Technological Innovations and the Labor Force: Does Job Polarization Lead to Wage Polarization?

Technological innovations have drastically increased labor productivity, but low labor force participation continues to exist, with labor force participation at its lowest rate since 1977. Our analysis draws from the job polarization phenomenon, which explains how automation has been a contributing factor in the drastic decrease of middle-skill jobs, while it has assisted in the increase of employment shares for high-skill and low-skill occupations. The purpose of this research is to investigate the relationship between job polarization and wage polarization. We test whether changes in employment shares affect occupational income trends. We analyze real annual median income using a time series approach, focusing separately on low, middle, and high-skill occupational categories. We further analyze these broad occupational categories at a micro level by examining changes in the real median annual income of individual occupations that comprise them. Results from our time series analysis are compared to the trends in employment shares of each occupational category. We find minimal evidence that changes in employment shares affect income trends. Job polarization, in fact, does not lead to wage polarization. Finally, we speculate on the future of the labor force as technological innovations continue to alter tasks performed and change the configuration of occupations