2. Nick Bloom, Stanford University, Labor Topics, 2015 1 LABOR TOPICS Nick Bloom Polarization and inequality

3. Nick Bloom, Stanford University, Labor Topics, 2015 2 Top 1% Polarization

4. Nick Bloom, Stanford University, Labor Topics, 2015 3 ALM (2003) predicts labor market polarization Goos and Manning (2008, RESTAT) point out in the paper “Lousy and lovely jobs” that routine tasks are most substitutable by computers Hence, occupations with a high input of routine tasks should expect to see the largest falls in employment and income from computerization They test this using both US and UK data and find supportive evidence

5. Nick Bloom, Stanford University, Labor Topics, 2015 First they establish that routine tasks are most concentrated in median paid jobs 4 Source: Goos and Manning (2008, RESTAT)

6. Nick Bloom, Stanford University, Labor Topics, 2015 They then show median jobs have shrunk, with a J-curve across all (UK) jobs 5 Source: Goos and Manning (2008, RESTAT)

7. Nick Bloom, Stanford University, Labor Topics, 2015 The jobs that have expanded are either non- routine manual or non-routine cognitive 6 Source: Goos and Manning (2008, RESTAT)

8. Nick Bloom, Stanford University, Labor Topics, 2015 And in fact many low skilled jobs have grown 7 Source: Goos and Manning (2008, RESTAT) And that’s despite relabelling (i.e. “cleaners” now being called “sanitation consultants” or some other ridiculous name)

9. Nick Bloom, Stanford University, Labor Topics, 2015 These changes are within and between industries 8 Source: Goos and Manning (2008, RESTAT)

10. Nick Bloom, Stanford University, Labor Topics, 2015 9 Source: Acemoglu and Autor (2010, HLE) The Acemoglu and Autor paper shows similar polarization by occupation (US data)

11. Nick Bloom, Stanford University, Labor Topics, 2015 10 Source: Acemoglu and Autor (2010, HLE) In fact this polarization is global in scope

12. Nick Bloom, Stanford University, Labor Topics, 2015 11 Source: Autor and Dorn (2013, AER) Recent Autor and Dorn paper argues clear service/non-service difference in low skill

13. Nick Bloom, Stanford University, Labor Topics, 2015 Polarization of US incomes too (1/2) 12 Source: Guvenen, Ozkan and Song (2013)

14. Nick Bloom, Stanford University, Labor Topics, 2015 Polarization of US incomes too (2/2) 13 Source: Autor and Dorn, (2013, AER)

15. Nick Bloom, Stanford University, Labor Topics, 2015 14 Top 1% Polarization

16. Nick Bloom, Stanford University, Labor Topics, 2015 Related topic is the change in inequality over time Well known paper by Piketty and Saez (2003, QJE) looks at income inequality over time, focusing on top 1% They do this by assembling a variety of IRS related sources on income and estate taxes paid, plus some other supportive data on CEO pay etc. (administrative data) While this is not closely related to SBTC, there are some parallels (and I think it’s another important topic) 15

17. Nick Bloom, Stanford University, Labor Topics, 2015 First result is incomes are very skewed! 16 Source: Sept. 2013 Update to Piketty and Saez (2003)

18. Nick Bloom, Stanford University, Labor Topics, 2015 Cross sectional income distribution 17

19. Nick Bloom, Stanford University, Labor Topics, 2015 Second, recent income growth is also skewed (so skew likely to keep rising) 18 Source: Sept. 2013 Update to Piketty and Saez (2003)

20. Nick Bloom, Stanford University, Labor Topics, 2015 Third, this inequality (at least for top income shares) has a U-shape over 20 th Century 19 Source: http://eml.berkeley.edu/~saez/lecture_saez_chicago14.pdfhttp://eml.berkeley.edu/~saez/lecture_saez_chicago14.pdf

21. Nick Bloom, Stanford University, Labor Topics, 2015 Third, this inequality (at least for top income shares) has a U-shape over 20 th Century 20 Source: http://eml.berkeley.edu/~saez/lecture_saez_chicago14.pdfhttp://eml.berkeley.edu/~saez/lecture_saez_chicago14.pdf

22. Nick Bloom, Stanford University, Labor Topics, 2015 Reason fall in capital incomes from WWII onwards, with rebound only via wage income 21 Source: July 2010 Update to Piketty and Saez (2003) Early 20 th century super rich collected dividends, probably from fortunes accumulated in 19th Century. By end 20 th century more wage incomes

23. Nick Bloom, Stanford University, Labor Topics, 2015 22 Reason fall in capital incomes from WWII onwards, with rebound only via wage income Source: http://eml.berkeley.edu/~saez/lecture_saez_chicago14.pdfhttp://eml.berkeley.edu/~saez/lecture_saez_chicago14.pdf

24. Nick Bloom, Stanford University, Labor Topics, 2015 Similar results for wealth (not incomes) 23 Source: http://eml.berkeley.edu/~saez/lecture_saez_chicago14.pdfhttp://eml.berkeley.edu/~saez/lecture_saez_chicago14.pdf

25. Nick Bloom, Stanford University, Labor Topics, 2015 The UK pattern is similar to the US 24 Source: Atkinson (2003)

26. Nick Bloom, Stanford University, Labor Topics, 2015 Canada is similar too 25 Source: http://eml.berkeley.edu/~saez/lecture_saez_chicago14.pdfhttp://eml.berkeley.edu/~saez/lecture_saez_chicago14.pdf

27. Nick Bloom, Stanford University, Labor Topics, 2015 As always the French have to be different 26 Source: Atkinson (2003)

28. Nick Bloom, Stanford University, Labor Topics, 2015 Japan and Sweden similar to France 27 Source: http://eml.berkeley.edu/~saez/lecture_saez_chicago14.pdfhttp://eml.berkeley.edu/~saez/lecture_saez_chicago14.pdf

29. Nick Bloom, Stanford University, Labor Topics, 2015 So what explains these long-run moves in income inequality? Piketty and Saez (2003) speculate one factor is much higher levels of wage and capital income tax since WWII –Slows down the accrual of multi-generational fortunes Another factor could be regulation of top pay (e.g. particularly during WWII) combined with social-norms (e.g. after WWI greater power of unions and left wing). SBTC may also be a factor, although hard to square with different French experience (which had no wage income recovery in late 20 th Century). 28

30. Nick Bloom, Stanford University, Labor Topics, 2015 An alternative and interesting take (from Greg Mankiw’s blog) 29