Polarization

Polarization refers to the process where middle-class jobs requiring moderate levels of skill decrease, leading to a relative increase in both low-paid and well-paid jobs.
By:
Updated: Jun 20, 2024

3 key takeaways

Copy link to section
  • Polarization results in fewer middle-class jobs and more jobs at the extremes of the pay scale.
  • It contributes to growing income inequality within a country.
  • Factors like globalization and technological advancements drive polarization.

What is polarization?

Copy link to section

Polarization is an economic phenomenon where the labor market sees a decline in middle-skill jobs, leading to a more pronounced divide between low-wage and high-wage occupations.

This shift often results from technological advancements and globalization, which either automate middle-skill jobs or outsource them to countries with lower labor costs.

Consequently, the job market becomes increasingly divided, with fewer opportunities for middle-income earners and a widening gap between the rich and the poor.

Factors contributing to polarization

Copy link to section
  • Globalization has led to the relocation of many manufacturing and middle-skill jobs to countries with cheaper labor costs. This outsourcing reduces the availability of these jobs in higher-income countries, contributing to the decline of the middle class.
  • Technological Advancements such as automation and artificial intelligence replace many routine and repetitive tasks typically performed by middle-skill workers. While technology creates high-skill jobs in tech sectors, it also increases the demand for low-skill jobs that cannot be automated, such as service and maintenance roles.

Impacts of polarization

Copy link to section
  • Income Inequality: With fewer middle-class jobs, income inequality grows as the economy becomes polarized between low-paying and high-paying jobs.
  • Economic Mobility: The reduction in middle-class jobs makes it harder for individuals to move up the economic ladder, as there are fewer stepping-stone opportunities available.
  • Social Consequences: Polarization can lead to social unrest and dissatisfaction as large segments of the population feel left behind in a rapidly changing economy.

Understanding polarization helps in grasping the broader implications of economic changes and may lead to exploring topics like wage disparity, the future of work, and policies for economic inclusion.



Sources & references
Risk disclaimer
Arti
AI Financial Assistant
Arti is a specialized AI Financial Assistant at Invezz, created to support the editorial team. He leverages both AI and the Invezz.com knowledge base, understands over 100,000... read more.