This paper shows that the United Kingdom since 1975 has exhibited a pattern of job polarization with rises in employment shares in the highest- and lowest-wage occupations. This is not entirely consistent with the idea of skill-biased technical change as a hypothesis about the impact of technology on the labor market. We argue that the “routinization” hypothesis recently proposed by Autor, Levy, and Murnane (2003) is a better explanation of job polarization, though other factors may also be important. We show that job polarization can explain one-third of the rise in the log(50/10) wage differential and one-half of the rise in the log(90/50).

This paper documents the pervasiveness of job polarization in 16 Western European countries over the period 1993–2010. It then develops and estimates a framework to explain job polarization using routine-biased technological change and offshoring. This model can explain much of both total job polarization and the split into within-industry and between-industry components. (JEL J21, J23, J24, M55, O33)

The structure of employment is always changing, and economists are always trying to understand those changes. In the 1990s the idea of skill-biased technological change (SBTC) was used to understand the shift in employment toward more educated workers (see David H. Autor and Lawrence F. Katz 1999, for a survey). However, in recent years, it has become appar ent that a more nuanced approach is needed. The idea of SBTC might lead one to predict a uni form shift in employment away from low-skilled and toward high-skilled occupations, but studies for the United States (Autor, Katz, and Melissa S. Kearney 2006) and the United Kingdom (Goos and Manning 2007) have shown that there is growth in employment in both the high est-skilled (professional and managerial) and lowest-skilled (personal services) occupations, with declining employment in the middle of the distribution (manufacturing and office jobs). This is what Goos and Manning (2007) term job polarization (although see the introduc to Goos and Manning 2007 for antecedents of these ideas). There are several hypotheses about the rea sons for job polarization. First, the routiniza tion hypothesis (first put forward by Autor, Frank Levy, and Richard Murnane 2003) sug gests that the effect of technological progress is to replace routine labor which tends to be clerical and craft jobs in the middle of the wage distribution. Second, there is the view that globalization in general, and offshoring in par ticular, is an important source of change in the job structure in the richest countries (see, for example, Alan S. Blinder 2007). Third, there may be a link between job polarization and

We estimate the impact of firm-level automation on individual worker outcomes by combining Dutch microdata with a direct measure of automation expenditures covering all private nonfinancial sector firms. Using a novel difference-in-differences event-study design leveraging lumpy investment, we find that automation increases the probability of incumbent workers separating from their employers. Workers experience a five-year cumulative wage income loss of 9% of one year’s earnings, driven by decreases in days worked. These adverse impacts of automation are larger in smaller firms, and for older and middle-educated workers. By contrast, no such losses are found for firms’ investments in computers.