The Transformation of Manufacturing and the Decline in U.S. Employment

71 Pages Posted: 2 Apr 2018

See all articles by Kerwin Kofi Charles

Kerwin Kofi Charles

University of Chicago - Harris School of Public Policy

Erik Hurst

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Mariel Schwartz

University of Chicago

Multiple version iconThere are 2 versions of this paper

Date Written: March 2018

Abstract

Using data from a variety of sources, this paper comprehensively documents the dramatic changes in the manufacturing sector and the large decline in employment rates and hours worked among prime-aged Americans since 2000. We use cross-region variation to explore the link between declining manufacturing employment and labor market outcomes. We find that manufacturing decline in a local area in the 2000s had large and persistent negative effects on local employment rates, hours worked and wages. We also show that declining local manufacturing employment is related to rising local opioid use and deaths. These results suggest that some of the recent opioid epidemic is driven by demand factors in addition to increased opioid supply. We conclude the paper with a discussion of potential mediating factors associated with declining manufacturing labor demand including public and private transfer receipt, sectoral switching, and inter-region mobility. Overall, we conclude that the decline in manufacturing employment was a substantial cause of the decline in employment rates during the 2000s particularly for less educated prime age workers. Given the trends in both capital and skill deepening within this sector, we further conclude that many policies currently being discussed to promote the manufacturing sector will have only a modest labor market impact for less educated individuals.

Suggested Citation

Charles, Kerwin Kofi and Hurst, Erik and Schwartz, Mariel, The Transformation of Manufacturing and the Decline in U.S. Employment (March 2018). NBER Working Paper No. w24468, Available at SSRN: https://ssrn.com/abstract=3154250

Kerwin Kofi Charles (Contact Author)

University of Chicago - Harris School of Public Policy ( email )

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Erik Hurst

University of Chicago - Booth School of Business ( email )

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National Bureau of Economic Research (NBER)

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Mariel Schwartz

University of Chicago

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Chicago, IL 60637
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