If the first part of the 19th century had seen substitution effects dominate, the latter half saw compensation effects in the ascendancy. Moving into the 20th century, and the third industrial revolution, these emerging patterns in jobs and wages have become clearer. Technology appears to be resulting in faster, wider and deeper degrees of hollowing-out than in the past. Why? Because 20th century machines have substituted not just for manual human tasks, but cognitive ones too. The set of human skills machines could reproduce, at lower cost, has both widened and deepened. Chart 22 shows the employment pattern in the UK over recent years, ranking professions’ skills by their average pay, while Chart 23 shows the picture for a set of countries over a similar period. They tell a striking and consistent story of mid-skill jobs being lost, counterbalanced by employment gains at the high-skill and, to lesser extent, low-skill segments of the workforce. The U-shape, or “hollowing out”, has deepened and widened. What has happened to these displaced mid-skill workers? Some appear to have “skilled-up”, typically through higher or further education. In the UK, total numbers in higher education have increased from around 130,000 in 1970 to over 2 million today. In the US, total numbers in higher education have increased from 2.4 million just after the Second World War, to over 20 million today. As in the late 19th century, this skilling-up has enabled workers to keep one-step-ahead of the machine. But some displaced workers have not been on the up-escalator.
Chart 18: Percentage of workforce by job type Agricultural Labourers  Telephonists and Telegraph Operators  Percentage of workforce  8  Percentage of workforce  0.6  7  0.5  6  0.4  5 4  0.3  3  0.2  2  0.1  1 -  Accountants Percentage of workforce  -  Hairdressers 0.8  Percentage of workforce  0.7  0.7  0.6  0.6  0.5  0.5  0.4  0.4  0.3  0.3  0.2  0.2  0.1  0.1  -  -  Source: Deloitte (2015)  22  0.8  BIS central bankers’ speeches  Chart 19: Share of unskilled workers in the UK, 1550–1849 Percent  Chart 20: Employment shares in US manufacturing, 1850–1910 45  Percentage point change in relative to 1850  White collar Skilled blue collar  40  15.0  Operative/unskilled  35  10.0  30  5.0  25  0.0  20  -5.0  15  -10.0  10  -15.0  5 155-Q99 1600-49 1650-99 1700-49 1750-99 1800-49  0  Source: de Pleijt and Weisdorf (2014)  1850  1860  1870  1880  1900  -20.0  1910  Source: Katz and Margo (2013)  Chart 21: Average real wages of unskilled building workers and GDP per capita, since 1270 Log scale, mean of 1270-1870=100  Allen Real Wages (Allen) Clark Real Wages (Clark)  320  GDP/cap GDP/cap 160  80  40  1270  1320  1370  1420  1470  1520  1570  1620  1670  1720  1770  1820  20 1870  Source: Broadberry, Campbell, Klein and van Leeuwen (2015); Clark (2005); Allen (2001)  BIS central bankers’ speeches  23  Chart 22: Change in employment shares, 2004 – 2014 Percent change in employment  5 4 3 2 1 0 -1  Managers, Professional Associate Skilled Process, Directors and Occupations Professional Trades Plant and Senior and Technical Occupations Machine Officials Occupations Operatives  Administrative Caring, Elementary Sales and and Leisure and Occupations Customer Secretarial Other Service Service Occupations Occupations Occupations  -2  Decreasing median pay  Source: ONS Notes: This chart shows the percentage point change in employment as a share of total employment.