Structural transformation, the knowledge economy, and the geography of low-income work

Abstract

Abstract The structural transformation toward the knowledge economy is often credited with increasing polarization and precarization of the low end of the labor market. Little is known, however, about the geography of low-income work since the literature has largely ignored sub-national variation. This article explores how the knowledge economy as the main driver of the transformation has affected the concentration of low-income work throughout the Swedish regional system for the last 30+ years. We propose a model where the knowledge economy affects the prevalence of low-income work through three mechanisms: polarization, upgrading, and labor market tightening. We find that the prevalence of low-income work in Sweden has decreased, and regions have converged under this metric over time. The penetration of the knowledge economy is, moreover, associated with lower levels of low-income work, and even though the knowledge economy is related to increasing polarization and, through it, an expansion of the low-income sector, the opposite effects of upgrading and tightening outweigh it. We discuss these findings in relation to studies conducted in different contexts and argue that institutional embeddedness, in particular (but not exclusively) labor market institutions, matters greatly in shaping these outcomes.