Economics: Analyzing Wage Polarization and Automation's Impact

This essay examines the impact of labor market polarization on wages, focusing on the disappearance of middle-skill jobs and the rise of high-skill and low-skill occupations. It discusses how technology, particularly automation and information technology, contributes to this polarization, leading to income inequality. The essay further explores macroeconomic factors like business cycles and globalization as drivers of wage polarization. Finally, it analyzes the potential effects of automated driving on the labor market, highlighting both the cost savings and risks to employment, particularly in developing countries. Desklib provides a platform to explore more such assignments and study materials.

Running head: ECONOMICS ASSIGNMENT
Economics Assignment
Name of Student:
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Table of Contents
Introduction......................................................................................................................................2
Impact of Polarization on wages......................................................................................................2
Rationale for the polarization of wages...........................................................................................2
Impact on labour market if automated driving becomes a reality...................................................3
Conclusion.......................................................................................................................................4
References........................................................................................................................................5

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Introduction
Polarization of labour refers to a situation when the jobs requiring moderate skill level
seems to disappear in compare to the jobs which are at bottom level comprised of “few skills”
and at the top level requiring greater skills. The overall job structure in the U.S. has discerned to
be polarized sharply in the last two decades because of increasing job openings in “both high-
skill, high-wage occupations and low-skill, low wage occupations”. This is coupled with
“contracting opportunities in middle-wage, middle-skill white-collar and blue-collar jobs”. These
are identified as the major contributor for causing income equality in the country. The report
aims to depict the impact of polarization on wages, rationale for the polarization of wages and
impact on labour market if automated driving becomes a reality.
Impact of Polarization on wages
As discussed by Autor, the barbell shape of the “occupational employment” growth has
shown that the occupational polarization will have a catalysing impact on the wage polarization.
This is depicted with relative rise in both high-education, “abstract task-intensive jobs and in
low-education, manual task-intensive jobs”1. It needs to be discerned that “information
technology has strongly contributed to the employment polarization”. This is measured in terms
of the quantity of the jobs and is not expected to get culminated in the corresponding wage
polarization. The advent of “information technology and computerization” has strongly
complemented the workers for performing of abstract task incentive jobs. In addition to this,
changes in the technology has altered the types of the jobs available and “polarization” of the
labour market, in which wage gains has been disproportionately distributed across the top and
the bottom of the skill and income distribution in compared to the middle.
Rationale for the polarization of wages
As per the empirical evidences gathered from the research it has been discerned that
“automation and information technology” has been seen to cause lesser degree of “wage
polarization” in the U.S. This consideration has been explained with the relevance of the
1 David, H. "Why are there still so many jobs? The history and future of workplace automation." Journal of
Economic Perspectives 29.3 (2015): 3-30.

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different types of the cross-sectional data. Therefore, technological changes are “far from the
only factor affecting” the U.S. labour market in last 15 years. Some of the other causes for the
polarization of the wages has been depicted with the different types of the macroeconomic
factors. The first main reason is considered with effects of business cycle. This has led to
“bursting of “dot-com” bubble in 2000 and collapse” of the curtailed investment and innovative
activity. The second important factor is determined with the “employment dislocations in the
U.S. labour market” which is depicted with sharp rise in the import penetration and rapid
globalization. In addition to this, the increasing pace of employment growth in both “high and
low-education jobs” has considerably reduced the share of employment accounted with the
“middle-skill” jobs. In 1979 the middle-skill occupations such as “sales; office and
administrative workers; production workers; and operatives” accounting for a total 60% of
employment.
Impact on labour market if automated driving becomes a reality
It needs to be understood that artificial intelligence (AI) in automated driving, will be
having a central impact on the “global labour market in the future years”. There have been
several effects identified pertaining to “working time, remuneration and on the working
environment, new forms of employment and the impact on labour relations”. The impact of new
“technology on the labour market” will be mostly seen with the blue and the white-collar job
sectors. The faster process of “division of labour” and more number of single working algorithm
for a detailed job complexity will result in declining workforce. This is seen because the
intelligent algorithm used in the automated driving will be able to replace the labour required for
manually driving the cars. The positive aspects of the change in technology may be identified
with considerable savings in terms of cost of labour and products. In addition to this, the
autonomous computer system in cars will not be dependent on the external factors to measure the
work reliability constantly and it “can work in danger zones” as well thereby replacing the risk
involved in employing manual labour. The negative impact of the automation process is feared in
the labour market of developing countries such as “North African countries and Indonesia”
which are not yet equipped for this due to lack of education and “investment in a (digital)
infrastructure”2.
2 Wisskirchen, Gerlind, et al. "Artificial intelligence and robotics and their impact on the workplace." The
International Bar Association Global Employment Institute (IBA GEI) (2017).

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Conclusion
The main impact of the polarization on wages has been depicted with occupational
polarization having a catalysing impact on the wage polarization. The rationale for this has been
depicted with the various types the macroeconomic factors along with the significant changes in
the technology and automation.

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References
David, H. "Why are there still so many jobs? The history and future of workplace
automation." Journal of Economic Perspectives 29.3 (2015): 3-30.
Wisskirchen, Gerlind, et al. "Artificial intelligence and robotics and their impact on the
workplace." The International Bar Association Global Employment Institute (IBA GEI) (2017).