boutons_deux
06-16-2014, 11:17 AM
The Downward Ramp
With the bursting of the tech bubble at the start of the 21st century, two decades of growth at the high end of the job market — once the province of college graduates with strong cognitive abilities — came to an abrupt halt, according to detailed studies of employment and investment patterns by three Canadian economists. We are still feeling the ramifications.
New evidence (http://economics.mit.edu/files/5554) produced by Paul Beaudry and David A. Green of the University of British Columbia, and Ben Sand of York University, demonstrates that the collapse (http://economics.mit.edu/files/1474), between 1980 and 2000, of mid-level, mid-pay jobs — gutted by automation or foreign competition (and often both) — has now spread to the high-skill labor market.
The U-shaped pattern of job growth characteristic of recent decades – strong at the top and bottom, but weak throughout the middle — has now become “a bit more like a downward ramp,” according to David Autor, an economist at M.I.T. who documented the decline (http://opinionator.blogs.nytimes.com/2013/08/24/how-technology-wrecks-the-middle-class/) in mid-level jobs in the 1980s and 1990s.
Preliminary findings suggest that this trend is alarming in almost every respect. Just one example: the drying up of cognitively demanding jobs is having a cascade effect.
College graduates are forced to take jobs beneath their level of educational training, moving into clerical and service positions instead of into finance and high tech.
This cascade eliminates opportunities for those without college degrees who would otherwise fill those service and clerical jobs. These displaced workers are then forced to take even less demanding, less well-paying jobs, in a process that pushes everyone down. At the bottom, the unskilled are pushed out of the job market altogether.
“Many higher skilled workers have moved down the occupation ladder and accepted less challenging employment,” Beaudry wrote in an emailed response to my inquiry about this development. “This movement down has been very detrimental to the low skilled, as higher skilled workers have taken many of ‘their’ jobs.”
Beaudry, Green and Sand, who all specialize in employment economics, have written two papers, “Inequality in the Future (http://www.aeaweb.org/articles.php?doi=10.1257/aer.104.5.381): The Declining Fortunes of the Young Since 2000,” and a more detailed (http://www.economics.ubc.ca/files/2013/05/pdf_paper_paul-beaudry-great-reversal.pdf)piece of scholarship, “The Great Reversal in the Demand for Skill and Cognitive Tasks.”
In these papers, the authors describe “a clear break in 2000,” a sudden shift in the job prospects of college graduates. They write that in earlier years, “each successive entry cohort has a higher share in cognitive occupations at the outset of their working lives.” From 1980 to 2000, the demand for highly skilled college graduates provided increased opportunity for good wages and advancement.
Beginning in 2000, however, each graduating class has encountered a smaller share of well-paying, high-prestige jobs. By 2010, the openings into these occupations were back to 1990 levels, the authors write.
Beaudry and his colleagues document their findings with some striking charts.
Figure 1 shows the steady rise from 1980 to 2000 in the cognitive level demanded by different employment tasks. In other words, a growing number of jobs required better reasoning ability, greater creativity and stronger management skills, until there was a sharp drop-off.
Photohttp://static01.nyt.com/images/2014/06/11/opinion/11edsall-chart1/11edsall-chart1-articleLarge.jpg
Beaudry, Green and Sand make the case that the technology bubble that burst in 2000 was far more significant than generally recognized. In their view, information technology underwent a period of revolutionary growth in the 1980s and 1990s, spurring a huge demand for well-educated workers to manage surging capital investments in computers, software and electronics.
At the turn of the 21st century, however, the I.T. revolution entered what the authors call a “maturity stage,” in which much of “the new capital is in place” and “cognitive task workers are only needed to maintain the new capital.”
Beaudry, Green and Sand illustrate the decline in I.T. capital investment. Figure 2 shows investment in information processing and software as a percentage of gross national product from the late 1940s to 2013. After climbing steadily from 1950 onward, the percentage drops precipitously from 2000 to 2003 and continues to fall at a slower rate through 2012.
http://static01.nyt.com/images/2014/06/11/opinion/11edsall-chart2/11edsall-chart2-articleLarge.jpg
Even more striking is the trend illustrated in Figure 3, which shows an almost vertical drop between 2000 and 2003 in the percentage of G.N.P. invested in computers and peripheral equipment.
http://static01.nyt.com/images/2014/06/11/opinion/11edsall-chart3/11edsall-chart3-articleLarge.jpg
Because these downward trends in capital investment and in the level of demand for high-skill workers were already in evidence between 2000 and 2007, the possibility that the post-2000 shifts were the result of the 2008 financial collapse should be discounted, according to Beaudry, Green and Sand.
