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Home Opinion Clinging on to a middle class life?
Middle-class • Jobs • Wages

Clinging on to a middle class life?

Brian Bell & Stephen Machin - 15 April 2014

It is increasingly difficult to enter a profession and be sure that a comfortable and secure middle-class lifestyle will automatically follow

Labour markets in advanced economies have changed fundamentally over the last few decades. In many places, wage differentials by education have increased substantially and those toward the top of the wage distribution have done better than those further down over an extended time period. At the same time a polarisation of jobs has occurred, with those in occupations performing tasks that require mainly routine skills facing additional pressures as technology has replaced such work.

The standard policy recommendation in light of these developments has been to focus on raising the education levels of the population to better equip workers to face the challenges of the new labour market. This is surely right. But there is a risk that policymakers fail to notice the relative deterioration for a diverse group of occupations that employ workers who are highly qualified and would historically have been able to live a very comfortable middle-class life – but may not be able to sustain such a lifestyle today.

1. Middle-class jobs, middle-class wages?
There are many white-collar occupations that employ large numbers of graduates and where work involves non-routine tasks. The opening paragraph would suggest that such occupations should have outperformed others over the recent past. Yet there is a surprising amount of variability, with the evidence suggesting that many of these occupations have faired worse than the average and at the same time they have failed to maintain their share at the top of the earnings distribution.

To see this, we selected a set of occupations for the UK in 1975 and 2013 that could be consistently tracked and that would surely be considered solidly middle-class. These occupations are now almost uniformly graduate-only and would have been predominantly so in the 1970s. Examples include academics, natural scientists, mechanical engineers, accountants and teachers. We computed the average (mean) wage in each occupation and compared it with the average wage across all occupations.

To be sure these are still relatively well-paid jobs. The average academic in the UK earns £48,000 p.a. against the national full-time average of £33,000. Indeed all of the occupations we considered earned more than the average, as one would expect given the educational attainment of the workers. But there is a clear trend over time toward an erosion of the wage premium. A teacher earned 24% more than the average in 1975, but only 6% more in 2013.

2. High-pay jobs
If these high-skill, non-routine occupations have not seen the relative gains we might have expected, the natural question is who have been the winners? A key part of the explanation is that these occupations have failed to keep pace at the top of the distribution. In 1975, teachers had double the probability of an average worker of being in the top 5% of all earners. By 2012, the top 5% of earners (those earning over £68,000) included almost no teachers. This pattern of gradual elimination from the top part of the earnings distribution is true for all the professions shown above.

Thus we have a situation in which these high-skill occupations pay relatively well at the median but not at the top – dragging the mean wage down. In their place, finance workers, management consultants, medical practitioners, IT professionals and the like have accounted for a rising share of the top earners. From a policy perspective we can see that a whole set of professions are likely to find it difficult to retain the very best workers as the wage structure is more compressed in these jobs than for the economy as a whole.

3. Accessing middle class living
Should policymakers worry about the fact that so many high-skill occupations have faired relatively poorly? On one level, the answer is no. These are still very well paid occupations and it is inevitable that some professions do better and some do worse over any period of analysis as supply and demand varies.

On another level however it should at least give us pause for thought. These are all occupations that seem to be the type that policymakers have been encouraging workers to equip themselves to enter. And yet these professions increasingly deny access to the top earnings in the economy.

Perhaps in the end what this tells us is that it is increasingly difficult to enter a profession and be sure that a comfortable and secure middle-class lifestyle will automatically follow. This, of course, has clear ramifications for the high profile policy discussions currently taking place on wages and living standards.

Brian Bell is associate professor of economics at the University of Oxford and Stephen Machin is professor of economics at University College, London and research director of the Centre for Economic Performance at the London School of Economics

This is a contribution to the “Making Progressive Politics Work” publication which will inform the Progressive Governance Conference taking place in Amsterdam on 24/25 April, 2014

This is a contribution to Policy Network's work on Progressive Capitalism.

Tags: Brian Bell , Stephen Machin , Opinion , Progressive Governance Conference , Progressive Governance , Growth , Social stability , Living standards , Policy Network , Global Progress , Competitiveness , Growth , Solidarity , Globalisation , Centre-left , Centre-left , Europe , EU , European Union , Eurozone , Southern Europe , Northern Europe , Production , Productivity , Growth , Wages , Investment , Jobs , Globalisation , Equality , Pre-distribution

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