The New Millennium’s Downward Ramp of Jobs

aa-unemployed-college-grads-300x198Recent research continues to shed light on the big trends in the US labor market. Unfortunately, many if not most of them are bad news.

As Thomas Edsall describes well in his latest New York Times column, it looks like demand has slowed down for even the most cognitively demanding jobs (in other words, the highest skilled ones) since the turn of the century. During the 1980s and 90s demand for jobs had a U-shaped pattern: there were plenty of opportunities at the high end and the low end (thanks to the rise of low-skilled service jobs) and shrinking opportunities in the middle. My MIT colleague David Autor, who did the most work to document this phenomenon, calls this the ‘polarization‘ or ‘hollowing out’ of the US job market.

A new study by Paul Beaudry, David A. Green, and Ben Sand looking at the same phenomenon finds that a very different pattern holds since 2000, with demand for even the highest skilled jobs declining slightly. After looking at this research, Autor observed that the pattern has gone from a U-shape to “a bit more like a downward ramp” since the turn of the century.

This is bad news for several reasons. One of the most important is that the downward ramp appears to be leading to a “skills cascade” in which highly skilled / educated workers take jobs lower down the skill / wage ladder (since there’s not much demand at high levels), which in turn pushes less skilled workers even lower down the ladder, and so on. Larry Katz has found that “lots of new college graduates are moving into the service sector, that is, into traditionally non-college jobs, displacing young non-college workers.”

Where this all ends is anyone’s guess. Edsall quotes Larry Summers at the end of the article as saying that “The single most important step the U.S. government can take to reverse these discouraging trends is to mount a concerted, large-scale program directed at renewing our national infrastructure.” Erik Brynjolfsson and I certainly agree; infrastructure investment is one of main things in the ‘Econ 101 playbook’ for restoring growth and opportunity that we put forward in our book The Second Machine Age (along with other economic no-brainers like fostering entrepreneurship, reforming immigration, and investing more in basic research).

Edsall quotes our book in his article:  “the transformations brought about by digital technology will be profoundly beneficial ones. We’re heading into an era that won’t be just different; it will be better.” We do in fact say this (and still believe it), but it’s inaccurate to portray us as tech pollyannas or utopians.

The quote above refers to the uncontroversial fact that tech progress grows the overall economic pie (to use the economist’s favorite metaphor). However, we spend more than a third of The Second Machine Age highlighting that the distribution of this pie is becoming more uneven (and hence problematic) in large part because of this same progress, and discussing ways to mitigate or reverse this trend.

All the evidence I see these days solidifies the conviction that our labor market is shifting both deeply and quickly these days. How long before we take action in response? As Edsall writes, maybe policy changes will come more quickly once large numbers of college-educated parents see their college-educated kids unable to find the jobs that used to be regarded as essentially the birthright of their class.