I asked two labor experts, Autor and Lawrence Katz, an economist at Harvard, about their work. Autor and Katz both confirmed by email that the Beaudry analysis was credible and disturbing. Autor described the displacement of lesser skilled workers by high-skill college graduates as “a bit like musical chairs. Very bad.”
Katz agreed that “lots of new college graduates are moving into the service sector, that is, into traditionally non-college jobs, displacing young non-college workers.” While graduates of elite colleges — by definition a minority of all those getting degrees — continue to do well in the labor market, “the average college graduate is experiencing slow wage gains,” a trend that is “worrisome and problematic,” Katz said.
Two other studies have produced similar findings.
Andrew Sum, an economist at Northeastern University, is the lead author of a Brookings Institution paper published in March, “The Plummeting Labor Market Fortunes of Teens and Young Adults (http://www.brookings.edu/~/media/Research/Files/Reports/2014/03/14%20youth%20workforce/BMPP_Youth_March10EMBARGO.pdf).” In an email, Sum wrote that “problems of mal-employment among young college grads had increased since 2000, leaving more of them in jobs that do not require college degrees and they earn much less relative to their peers in college educated jobs when they do so. Mal-employment involves working in jobs that do not require a four-year degree or higher level cognitive skills.” It’s not just baristas, either: many college graduates are working in stores like Target or Whole Foods.
The downward pressures mean that the problem of declining opportunity will now be a fact of life across nearly all classes.
Insofar as men and women are pushed into jobs that pay less and provide less satisfaction, their hostility to both those above them and those below them is likely to intensify.
Of course it’s impossible to say for sure, but one possible development in an environment of general downward mobility is that fewer people will keep the common good in view while focusing on their own self-interest. Competition in the workplace is likely to become increasingly pervasive, and backlash over affirmative action policies benefiting minorities and women threatens to mobilize futher political reaction.
Beaudry and his collaborators do not say how long they think these post-2000 trends will continue to shape employment opportunity. Unforeseen technological advances could once again produce high-end employment seen in earlier periods of intense technological innovation, but Beaudry, Green and Sand are not optimistic.
The other possibility – the option pressed by (http://www.epi.org/publication/raising-americas-pay/) the Economic Policy Institute – is that government will intervene with policies to remediate stagnant or eroding wages.
The decline of opportunities for the college-educated may, paradoxically, offer those on the economic left a glimmer of hope. College graduates stuck in an employment trough are, in many cases, the children of the upscale Democratic elite – a constituency historically more concerned with social and cultural issues than economic ones.
This cohort is often more sympathetic to the problems of educated professionals than those of day laborers. If their children begin to face hurdles similar (although of course hardly identical) to those confronting manual and semi-skilled workers, interest in a more activist government may grow even as the question arises: Can policies be developed to counter adverse employment trends?
This possibility has been explored from various angles (http://faculty-web.at.northwestern.edu/economics/gordon/WSJ_121222.pdf) by Robert Gordon, an economist at Northwestern; Lawrence Summers (http://larrysummers.com/commentary/financial-times-columns/why-stagnation-might-prove-to-be-the-new-normal/), the former secretary of the Treasury, now at Harvard; and Erik Brynjolfsson and Andrew McAfee at M.I.T. who wrote “The Second Machine Age (http://books.wwnorton.com/books/The-Second-Machine-Age/).”
Gordon’s prognosis is perhaps the bleakest: “The future of American economic growth is dismal, and policy solutions are elusive.”
Summers has warned of the threat of sustained, long-term economic stagnation, but he is a believer (http://larrysummers.com/idle-workers-low-interest-rates-time-to-rebuild-infrastructure/) in the efficacy of government action: “The single most important step the U.S. government can take to reverse these discouraging trends is to mount a concerted, large-scale program directed at renewing our national infrastructure,” he wrote.
( Summers blind-squirreled that one. He can never make up for the financial deregulation he enabled )
Most optimistic of all are Brynjolfsson and McAfee, who argue that “the transformations brought about by digital technology will be profoundly beneficial ones. We’re heading into an era that won’t be just different; it will be better.”
Based on the evidence so far, though, this better era has yet to materialize. For now, pessimists appear to be carrying the day. It remains unclear when, or even if, that will change.
http://www.nytimes.com/2014/06/11/opinion/the-downward-ramp.html?hp&rref=opinion&_r=0
So the "Is College Cost Worth it?" answer of yes, really means under-employed college grads will do better of their lifetime, YES!, but only better than the under-employed no-college low-wagers they pushed down the income scale.
