Polarisation, mobility and segmentation in the
labour market
Craig Holmes
ESRC Centre on Skills, Knowledge and Organisational
Performance,
University of Oxford
Labour market segmentation
• Labour market segmentation theory developed as a
departure from traditional models of labour supply and
demand in the 1960s and 1970s
• LMS suggests it is possible to identify parts of the labour
market between which mobility is severely or entirely
restricted
– These restrictions are related to factors other than individual
skills or abilities
– Dual market: primary and secondary sector distinguished by
wages, security, prospects for promotion and training investment
– Initial employment matters  workers becoming ‘trapped’
Labour market segmentation
• The initial literature did not find significant empirical
support.
– Mayhew and Roswell (1976) looking at mobility between three
labour market segments in the UK over the past working life of
employees in 1972.
– Segments were defined by occupation and status within their
jobs.
– Allocation of each occupation-status pair was based on the
authors' own judgment, intention of creating segments of the
lowest possible mobility.
– Mobility matrices derived from this method show significant
mobility between segments for many individuals.
Job polarisation in the UK
• Polarisation hypothesis (Goos and Manning 2007):
– Price of computer capital has fallen since late 1970s
– Computer capital replaces labour engaged in routine tasks
– Non-routine tasks may be complementary to computer capital
(e.g. management, skilled professionals)
– Result: growth in non-routine occupations due to changes in
demand (complementarities) and supply (displaced routine
workers)
– Routine occupations found in middle of income distribution
– Non-routine occupations found at top and bottom of distribution
• Managers, skilled professionals at the top
• Non-routine ‘service’ occupations at the bottom e.g. hairdressers, cleaners
Polarisation and segmentation
• Obvious overlap between the primary and secondary
segments and growth occupations
• Individuals tend to move short distances within the
labour market in terms of job quality. Declining middling
occupations reduces options for transitory upward steps
to better occupations.
• Hence, a hollowed-out labour market could create two
segments with limited mobility between them.
The labour market and segmentation
• Jobs defined by occupation, industry and skill:
Industries
Levels of skill
or expertise
within each
industryoccupation
Occupational
groups
increasing in
quality
The labour market and segmentation
• Example 1: craft union model or occupational labour
markets
Industries
Primary
segment
Occupational
groups
Secondary
segment
The labour market and segmentation
• Example 2: internal labour markets
Industries
Primary
segment
Occupational
groups
Secondary
segment
The labour market and segmentation
• Example 3: polarisation
Industries
Primary
segment
Middling
occupations
Secondary
segment
Occupational
groups
The labour market and segmentation
• A hollowed-out labour market has
– Fewer middle jobs for low wage workers to move into
– Increasing competition for those that remain.
– Significant upward mobility may either be slower, or require
much more difficult and sizeable leaps.
• Before embarking on a study of mobility using
longitudinal analysis, it is important to understand the
ways the polarisation phenomena has or has not
manifested within a dataset that can be used for
analysing working life mobility
Job polarisation in the UK: an assessment
• Holmes, (2010), SKOPE research paper No. 90
• Looks at single cohort from National Child Development
Study between 1981 (aged 23) and 2004 (aged 46).
• Replicates the Goos and Manning methodology for our
NCDS dataset
– Finds growth in high wage and low wage occupations, decline in
mid-range occupations, proxied by 1981 wage
– Evidence of routinisation driven employment changes
Job polarisation in the UK: an assessment
• However, wage distributions exhibit little evidence of
polarisation
– Most jobs still fall in the middle of wage distribution
– How can these two observations be reconciled?
• Existing evidence relies on a strong assumption that
wage structures have remained constant over the past
three decades
– Changing wage structures, due to the associated changes in
supply and demand of different workers, may have led to a new
type of middling occupation
Job polarisation in the UK: an assessment
• Change in employment share of wage deciles.
• Initially highest and lowest paid occupations grew more
than the middle earning occupations
Job polarisation in the UK: an assessment
• Resulting wage distributions are important
• Absent of other effects, a polarising labour force should
be observed as in the diagram below
cumulative
probability
1
initial
distribution
polarising
distribution
0
log wage
Job polarisation in the UK: an assessment
• Changing distributions from NCDS cohort (hourly and
weekly, full-time workers):
Job polarisation in the UK: an assessment
• Econometric methods for analysing changes accurately
• Descriptive method (see Holmes, 2010) – change in
employment at each (log) wage percentile
• Polarisation illustrative example:
Job polarisation in the UK: an assessment
Further research
• This suggests polarisation may not be as clear-cut a
mechanism for creating labour market segmentation
• However, still suggests several issues for further mobility
analysis
– Destinations of displaced routine occupation workers
• Are they able to move upwards?
• Difference between occupational and wage mobility
– Experience of new entrants compared to existing workers
• Are new entrants more polarised?
• Do they experience different patterns of occupational and wage mobility
– Role of skills in both cases
Further research
• Destination of displaced routine workers
– Model: four occupational categories (professional, managerial,
routine and service)
– Separate out transitions from routine occupations caused by
routinisation from those caused by career advancement
– Similarly for transitions between routine and service occupations
– Empirical strategy:
• Define four occupational categories (SOC, SEG)
• Calculate transition probabilities in NCDS (1981 – 2004)
• Apply to larger sample of 23 year olds in 1981 (e.g. LFS) and compare to a
counterfactual occupational structure (e.g. 46 year olds in LFS 1981)
Further research
• Destination of displaced routine workers
– Initial results:
Initial structure, Pre-routinised
Post-routinised
1981, 23 year structure, 46 year structure, 46
olds
olds
years olds
Professional
8.4%
9.5%
13.2%
Managerial
10.1%
12.6%
25.6%
Routine
69.3%
66.6%
41.1%
Service
12.2%
11.3%
20.1%
• Probability of transition to professional depends on having a degree, rather
than starting occupation
• Need to breakdown upward movers by upskilled and non-upskilled
Further research
• Different experiences of later cohorts
– Autor and Dorn (2009) – declining occupations are getting
“older”
– Continue using cohort approach - make use of later cohort study
(1970 British Cohort Study) for comparison
– Differences at entry – more polarised as older workers hold on to
positions in declining occupations. New entrants driving cross
sectional polarisation?
– Different mobility opportunities compared to NCDS cohort?