Report

The Middle Class – A shift towards high-skill occupations

Labour markets across the OECD have polarised in recent decades, as the share of middle skill occupations has declined relative to that of both high- and low skill occupations. This paper shows that, contrary to what is often assumed in the public debate, job polarisation has not resulted in a decline in the share of households with middle-income across 18 OECD countries. Most of the changes in the share of middle-income households result instead from changes in the propensity of workers in different occupations to be in it. In fact the results point to a change in the relationship between occupational skill levels and household income as both middle and high skill jobs increasingly fail to deliver on the promise of the relative income status traditionally associated with their skill level. These changes might help explain some of the social frustration that has been at the centre of the political debate in recent years.

The main result is that, contrary to what is often assumed, changes in the size of different occupations (i.e. job polarisation) have had a small impact on the share of working adults who belong to middle-income households. Instead, the observed changes in the share of workers in middle-income households are generally explained by changes in the propensity of different occupational groups to be in it, as the distribution of different occupational groups across income groups have changed significantly in recent times.

Hence, the generally modest variations in the share of workers in middle-income households mask two very significant changes for policy. First, the work composition of the middle-income class has changed substantially, with a shift towards high-skill occupations that is larger than that observed in the aggregate economy. On average, across the country considered, the share of workers in middle-income households who are in a high-skill occupation has increased from 35% to 47% between mid-1990s and the mid-2010s, while the share of those holding a middle-skill job has declined from 41% to 32%.
114. The second important policy implication is that occupations of different skill levels are increasingly failing to deliver the income status traditionally associated to them. The probability that a high-skill worker is in the upper-income class declined in the majority of countries. On average, the proportion of high-skill workers found in the upper-income class declined from one-quarter to one-fifth. Most middle-skilled workers are in middle-income households, but the probability that they are in the lower-income class has increased in 14 countries. In 12 countries, both low-skill and middle-skill workers have tended to move towards the lower-income class.

The analysis at the household-level also confirms this change in the relationship between occupational skill levels and household income. In particular, the presence of two earners is becoming less effective in achieving middle class status, as couples involving only low and middle skill workers have seen an increase in the probability of finding themselves in the lower income class.

Overall, therefore, the analysis highlights that some jobs increasingly fail to deliver on the promise of the relative income status traditionally associated with their skill level. These changes might help explain some of the social frustration that has been at the centre of the political debate in recent years. An important avenue for future research is how these changes relate to changes in the value of different educational levels.

Chosen excerpts by Job Market Monitor. Read the whole story at OECD iLibrary | Job polarisation and the middle class: New evidence on the changing relationship between skill levels and household income levels from 18 OECD countries

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