With the bursting of the tech bubble at the start of the 21st century, two decades of growth at the high end of the job market — once the province of college graduates with strong cognitive abilities — came to an abrupt halt, according to detailed studies of employment and investment patterns by three Canadian economists. We are still feeling the ramifications.
New evidence (http://economics.mit.edu/files/5554) produced by Paul Beaudry and David A. Green of the University of British Columbia, and Ben Sand of York University, demonstrates that the collapse (http://economics.mit.edu/files/1474), between 1980 and 2000, of mid-level, mid-pay jobs — gutted by automation or foreign competition (and often both) — has now spread to the high-skill labor market.
The U-shaped pattern of job growth characteristic of recent decades – strong at the top and bottom, but weak throughout the middle — has now become “a bit more like a downward ramp,” according to David Autor, an economist at M.I.T. who documented the decline (http://opinionator.blogs.nytimes.com/2013/08/24/how-technology-wrecks-the-middle-class/) in mid-level jobs in the 1980s and 1990s.
Preliminary findings suggest that this trend is alarming in almost every respect. Just one example: the drying up of cognitively demanding jobs is having a cascade effect.
College graduates are forced to take jobs beneath their level of educational training, moving into clerical and service positions instead of into finance and high tech.
This cascade eliminates opportunities for those without college degrees who would otherwise fill those service and clerical jobs. These displaced workers are then forced to take even less demanding, less well-paying jobs, in a process that pushes everyone down. At the bottom, the unskilled are pushed out of the job market altogether.
“Many higher skilled workers have moved down the occupation ladder and accepted less challenging employment,” Beaudry wrote in an emailed response to my inquiry about this development. “This movement down has been very detrimental to the low skilled, as higher skilled workers have taken many of ‘their’ jobs.”
Beaudry, Green and Sand, who all specialize in employment economics, have written two papers, “Inequality in the Future (http://www.aeaweb.org/articles.php?doi=10.1257/aer.104.5.381): The Declining Fortunes of the Young Since 2000,” and a more detailed (http://www.economics.ubc.ca/files/2013/05/pdf_paper_paul-beaudry-great-reversal.pdf)piece of scholarship, “The Great Reversal in the Demand for Skill and Cognitive Tasks.”
In these papers, the authors describe “a clear break in 2000,” a sudden shift in the job prospects of college graduates. They write that in earlier years, “each successive entry cohort has a higher share in cognitive occupations at the outset of their working lives.” From 1980 to 2000, the demand for highly skilled college graduates provided increased opportunity for good wages and advancement.
Beginning in 2000, however, each graduating class has encountered a smaller share of well-paying, high-prestige jobs. By 2010, the openings into these occupations were back to 1990 levels, the authors write.
Beaudry and his colleagues document their findings with some striking charts.
Figure 1 shows the steady rise from 1980 to 2000 in the cognitive level demanded by different employment tasks. In other words, a growing number of jobs required better reasoning ability, greater creativity and stronger management skills, until there was a sharp drop-off.
Photohttp://static01.nyt.com/images/2014/06/11/opinion/11edsall-chart1/11edsall-chart1-articleLarge.jpg
Beaudry, Green and Sand make the case that the technology bubble that burst in 2000 was far more significant than generally recognized. In their view, information technology underwent a period of revolutionary growth in the 1980s and 1990s, spurring a huge demand for well-educated workers to manage surging capital investments in computers, software and electronics.
At the turn of the 21st century, however, the I.T. revolution entered what the authors call a “maturity stage,” in which much of “the new capital is in place” and “cognitive task workers are only needed to maintain the new capital.”
Beaudry, Green and Sand illustrate the decline in I.T. capital investment. Figure 2 shows investment in information processing and software as a percentage of gross national product from the late 1940s to 2013. After climbing steadily from 1950 onward, the percentage drops precipitously from 2000 to 2003 and continues to fall at a slower rate through 2012.
http://static01.nyt.com/images/2014/06/11/opinion/11edsall-chart2/11edsall-chart2-articleLarge.jpg
Even more striking is the trend illustrated in Figure 3, which shows an almost vertical drop between 2000 and 2003 in the percentage of G.N.P. invested in computers and peripheral equipment.
http://static01.nyt.com/images/2014/06/11/opinion/11edsall-chart3/11edsall-chart3-articleLarge.jpg
Because these downward trends in capital investment and in the level of demand for high-skill workers were already in evidence between 2000 and 2007, the possibility that the post-2000 shifts were the result of the 2008 financial collapse should be discounted, according to Beaudry, Green and Sand.
