Here’s Why the Middle Class Is Being Hollowed Out
Business + Economy

Here’s Why the Middle Class Is Being Hollowed Out


The labor market is extremely complex and it's constantly evolving.

There are two big themes we've seen in recent decades: 1) companies have increasingly outsourced tasks overseas and 2) companies have increasingly automated functions.

These themes have been devastating for those at the middle-skill level.

Wells Fargo Securities' Eugenio Aleman and Anika Khan recently published a paper that included a chart showing job growth by skills level from 2003 to 2013.

It's jarring.

Source of charts: US Dept of Labor & Wells Fargo Securities

As you can see, jobs have been expanding at the low and high-skill levels. Middle-skill jobs have actually contracted.

"The decline in the share of middle-skill jobs has largely been driven by technological advancements and outsourcing of jobs overseas," Aleman and Khan explain. "Middle-skill jobs are classified as those that require some routine set of tasks, while high- and low-skill jobs perform non-routine tasks. Workers in routine professions have been increasingly displaced by the widespread use of computers."

Someone has to make those computers.

"With the increase in technology, the demand for high-skill workers continues to expand," the economists write.

It may be counterintuitive that low-skill jobs aren't being replaced by robots. But the world just isn't that simple.

"High-skill jobs are typically those that require some post-secondary education, while low- skill occupations, including food preparation and building and grounds maintenance require face- to-face interaction," they add. "These factors make these functions very difficult to outsource or automate."

Among other things, this has implications for inequality.

"Occupations that are high-skill are those that have an annual wage greater than $60,000," they note. "The top occupations in this category include management, computer and mathematical, legal, and architecture and engineering. Middle-skill occupations are jobs that bring home an annual median wage of $25,000 to $59,000, while low- skill occupations are jobs with an annual median wage of less than $25,000."

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