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Job polarisation and the Great Recession

A job polarisation trend has seen relatively more workers in the European Union employed in skilled and unskilled jobs, while mid-skilled jobs have be

Publishing date
03 November 2020

The technological advancements of the last few decades have been a major source of job polarisation. This means that demand for workers has increased for both well-paid skilled jobs (typically requiring non-routine cognitive skills; for example, managerial and professional roles) and low-paid least-skilled jobs (requiring non-routine manual skills, such as cleaning or agricultural jobs), while demand has fallen for workers for middle-skilled jobs that have typically required routine manual and cognitive skills, such as construction or administrative jobs.

This polarisation has been particularly pronounced since the Great Recession of 2007-2009 (for more, see here). Prior to the Great Recession, instead of polarisation, there was a trend of upskilling of the European workforce. Workers tended to shift from middle-skilled jobs to high-skilled jobs. Meanwhile, low-skilled jobs were largely unaffected. However, since the Great Recession, up to 2016, the employment share of middle-skilled jobs dropped by approximately 5 percentage points, while the shares of high-skilled and low-skilled jobs increased, the former by around 4 percentage points and the latter by 1 percentage point.

Figure 1: Changes in employment shares for low-, middle-, and high-skilled workers in selected EU countries for 2002-2009 and 2009-2016

Source (for all figures): Brekelmans, S. and G. Petropoulos. (2020) ‘Occupational change, artificial intelligence and the geography of EU labour markets’, Working Paper 03/2020, Bruegel. See here.

Note: These figures are based on European Union Labour Force Survey data, in which the employment share is calculated for 2002, 2009 and 2016 as the total number of persons employed at each skill level as a share of the total number of persons employed. Change in employment share within a specific period is derived by subtracting the employment share in the first year of the period from the employment share in the last year of the period. The number of persons employed at each skill level is obtained by assigning the occupation of each respondent to the corresponding broad category considered in the source. The countries of our sample are 24 EU members (Bulgaria, Croatia, Malta and Romania not included). The pre-Brexit United Kingdom is part of our sample.

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One of the consequences of the Great Recession was an increase in over-qualification in the EU, with the labour market’s demand for skills not keeping up with the rising supply of university graduates. The lack of attractive job opportunities gave individuals an incentive to invest further in their human capital by pursuing university degrees, in order to increase their chances of entering the job market with the best possible range of options. As a result the number of university graduates significantly increased between 2009 and 2016 (Figure 3). Meanwhile, workers were also pushed to accept offers of low-skilled jobs they would not have found attractive in the past (Figure 2). This led to a job polarisation in which both the employment share of low- and high-skilled jobs increased after 2009. In other words, the increase in the number of university graduates has led to increases in graduates taking both high-skill and low-skill jobs, resulting in the polarised picture we observe.

Figure 2: Changes in shares of EU workers with tertiary education in low-, middle-, and high-skilled jobs

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Figure 3: Change in the employment of EU workers with tertiary education at low-, middle-, and high-skilled jobs

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Meanwhile, since the Great Recession, as labour-market competition has intensified, individuals with low secondary education have increasingly been absorbed into low-skill jobs, in contrast to the pre-crisis period when they could more easily move into middle-skilled jobs. From 2009 to 2016 these less-educated workers lost out in terms of mid-skilled jobs. The share of these workers in mid-skilled jobs declined by approximately 6 percentage points.

Despite the increase in over-qualified workers, the benefits from education remain significant. For all educational groups, the post-2009 period saw real wage declines initially, followed by a mild recovery from 2013. Between 2005 and 2016, straddling the Great Recession, real wages in EU countries tended to stagnate. But higher-educated workers (those with tertiary education) still came out ahead, with real wage growth of 1.9% between 2005 and 2018. Upper and post-secondary educated workers saw their real wages increase less, by 1.5% over the same period, while lower-secondary educated workers’ real wages were constant. A common characteristic for each educational group is that post-crisis, the cumulative growth of real wages still has not reached pre-crisis levels (with peak in 2007, Figure 4).

Figure 4: Cumulative percentage changes in real yearly wages by educational attainment in selected EU counties, 2005-2018

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Source and coverage: see source and note to Figure 1. See here for further information on how these cumulative changes are computed.

 

This Blog was produced within the project "Future of Work and Inclusive Growth in Europe", with the financial support of the Mastercard Center for Inclusive Growth. 

 

Recommended citation: Brekelmans, S. and G. Petropoulos (2020) ‘Job polarisation and the Great Recession’, Bruegel Blog, 3 November

About the authors

  • Georgios Petropoulos

    Georgios Petropoulos joined Bruegel as a visiting fellow in November 2015, and he has been a resident fellow since April 2016. Since March 2022, he has been a non-resident fellow. Since March 2019, he is a Marie Curie Skłodowska Research Fellow at MIT and Bruegel and post-doctoral fellow at the MIT Initiative on the Digital Economy. Georgios’ research focuses on the implications of digital technologies on innovation, competition policy and labour markets. He is currently studying how we should regulate digital platforms, what the relationship between big data and market competition is as well as how the adoption of robots and information technologies affect labour markets and firms’ market returns. He holds a bachelors degree in Physics, master’s degrees in mathematical economics and econometrics and a PhD degree in Economics. He has also studied Astrophysics at a Master's level.

  • Sybrand Brekelmans

    Sybrand is a Dutch national and a research assistant at Bruegel since September 2019. He holds a Master's Degree in Specialized Economic Analysis in macroeconomic policy and financial markets from the Barcelona Graduate School of Economics (BGSE). Prior to that, he completed a BSc in Economics and Mathematics at the University of Utrecht. His research interests include international trade, monetary policy, and empirical techniques such as complexity analysis and macroeconometrics.

    Prior to Bruegel, Sybrand has worked at the OECD Development Centre where he was part of the Asia Desk. He was involved in the drafting of the unit's biannual flagship publication: The Economic Outlook for Southeast Asia, China and India. He contributed to the publication on topics such as international and regional trade, monetary policy, and infrastructure development policy. Among others, he worked on trade-related issues, focusing on the trade war between the United-States and China and its impact on the Southeast Asian economies.

    Sybrand is fluent in Dutch, French, and English and speaks German at a basic level.

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