Full Citation
Title: Labor market polarization. The routinization hypothesis and the losing middle-class
Citation Type: Dissertation/Thesis
Publication Year: 2019
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Abstract: Labor market polarization refers to the observed changes in the employment structure. Since the beginning of the 1980s, there has been a notable change in the employment shares in favor of high-paid and low-paid workers at the expense of middle-paid workers. This phenomenon is detected in most industrialized Western countries and is of great importance since the middle-class represents a significant employment group in many developed countries. Thus, a decline in the middle-class may have great socioeconomic impacts. This thesis is a literature review that aims to give a deeper understanding of labor market polarization and the reasons behind it. This thesis examines polarization over the time period 1980-2010, with a focus on the Finnish labor market. The most favored explanation for polarization is the routinization hypothesis or the so-called routine-biased technological change. This hypothesis claims that the reason behind the shrinking middle-class is the substitution of routine tasks and complementation of high-skilled workers with technology. Routine tasks tend to locate in the middle of the wage and skill distribution. Therefore, the demand for middle-class workers declines with technological improvements and the price reduction of computer capital. The routine workers affected by polarization are forced to reallocate themselves in the labor market and they frequently end up in low-paying service occupations. Thus, the recent changes in the employment structure explained by the routinization hypothesis are all in accordance with the shrinking middle-class and the changes in the employment shares in favor of low-paying and high-paying occupations we observe today.
Url: https://aaltodoc.aalto.fi/handle/123456789/41507
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Authors: Jutila, Laura
Institution: Aalto University
Department: Economics
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Publisher Location: Espoo, Finland
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Data Collections: IPUMS USA
Topics: Labor Force and Occupational Structure, Other
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