The loss of middle-skilled jobs is increasing inequality in cities

Where have all the workers gone?
Where have all the workers gone?
Image: Reuters/Brian Snyder
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Economists often divide the job market into low-skilled, middle-skilled, and high-skilled jobs. Low-skilled jobs are those that just about anyone can do with a minimal amount of training, such as cleaning or working in a warehouse. Middle-skilled jobs are those that take a significant amount of training, but are routine once you learn how to do them, which includes most clerical and manufacturing jobs. Finally, there are the high-skilled jobs that involve a substantial formal education and critical thinking, such as positions in management and engineering.

Over the past several decades, the middle has shrunk across the rich world. Many middle-skilled jobs have been replaced by software, like clerical work, while others have gone away due to robotic automation and outsourcing, like manufacturing work. A 2017 report by the OECD, a club of rich nations, found that from 1995 to 2015, the share of middle-skilled jobs in OECD countries fell from 49% of all positions to 40%.

This shift is having a dramatic effect on US cities, and probably other urban areas across the rich world.

At this year’s national meeting of the American Economic Association, MIT economist David Autor presented the keynote address on forthcoming research with his colleague Juliette Fournier. Autor and Fournier studied the recent history of the US labor market and, like the OECD, they found that middle-skilled jobs have been disappearing. This is primarily good news, though, as most of those positions have been replaced by high-skilled, better-paying jobs.

Most, but not all. Autor and Fournier find that, for workers who did not go to college, a larger share of middle-skilled work has been replaced by low-skilled jobs. Though the proportion of Americans who don’t attend college has been falling, this still represents about one-third of the working-age population.

In perhaps the most innovative part of their research, Autor and Fournier show that the move from middle-skilled to low-skilled work among less-educated workers has been particularly prominent in cities. In 1970, non-college educated workers were substantially more likely to do mid-skilled work in the top 10% most-populated areas of the US than in the bottom 10%. But by 2015, there was virtually no difference. In other words, cities are no longer better than rural areas for providing decent jobs for workers with less education.

This has the effect of increasing inequality in American cities. People in places like New York, Chicago, and San Francisco are increasingly either in high-skilled, high-salary jobs, or they are working in low-skilled, low-wage service jobs in the food and healthcare industries. The research shows that the gentrification in some major cities may be as much a result of the decline in opportunities for people without college degrees as it is an influx of highly educated, highly paid workers.

Although Autor and Fournier’s research only addresses the US, the shift from middle-skilled work is likely a feature across much of the rich world. The manufacturing, sales, and administrative jobs that make up the bulk of middle-skilled positions are disappearing or moving to low-cost locations in developing countries. What’s left in the world’s biggest, richest cities is skewed towards the top and bottom, without much in between.