180

0

190

0

200

0

% c

han

ge in

em

plo

ymen

t sha

re b

elo

w t

hre

sho

ld w

ag

e

Threshold gross weekly earning, £

1995-2002 2002-2008

www.skope.ox.ac.uk

Room to move up?

• NCDS earnings data on managerial workers, based on occupation five years before:

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

0 -

50

50 -

100

100

- 15

0

150

- 20

0

200

- 25

0

250

- 30

0

300

- 35

0

350

- 40

0

400

- 45

0

450

- 50

0

500

- 55

0

550

- 60

0

600

- 65

0

650

- 70

0

700

- 75

0

750

- 80

0

800

- 85

0

850

- 90

0

900

- 95

0

950

- 10

00

Em

ploy

men

t sha

re

Gross weekly wage

Managerial

Routine

www.skope.ox.ac.uk

Room to move up?

• NCDS earnings data on intermediate workers, based on occupation five years before:

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

0 -

50

50 -

100

100

- 15

0

150

- 20

0

200

- 25

0

250

- 30

0

300

- 35

0

350

- 40

0

400

- 45

0

450

- 50

0

500

- 55

0

550

- 60

0

600

- 65

0

650

- 70

0

700

- 75

0

750

- 80

0

800

- 85

0

850

- 90

0

900

- 95

0

950

- 10

00

Em

ploy

men

t sha

re

Gross weekly wage

Intermediate

Routine

www.skope.ox.ac.uk

Room to move up?

• Is this the result of observable differences between the two?• Ordered logit model:

– Dependent variable, Y – earnings group– Y = 1,…,20– Include qualifications and demographics– Observed wages in 1991, 1999 and 2004. Observed occupations five

years before each date.Managerial Intermediate

Occupation of employment five years before

PROFESSIONAL 0.246 0.616 **MANAGERIAL Ref. 0.574 ***INTERMEDIATE -0.290 Ref.ROUTINE -0.498 *** -0.982 ***MANUAL -1.212 ** -0.586SERVICE -1.240 *** -1.339 ***UNEMP -1.941 *** -1.495 ***NONEMP -1.110 *** -1.098 ***

www.skope.ox.ac.uk

A better start?

• Younger cohort early employment patterns changed:– Less likely to go into routine occupations– More likely to go into intermediate occupation; no effect on

probability of going into managerial position

• Qualification levels matter– Younger cohort more qualified

• However:– Share of younger cohort going into routine jobs has not fallen in

proportion with total number of jobs– Qualification levels does not have larger effect in younger cohort– Possibly contradict the notion of routine jobs ‘getting older’ (Autor

and Dorn, 2009)

www.skope.ox.ac.uk

Summary

• Three main concerns about the “winners” from changes to occupational structure

• Wages in growing higher skill non-routine occupational groups increasingly spread out:– 1995-2002: distribution shifted upwards, with long tail– 2002-2008: increased employment in lower wage jobs in these

categories

• Upward mobility from routine jobs lower earnings, even after accounting for education/experience differences

• New, more qualified labour market entrants not entering these jobs as often as might be expected

