Working Paper: NBER ID: w24468
Authors: Kerwin Kofi Charles; Erik Hurst; Mariel Schwartz
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.
Keywords: manufacturing; employment; labor market; opioid epidemic
JEL Codes: E24; J21; J23; R23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Decline in manufacturing jobs (O14) | Increased local opioid use and overdose deaths (I12) |
| Manufacturing sector transformation (O14) | Decline in labor demand (J23) |
| Import competition and automation (F10) | Decline in labor demand (J23) |
| Decline in manufacturing employment (O14) | Decline in employment rates for prime age workers (J69) |
| Decline in local manufacturing share (O14) | Decline in local employment rates (F66) |