The U.S. labor market is increasingly polarized into high- and low-skilled jobs pools, with the middle-wage range being hollowed out. From white-collar sales and office positions to blue-collar production and operator jobs, opportunities and earnings in the middle of the labor market have been declining. Though this pattern predates the Great Recession beginning in 2007-08, the sharp economic downturn that the U.S. has undergone has exacerbated this trend. Wages for highly educated workers are continuing to rise, while earnings for less-educated workers are continuing to fall, especially for males.

A 2013 paper from Duke University and the University of British Columbia, “The Trend Is the Cycle: Job Polarization and Jobless Recoveries,” finds that the “hollowing out” of middle-income jobs takes place at a rapid rate during recessions. The researchers note that “job polarization is not a gradual process; essentially all of the job loss in middle-skill occupations occurs in economic downturns. Second, jobless recoveries in the aggregate are accounted for by jobless recoveries in the middle-skill occupations that are disappearing.” Some survey data suggest that increasing numbers of Americans are in fact overqualified for their jobs, partly the result of this “hollowing out” phenomenon. (Nevertheless, it remains the case that a college degree is, on average, one of the best investments toward obtaining a middle-income job in a difficult economy, according to a 2013 study from the Pew Center on the States.)

A 2010 study from MIT and the National Bureau of Economic Research and published by the Brookings Institution, “The Polarization of Job Opportunities in the U.S. Labor Market,” examines labor market patterns over the past three decades, documents the effects of the Great Recession and examines why such polarization continues to increase.

The study’s findings include:

• Between 2007 and 2009, there was little change in total employment for high-skill managerial and professional occupations, or for low-skill, low-wage service occupations. However, white-collar sales and office jobs suffered an 8% decline, while jobs in blue-collar sectors such a production, repair and operations fell by 16%.
• In 1963, wages of college graduates were 1.5 times greater than those of high school graduates. By 2009, that gap had grown by 45%
• Among males with high school degrees, real earnings declined 12% between 1979 and 2007. Among females at the same education level, real earnings did not sharply decline during that period.
• Factors driving job polarization include automation of tasks and the outsourcing of jobs to countries where labor is comparatively cheaper. The decline of unions in the private sector and the falling real value of the federal minimum wage are also significant factors.
• Job polarization is not a uniquely American phenomenon, as evidenced by comparisons with European Union countries, which have seen middle-wage occupational opportunities decline.

The study’s author concludes that, though the U.S. economy may rebound in terms of overall growth, the longer-term evolution of the labor market may become increasingly problematic. Policy makers should look at solutions in terms of education, training, and investment, the author suggests.

For more perspective on the changing job market, see the paper, “The Race between Education and Technology: The Evolution of U.S. Educational Wage Differentials, 1890 to 2005.” Further, a 2011 study from the University of Washington and Harvard University published in the American Sociological Review, “Unions, Norms and the Rise in American Wage Inequality,” provides insight into the decline of organized labor and how it helps account for workforce changes. The study notes that the decline of organized labor since 1973 explains one third of the increase in wage inequality among men and one fifth of the increased inequality among women, which is “an effect comparable to the growing stratification of wages by education.”

Keywords: Europe, economy, poverty, organized labor