www.skope.ox.ac.uk

Contact Details

Craig HolmesESRC Centre on Skills, Knowledge and Organisational

Performance (SKOPE), Department of Education,

Norham Gardens,Oxford

Email: craig.holmes@education.ox.ac.uk

www.skope.ox.ac.uk

Wages at the top

• Example: graduates in managerial occupations

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%10

0

200

300

400

500

600

700

800

900

1000

1100

1200

1300

1400

1500

1600

1700

1800

1900

2000

% c

hang

e in

em

ploy

men

t sha

re b

elow

thr

esho

ld w

age

Threshold gross weekly earnings, £

1995-2002

2002-2008

www.skope.ox.ac.uk

Wages at the top

• Example: non-graduates in managerial occupations

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%10

0

200

300

400

500

600

700

800

900

1000

1100

1200

1300

1400

1500

1600

1700

1800

1900

2000

% c

hang

e in

em

ploy

men

t sha

re b

elow

thre

shol

d w

age

Threshold gross weekly earning, £

1995-2002

2002-2008

www.skope.ox.ac.uk

Wages at the top

• Example: managerial occupations in real esate, renting and business activities

-30.0%

-25.0%

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%10

0

200

300

400

500

600

700

800

900

1000

1100

1200

1300

1400

1500

1600

1700

1800

1900

2000

% c

hang

e in

em

ploy

men

t sha

re b

elow

thr

esho

ld w

age

Threshold gross weekly wage

1995-2002

2002-2008

www.skope.ox.ac.uk

Wages at the top

• Example: managerial occupations in manufacturing

-25.0%

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%1

00

200

300

400

500

600

700

800

900

100

0

110

0

120

0

130

0

140

0

150

0

160

0

170

0

180

0

190

0

200

0

% c

han

ge

in e

mp

loym

ent s

hare

bel

ow

th

resh

old

wa

ge

Threshold gross weekly wage

1995-2002

2002-2008

www.skope.ox.ac.uk

Wages at the top

• Example: managerial occupations in retail and wholesale

-25.0%

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

100

200

300

400

500

600

700

800

900

1000

1100

1200

1300

1400

1500

1600

1700

1800

1900

2000

% c

hang

e in

em

ploy

men

t sha

re b

elow

thr

esho

ld w

age

Threshold gross weekly wage

1995-2002

2002-2008

www.skope.ox.ac.uk

Wages at the top

• Example: managerial occupations in financial intermediation

-25.0%

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%10

0

200

300

400

500

600

700

800

900

1000

1100

1200

1300

1400

1500

1600

1700

1800

1900

2000

% c

hang

e in

em

ploy

men

t sha

re b

elow

thr

esho

ld w

age

Threshold gross weekly wage

1995-2002

2002-2008

www.skope.ox.ac.uk

Appendix: data

• National Child Development Study (NCDS)– Members all born in a single week in March 1958– Use waves 1981, 1991, 1999-2000, 2004-5– Data covers age 23 to age 46-7– N = 10-12,000 in each wave

• British Cohort Study (BCS)– Members all born in a single week in April 1970.– Use waves 1996, 1999, 2004, 2008– Data covers age 25 to age 38– N = 9,000 in each wave

www.skope.ox.ac.uk

Appendix: data

• Occupations coded in KOS (1981) SOC90 (1991, 1999) and SOC2000 (2004).– Manually converted to SOC2000 based on occupation descriptions– Reduced to 3 digit coding to reduce dropped observations

• Occupations placed into one of six groups:– Professional, managerial, intermediate, routine, service, manual non-

routine– Allocation based on description, wages and wider economy

employment changes– Managerial and intermediate are both higher skill, non-routine

occupations without high qualification entry requirements– Manual non-routine and service are both low skill non-routine

occupations.

www.skope.ox.ac.uk

Appendix: occupational mobilityLevel 0-1 Academic Level 2-3 Academic Level 4-5 Academic

0% DISP

10% DISP

Effect of

DISP

0% DISP

10% DISP

Effect of

DISP

0% DISP

10% DISP

Effect of

DISP

PROFESSIONAL 0.5% 0.7% 0.2% 0.8% 1.4% 0.6% 3.4% 8.1% 4.7%

MANAGERIAL 1.0% 1.8% 0.9% 2.2% 3.8% 1.6% 3.3% 6.5% 3.2%

INTERMEDIATE 0.5% 0.9% 0.3% 0.9% 1.7% 0.8% 4.7% 6.0% 1.3%

ROUTINE 95.3% 89.8% -5.4% 95.2% 88.7% -6.5% 88.8% 77.1% -11.6%

SERVICE 0.8% 1.2% 0.5% 0.4% 0.9% 0.4% 0.3% 0.3% 0.1%

UNEMPLOYED 0.9% 1.7% 0.8% 0.3% 0.9% 0.6% 3.3% 1.0% -2.2%

NONEMPLOYED 0.6% 1.6% 1.0% 0.7% 1.6% 1.0% 1.2% 2.2% 1.1%