Job Polarization and Labor Market Outcomes for Older, Middle-Skilled Workers

Abstract

Numerous studies have found that even as employment growth in high- and low-skill occupations has been robust, employment in middle-skill occupations such as office administration and manufacturing is in long-term decline.  The timing of this decline could not be worse for the older workers looking to prolong their careers to compensate for decreasing Social Security and pension income.  But few existing studies have examined the consequences of job polarization on older workers, who may be less likely than prime-aged workers to find work in high- or low-skill occupations.  This paper uses the Survey of Income and Program Participation to investigate employment outcomes specifically for older workers first observed in middle-skill jobs.  If they leave a middle-skill job, are they able to find jobs in another skill level, or are they forced out of employment prematurely?  What are the circumstances surrounding these transitions, and how are the workers’ earnings affected?

This paper found that:

• Middle-skill employment among workers ages 50-61 has declined, by a magnitude that is similar to the decline among workers ages 35-49.
• But at least until the Great Recession, the probability of transitioning to a high- or low-skill job was increasing for older workers, and the share of workers ages 50-61 exiting employment was decreasing.
• While transitions from middle- to low-skill jobs may not be preferred, the fact that only half of these transitions occur after an involuntary job loss or involve switching from a full-time to a part-time work schedule suggests that these transitions may have been by choice.
• Earnings changes after skill-level transitions are modest and often positive.

 
The policy implications of this paper are:

• Both prime-aged and older workers have struggled to remain in middle-skill occupations but, over the long run, older workers have grown increasingly likely to land on their feet.
• Middle-skilled workers may require unemployment benefits and other income-support programs and job training to ensure that the decline in their employment opportunities does not have long-lasting consequences, but that safety net is no more necessary for older workers.