Massachusetts Institute of Technology economist David Autor notes an increase in personal-service jobs—the ones that can’t be done remotely from overseas and can’t easily be done by machines. … Between 1989 and 2007—just before the recession—they found a 5% increase in routinized production, machine-operator and clerical jobs—but a 36% increase in personal-service jobs and a 40% increase in top-of-the-pyramid jobs, such as managers, professionals and finance wizards.Now here is the bad news. These are low paying jobs, and the recession hasn’t helped:
This polarization of the job market has persisted. Between 2007 and 2010, the total number of jobs in the U.S. fell by nearly 6%, but the previous pattern held: The number of middle-skill jobs, those most susceptible to automation or offshoring, fell by 12%. The number of high-end, high-education jobs fell by 1%. But despite the recession, there was a 2% increase in personal-service jobs.
More jobs are better than fewer jobs—particularly for those who would otherwise be unemployed. But Mr. Autor cautions: “These aren’t going to be high-paying jobs because the skills are quite generic. Anyone can be productive at them in the next day or two. If you had to choose which jobs you’d want to go away, you’d pick these low-wage jobs, not the middle-skill ones.”1. This is as much a story about automation as outsourcing, though the media tends to focus on the latter rather than the former — except when a politician rages against the machines as President Obama did when he knocked ATMs as job losers.
Before the recession, when unemployment was low and workers relatively scarce, wages for personal-service workers rose while wages for middle-skill jobs sagged. Mr. Autor and colleague David Dorn found a 16% increase in inflation-adjusted average hourly wages between 1980 and 2005 for these service workers and a 30% increase for the professionals, managers and upper-end finance workers. That contrasts with a 6% increase for machine operators and assemblers and a 4% decline for production and craft workers.
But the subsequent recession and sluggish recovery produced a glut of workers for these relatively low-skill, personal-service jobs; wages have been depressed as a consequence, Mr. Autor says. And incomes of barbers and some other personal-care workers were squeezed during the recession and immediately after the recession when many consumers cut back spending on easy-to-skip services such as dining out or delayed getting their hair cut.
2. Also note that between 1989 and 2007 — the span Autor and Acemoglu look at — the U.S. economy added 27 million private sector jobs and U.S GDP increased by 67%, adjusted for inflation, or about 3% a year. Workers in those middle-skill jobs either moved up into higher-skill jobs or moved down into lower-skill jobs. There was not a glut of unemployment.
I would argue that overall U.S. economic performance, quite impressive vs. our EU competitors and for the size of the U.S. economy, was because of our openness and toleration of creative destruction, not despite it.
3. When this story screams out about is the need to improve U.S. education, which Acemoglu has written about. Here is a bit of his view: “We’ve seen a big increase in inequality, measured in various ways, and this reflects the fact that the top people, the more educated, high earners have become more skilled. Technology has favored them, globalization has favored them, and inequality has increased for that reason.”