First Advisor

Dr. Grace Arnold

Date of Award

Spring 6-2026

Document Type

Thesis

Degree Name

Bachelor of Science (B.S.) in Economics and University Honors

Department

Economics

Language

English

Subjects

Labor Market Polarization, Task Biased Technological Change, Cleansing Effect of Recessions, Routine Job Displacement, Economic Downturns, Middle Skill Employment

Abstract

Abstract

This paper investigates the episodic nature of labor market polarization in the United States between 2000 and 2010. While the Skill-Biased Technological Change (SBTC) framework may have successfully explained the rise of inequality in the 1980s, it struggled to account for the wage stagnation and hollowing out of the middle class that followed in the 1990s and 2000s. Utilizing Task-Biased Technological Change (TBTC) as a primary lens, this study examines how the codification of routine tasks allowed for the widespread substitution of middle-skill labor by technological capital. By synthesizing IPUMS-CPS occupational data with Bureau of Economic Analysis (BEA) investment statistics, the research employs an OLS regression model to test the correlation between IT investment and task-based employment shares.

The results reveal a strong correlation between technological investment and the contraction of routine occupations, while finding that technology explains a much smaller portion of the variance in the abstract and manual tails of the distribution. Most significantly, this paper finds that the displacement of routine labor is not a linear trend but an episodic one. The velocity of job share loss nearly doubled during the recessionary windows of 2001 and 2008 compared to periods of stable growth. These findings provide empirical support for the "cleansing effect" hypothesis, suggesting that economic downturns act as catalysts that accelerate the permanent restructuring of the labor market through technology investment.

Download

Share

COinS