The right skills: How to fight inequality with middle-income jobs - Canadian Government Executive
Best PracticePolicy
March 27, 2018

The right skills: How to fight inequality with middle-income jobs

As mid-skilled jobs change, getting policy right is vital.

Headlines about the world of work are often dominated by the two ends of the spectrum: one day, it’s tech genius millionaires amassing more wealth; the next, it’s the plight of the “gig economy” precariat stuck on the bottom rung.

But what about the in-betweeners? Stable, unromantic middle-skilled jobs – often defined as those that require more than a high school education but less than a full university degree – are in many cases the most under threat thanks to technological and societal change. But they can be a valuable tool for policymakers for lifting workers out of poverty and creating thriving economies.

So why are these jobs under threat, and what can government do to keep them?

The great divide

The middle is hollowing out. According to an OECD analysis, “between 1995 and 2015, all but two [member] countries… have experienced some degree of job polarisation, with middle-skill jobs losing shares relative to both top and bottom ones.”

Meanwhile, in the United States, think tank types have been wringing their hands about this issue for some time. A Brookings report warned in 2015 that, at the same time, the traditional middle of the US jobs market – made up largely of construction, production and clerical jobs – was shrinking, while new categories of middle-skilled jobs in areas like healthcare and mechanical repair were opening up, but employers were struggling to fill them.

“Policies to directly encourage American employers to create more such jobs… might be needed,” the report warned.

Stijn Broeke, a senior economist at the OECD, cautioned against too much alarmism: “It’s the share of middle-skilled jobs which is declining,” he said, “that doesn’t mean it’s the overall number of middle-skilled jobs which is declining.” In some countries, a growth in high or low-skill jobs, or both, could produce the same effect.

But nonetheless, he said, the polarisation of the labour market creates challenges: “What we are seeing in many OECD countries is increases in inequality and these trends are contributing to that.”

Matching skills to places

In Austin, Texas, economic good fortune, including a strong tech sector, has brought problems alongside its benefits. Affordability of housing in the centre of town is plummeting, while many residents – particularly among its non-white population, remain stuck in poverty.

For John-Michael Cortez, Special Assistant to Austin’s mayor, attracting middle-skilled jobs to the city is as important as taking part in the bunfight over Amazon’s next headquarters – a battle in which many US cities are now firmly locked.

“We’re not taking our foot off the gas on things like Google and Apple,” Cortez said in an interview last year, “our focus is on what are the types of jobs and companies that are going to create opportunities to pull people out of poverty.”

The city is redesigning its incentive schemes for businesses to try and attract those who can offer middle-skilled jobs in three target sectors: nursing, middle-skilled IT jobs such as help desk work, and skilled trades like plumbing. It hopes to pull 10,000 people out of poverty in five years by boosting the availability of such roles and training locals to fit them.

Meanwhile, in Denver, Colorado, middle-skilled jobs are also a focus. “We’re not just job training but we’re creating skills and knowledge related to where the jobs are going and where those opportunities may be in the future,” said Jeff Romine, Chief Economist for the Denver Office of Economic Development, last year. “We’ve been very strategic in the sense of thinking about what those clusters of opportunity are.” Denver is focusing its workforce programs in the service and retail sectors, as well as apprenticeships for low-level construction jobs.

In Britain, a new report by the Centre for Progressive Policy think tank calls for local government to adopt just such a “place-based” skills strategy to achieve inclusive growth. Different towns and cities will have very different labour market conditions, and therefore different remedies are needed.

For example, in one set of middle-skilled roles – the skilled trades – it points out that there is a 73% shortage for such positions in the mid-western English “Black Country,” but only a 26% shortage in Cheshire and Warrington, in the north-west of England.

“Local government,” the report said, must be “able to drive responses to local priorities”. In the UK’s highly centralised system it can be difficult for them to do so – for example, it is hard to offer students incentives to study particular vocational courses for which there is a strong need. The report believes further devolution of powers from central government might be necessary to help change the game.

A helping hand

According to the OECD, the shifting skills picture is more to do with the changing nature of jobs available within particular industries, than it is to do with the decline of industries overall.

While one-third of the reduction in middle-skilled jobs’ share of the labour market is to do with the decline of manufacturing, two-thirds is thanks to a decline in middle-skilled roles across all industries.

Such seismic change across the board highlights the need to keep workers nimble – providing them with opportunities to change or improve their skill set during their career.

This can be a particular challenge for low-skilled people, who are in the most need of help to shunt them up the ladder, but who can be the hardest to reach with this training. Some policy design also inherently favours higher-skilled workers. For example, employers who are handed subsidies to invest in training can often be tempted to splash all the cash on the highest-skilled workers because the returns for the business might be largest.

The Nordic countries, said Broeke, stand out as an exception – in Norway, the gap between the share of low-skilled and high-skilled workers participating in training is the lowest in the OECD. “Education and training remains accessible pretty much throughout people’s lives, and free of charge,” Broeke said.

But, he added: “That’s, of course, a very expensive system.” Norway and similar countries have a longstanding political commitment to adult education, and put up budgets to match.

Policies that are both less expensive and targeted at helping low-skilled workers move ahead include “retention and advancement schemes,” which Broeke said are more and more prevalent in evidence in OECD countries. These are aimed at low-skilled workers who struggle with keeping a job, or are finding it hard to make progress in their career.

In the United States, for example, the employment retention and advancement project ran from 1998 to 2011, in which time 13 states were handed grants to develop policy that would give workers better job stability and encourage them to make progress.

Skills training, particularly in the lower-middle end of the labour market, is rarely sexy, and hard to make a top-rank political issue. According to the former British skills minister Nick Boles, ex-prime minister Tony Blair once said: “You can announce you’re invading a country, but bury it in a speech about skills and nobody will notice.”

But in a time of coming unrest and change, the consequences of ignoring it could be catastrophic. It’s important to remember that changing times don’t just affect the top and bottom – governments have to focus on how to keep people well-situated in the middle.

This piece originally appeared on Apolitical, the global network for public servants. You can find the original here

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