If your job as a bank teller, retail clerk or travel agent disappeared, would you be more likely to move up or down the employment chain?
The unfortunate answer is down, which helps explain why the loss of many middle-class jobs is having such a punishing effect on the U.S. economy and the fortunes of the typical family.
A new study by the Federal Reserve Bank of Dallas details the types of jobs that have been disappearing and validates the job stress many workers have been feeling. Between 2001 and 2011, both low-skill and high-skill jobs rose as a percentage of the total labor market, while the percentage of middle-skill jobs fell by about 10%. Middle-skills jobs have been in decline for about 20 years, according to the study, although the early part of the trend, in the 1990s, was barely noticeable. During the past 10 years, however, the loss of middle-skill jobs has intensified to the point that it now threatens the prosperity of the entire middle class.
This is the “barbell economy” some analysts have been talking about, which is characterized by swelling employment at the bottom and top of the income ladder, while the middle gets hollowed out.
Many workers fault globalization for the decline of decent-paying middle-class jobs, since big companies have moved many manufacturing plants and other types of operations overseas, where labor is cheaper. But the Dallas Fed sees that as a small factor in the loss of middle-skill jobs. A much bigger factor is the automation that has come with the digital revolution, since computers and other machines can now do many of the jobs once performed by humans. ATMs and smartphones, for example, now do much of what bank tellers once did. Travel sites such as Travelocity and Kayak serve as virtual travel agents — at no charge. There are no clerks when you check out at an e-commerce site such as Amazon or eBay.
The upside of the “nonroutine” job
Some low- and middle-skill jobs are “nonroutine,” as the Dallas Fed calls them, which means they involve hands-on work, human interaction or thinking on your feet, and therefore can’t be done effectively by a machine (not yet, anyway). Think sanitation, construction, childcare, roving security, healthcare and middle managers who make operational and personnel decisions. At the top of the chain — where the 1% reside — there’s growing demand for highly skilled professionals who must do a lot of qualitative problem-solving that requires global know-how and other rare talents.
It’s no secret that middle-income jobs have been evaporating, but this latest analysis goes a step further by drawing a distinction between routine jobs, which are threatened, and nonroutine jobs, which are safer, even if they’re at the low end of the skill ladder. The study defines routine jobs as those requiring “the ability to follow precise, well-understood procedures, which can, in principle, be carried out by a computer. ” Routine jobs can be blue-collar positions such as an assembly-line worker (increasingly being replaced by robots) or white-collar positions such as bookkeeper or insurance underwriter. Since 1981, routine jobs have dropped from 58% of the workforce to 44%.
Employers shed the most jobs during recessions, which provide an opportunity to reorganize staff and aggressively adopt labor-saving technology. This chart shows how routine jobs have disappeared at an increasing rate during the past three recessions, which started in 1990, 2001 and 2007:
Source: Federal Reserve Bank of Dallas
The obvious implication for workers is that it’s better to have a nonroutine job than a routine one. The more your job involves thinking, creativity, innovation and problem-solving, the better off you’re likely to be.
Women, it turns out, have adapted better to this workplace dichotomy than men. Men have been more likely to move from the middle of the skill ladder to the lower end, while women tend to move from the middle to the higher end. That’s probably because women have been earning a larger share of college and graduate degrees, with better education making them more adept at climbing the skill ladder. Men at risk of falling in the other direction might want to heed the example. This chart shows the changes by gender between 1979 and 2007:
Source: Federal Reserve Bank of Dallas
The first “jobless recovery,” in the early 1990s, was followed by nearly a decade of booming growth, which obscured its significance. That’s not likely to happen now. The development of advanced robots, drones, autonomous vehicles, artificial intelligence and other technologies could replace even more routine jobs in the future, and perhaps some nonroutine ones as well. Competing with the machines will only get more challenging.