Over the past two decades, the structure of occupations and jobs across many developed countries has changed significantly. There has been a growth in high-skill jobs such as managers, professionals, and technicians, and a decline in lesser-skill jobs such as process operatives or clerical and administrative workers. However, the change in the occupational structure is not entirely biased towards higher skills – low-skill jobs, particularly service occupations, have also grown.
There are several theories that explain this development, including information and communications technology (ICT) capital investments that substitute for routine task-based jobs (Author, Levy, and Murnane 2003; Goos and Manning 2007); the ability to offshore certain jobs to places where labour costs are lower is another explanation (Feenstra and Hanson 1996); and the increasing demand for low-skill services that occurs when relative incomes at the higher end rise – professionals working long hours may eat out more or employ someone to perform domestic chores they have little time for.
The existing empirical literature has tended to support the technology explanation. Goos, Manning, and Salomons (2009) use cross-country data on task content, offshorability and earnings inequality and find occupations grow when they score highly for non-routine tasks and shrink when they score highly for routine tasks. One possible issue with this analysis is that, as Blinder (2009) points out, it is routine jobs that are most easily offshorable as they typically require little customer interaction and performance can be easily monitored remotely as the series of tasks to be performed are well established. Hence, there is a lot of overlap between the technology and offshoring explanations. However, offshorability is more difficult to measure with any precision. Therefore, the task content measure might be picking up the true effect of this variable.
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