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Thursday,
February 27, 2020 / 05:47 PM / By Era Dabla-Norris, Carlo Pizzinelli and Jay
Rappaport, IMFBlog / Header Image Credit:
Will I do as well as my
parents?
A positive answer to this question once seemed a foregone conclusion;
now, for recent generations, less so. Despite being more educated than their
parents, millennials-those born between 1980 and 2000-may have less job
stability during their working life. Concerns that it might be more difficult
to break into the middle class, or to have enough retirement savings, are also
rising to the fore in policy debates in many advanced economies.
These concerns stem from the fact that the nature of work and the economic
returns to different skills and education-levels are changing rapidly. The
number of well-paid middle-skill jobs in manufacturing and clerical occupations
has decreased substantially since the mid-1980s in the United States and
Europe. Job opportunities today are more concentrated in relatively high-skill,
high-wage jobs and low-skill, low-wage jobs.
This "hollowing out" of the middle classes has been linked to the
disappearance of routine occupations-jobs with a higher share of tasks
performable through a set of easily codified rules (such as bookkeeping,
clerical work, and some manufacturing jobs)- driven by technological progress and global integration.
Automation and artificial intelligence continue to replace workers and
may also limit job creation in growing sectors. By extension, younger workers' wages may stagnate, or they may be forced to move to low-skill and low-pay
occupations.
At the same time, earnings and income gaps between generations have
widened significantly in many countries. Many of these trends were exacerbated
by the global financial crisis. In Europe, for instance, incomes declined for young people after the 2007
crisis due to unemployment. They have since recovered but have
not grown. The rise of the so-called "gig" economy, and increases in temporary
contracts, exacerbated the problem and further decreased job stability,
particularly for the young.
New IMF staff research has zoomed-in on
how these trends vary by gender and the level of education using labor force
data from the United Kingdom over the period 2001-2018.
Non-college educated workers
In the United Kingdom, workers without a college (university) degree
have experienced the most drastic decline in routine jobs. Non-college-educated
workers are 5 to 15 percentage points less likely to be employed in routine
jobs now than they were two decades ago. This trend has had a big impact on
younger generations, as middle-wage, middle-skill job opportunities they would
take up continue to evaporate.
But labor market opportunities for non-college educated young women
appear most affected. They are increasingly likely to be employed in low-skill
manual-based jobs, and their real wages over all occupations have fallen in the
past two decades. Millennial women's wages today are more than 10 percent lower
than those of women in the baby boomer generation, almost double the gap that
exists for their male counterparts.
College-educated workers
College (university) educated workers in the United Kingdom face
different challenges. The share of college-educated workers increased from 29
percent in 2001 to 45 percent in 2018. As attainment of higher education rises
for younger generations, the returns to a university degree are falling. IMF
staff research find that, although an undergraduate degree still leads to a
much higher likelihood of having a "good job," it presents less of a guarantee
than it did in the past in the United Kingdom. Other research suggests this is the case
for the United States as well. The two criteria of a "good job" are wages and
the extent of abstract-thinking in a job's tasks, which can be complementary to
technology. An abstract job is one that typically requires creative,
problem-solving, and coordination tasks performed by professionals and
managers.
The share of abstract jobs among the highly-educated has fallen between
2001 and 2018. In recent years, both highly-educated male and female workers
have become more likely to take middle-skill jobs compared to less-educated
workers. Therefore, for members of recent generations, a college education does
less to ensure a high-paying job in an abstract job than it did for their
parents. The widening gap between the wages of the young and those of older
people since the Global Financial Crisis, although narrowing more recently, is
also of concern.
Policy Solutions
Policy responses to automation should focus on building skills to
complement automation and reducing the impact of job displacement to workers
both in the short and long run.
In the short term, policies should create new opportunities for people
displaced by automation, particularly for low-skilled workers. Additionally,
supporting research and development fields can help employ college-educated
workers in areas such as science and technology. Removing legal barriers to
employment and allowing for more flexible contracts may also help more young
people get jobs.
Over the long term, education and skills training programs need to
prepare participants to meet the adjusted demands of the labor market. College
graduates should be literate in, and easily capable of using, technology for
their chosen sector.
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