TY - JOUR AU - Charles, Kerwin Kofi AU - Hurst, Erik AU - Schwartz, Mariel TI - The Transformation of Manufacturing and the Decline in U.S. Employment JF - National Bureau of Economic Research Working Paper Series VL - No. 24468 PY - 2018 Y2 - March 2018 DO - 10.3386/w24468 UR - http://www.nber.org/papers/w24468 L1 - http://www.nber.org/papers/w24468.pdf N1 - Author contact info: Kerwin Kofi Charles School of Management Yale University 165 Whitney Avenue New Haven, CT. 06511 Fax: NA E-Mail: kerwin.charles@yale.edu Erik Hurst Booth School of Business University of Chicago Harper Center Chicago, IL 60637 Tel: 773/834-4073 Fax: 773/702-0458 E-Mail: erik.hurst@chicagobooth.edu Mariel Schwartz Kenneth C. Griffin Department of Economics University of Chicago 5757 S. University Avenue Chicago, IL 60637 E-Mail: mes98@uchicago.edu M1 - published as Kerwin Kofi Charles, Erik Hurst, Mariel Schwartz. "The Transformation of Manufacturing and the Decline in U.S. Employment," in Martin Eichenbaum and Jonathan A. Parker, editors, "NBER Macroeconomics Annual 2018, volume 33" University of Chicago Press (2019) AB - 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. ER -