I asked two labor experts, Autor and Lawrence Katz, an economist at Harvard, about their work. Autor and Katz both confirmed by email that the Beaudry analysis was credible and disturbing. Autor described the displacement of lesser skilled workers by high-skill college graduates as “a bit like musical chairs. Very bad.”
Katz agreed that “lots of new college graduates are moving into the service sector, that is, into traditionally non-college jobs, displacing young non-college workers.” While graduates of elite colleges — by definition a minority of all those getting degrees — continue to do well in the labor market, “the average college graduate is experiencing slow wage gains,” a trend that is “worrisome and problematic,” Katz said.
Two other studies have produced similar findings.
Andrew Sum, an economist at Northeastern University, is the lead author of a Brookings Institution paper published in March, “The Plummeting Labor Market Fortunes of Teens and Young Adults (http://www.brookings.edu/~/media/Research/Files/Reports/2014/03/14%20youth%20workforce/BMPP_Youth_March10EMBARGO.pdf).” In an email, Sum wrote that “problems of mal-employment among young college grads had increased since 2000, leaving more of them in jobs that do not require college degrees and they earn much less relative to their peers in college educated jobs when they do so. Mal-employment involves working in jobs that do not require a four-year degree or higher level cognitive skills.” It’s not just baristas, either: many college graduates are working in stores like Target or Whole Foods.
The downward pressures mean that the problem of declining opportunity will now be a fact of life across nearly all classes.
Insofar as men and women are pushed into jobs that pay less and provide less satisfaction, their hostility to both those above them and those below them is likely to intensify.
Of course it’s impossible to say for sure, but one possible development in an environment of general downward mobility is that fewer people will keep the common good in view while focusing on their own self-interest. Competition in the workplace is likely to become increasingly pervasive, and backlash over affirmative action policies benefiting minorities and women threatens to mobilize futher political reaction.
Beaudry and his collaborators do not say how long they think these post-2000 trends will continue to shape employment opportunity. Unforeseen technological advances could once again produce high-end employment seen in earlier periods of intense technological innovation, but Beaudry, Green and Sand are not optimistic.
The other possibility – the option pressed by (http://www.epi.org/publication/raising-americas-pay/) the Economic Policy Institute – is that government will intervene with policies to remediate stagnant or eroding wages.
The decline of opportunities for the college-educated may, paradoxically, offer those on the economic left a glimmer of hope. College graduates stuck in an employment trough are, in many cases, the children of the upscale Democratic elite – a constituency historically more concerned with social and cultural issues than economic ones.
This cohort is often more sympathetic to the problems of educated professionals than those of day laborers. If their children begin to face hurdles similar (although of course hardly identical) to those confronting manual and semi-skilled workers, interest in a more activist government may grow even as the question arises: Can policies be developed to counter adverse employment trends?
This possibility has been explored from various angles (http://faculty-web.at.northwestern.edu/economics/gordon/WSJ_121222.pdf) by Robert Gordon, an economist at Northwestern; Lawrence Summers (http://larrysummers.com/commentary/financial-times-columns/why-stagnation-might-prove-to-be-the-new-normal/), the former secretary of the Treasury, now at Harvard; and Erik Brynjolfsson and Andrew McAfee at M.I.T. who wrote “The Second Machine Age (http://books.wwnorton.com/books/The-Second-Machine-Age/).”
Gordon’s prognosis is perhaps the bleakest: “The future of American economic growth is dismal, and policy solutions are elusive.”
Summers has warned of the threat of sustained, long-term economic stagnation, but he is a believer (http://larrysummers.com/idle-workers-low-interest-rates-time-to-rebuild-infrastructure/) in the efficacy of government action: “The single most important step the U.S. government can take to reverse these discouraging trends is to mount a concerted, large-scale program directed at renewing our national infrastructure,” he wrote.
( Summers blind-squirreled that one. He can never make up for the financial deregulation he enabled )
Most optimistic of all are Brynjolfsson and McAfee, who argue that “the transformations brought about by digital technology will be profoundly beneficial ones. We’re heading into an era that won’t be just different; it will be better.”
Based on the evidence so far, though, this better era has yet to materialize. For now, pessimists appear to be carrying the day. It remains unclear when, or even if, that will change.
http://www.nytimes.com/2014/06/11/opinion/the-downward-ramp.html?hp&rref=opinion&_r=0
So the "Is College Cost Worth it?" answer of yes, really means under-employed college grads will do better of their lifetime, YES!, but only better than the under-employed no-college low-wagers they pushed down the income scale.