Inequality and Specialization:
The Growth of Low-Skill Service Jobs in the United States_
Abstract
After a decade in which wages and employment fell precipitously in low-skill occupations
and expanded in high-skill occupations, the shape of U.S. earnings and job growth sharply
polarized in the 1990s. Employment shares and relative earnings rose in both low and highskill
jobs, leading to a distinct U-shaped relationship between skill levels and employment and
wage growth. This paper analyzes the sources of the changing shape of the lower-tail of the
U.S. and wage and employment distributions. A first contribution is to document a hitherto
unknown fact: the twisting of the lower tail is substantially accounted for by a single proximate
cause—rising employment and wages in low-education, in-person service occupations. We study
the determinants of this rise at the level of local labor markets over the period of 1950 through
2005. Our approach is rooted in a model of changing task specialization in which ‘routine’
clerical and production tasks are displaced by automation. We find that in labor markets that
were initially specialized in routine-intensive occupations, employment and wages polarized after
1980, with growing employment and earnings in both high-skill occupations and low-skill service
jobs.