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Labor Polarization in the US: A Warning for Mexico

June 25, 2019

According to the Federal Reserve Bank of San Francisco, the fall in the labor force participation of the population group known as the prime age work force (25-54 years) is mainly explained by the polarization of the labor market.

Polarization manifests itself in the gradual disappearance of routine jobs that have been in the middle of the distribution of wages and skills. These are jobs that are being replaced by automation and other new production technologies.

Only from 2000 to date, routine manual jobs have lost their share of employment by 4 percentage points.

These jobs tend to be concentrated in the manufacturing industry, but are also common in other industries, such as transportation and construction. These jobs have declined as production technologies have evolved to replace them and the use of these technologies has also spread to developing countries with low-cost labor.

This trend represents a challenge for employment in Mexico, whose specialization in manufacturing leaves it vulnerable to automation, although in the short term it offers the attraction of the availability of a growing workforce, when the United States is already in full employment and with strong demographic restrictions.


Recent research has found that the disappearance of manufacturing jobs in the US is closely related to the decline in participation rates of the working-age workforce: 25-54 years. (Charles, Hurst and Schwartz 2018).

Additionally, as the labor market has evolved and some workforce participants have withdrawn, other long-term economic and social trends have reinforced low participation rates among people of working age.

These factors include the increase in disability claims and other indicators of ill health (such as opioid abuse). There is also a growing fraction of individuals (mainly men) with a prison record and an increasing availability of leisure activities, such as online games.

Policies to improve labor participation recommended by the San Francisco Fed include encouraging skill acquisition and retraining, increasing job mobility, improving workforce health, and facilitating childcare (for working parents and / or mothers). ).

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