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Places versus People: The Ins and Outs of Labor Market Adjustment to Globalization

December 2024

Working Paper Number:

CES-24-78

Abstract

We analyze the distinct adjustment paths of U.S. labor markets (places) and U.S. workers (people) to increased Chinese import competition during the 2000s. Using comprehensive register data for 2000'2019, we document that employment levels more than fully rebound in trade-exposed places after 2010, while employment-to-population ratios remain depressed and manufacturing employment further atrophies. The adjustment of places to trade shocks is generational: affected areas recover primarily by adding workers to non-manufacturing who were below working age when the shock occurred. Entrants are disproportionately native-born Hispanics, foreign-born immigrants, women, and the college-educated, who find employment in relatively low-wage service sectors like medical services, education, retail, and hospitality. Using the panel structure of the employer-employee data, we decompose changes in the employment composition of places into trade-induced shifts in the gross flows of people across sectors, locations, and non-employment status. Contrary to standard models, trade shocks reduce geographic mobility, with both in- and out-migration remaining depressed through 2019. The employment recovery instead stems almost entirely from young adults and foreign-born immigrants taking their first U.S. jobs in affected areas, with minimal contributions from cross-sector transitions of former manufacturing workers. Although worker inflows into non-manufacturing more than fully offset manufacturing employment losses in trade-exposed locations after 2010, incumbent workers neither fully recover earnings losses nor predominately exit the labor market, but rather age in place as communities undergo rapid demographic and industrial transitions.

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labor, hispanic, recession, tariff, immigrant, immigrated, relocating, workforce, immigration, unemployed, disparity, migrate, migration, migrating, relocate, immigrant workers

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Standard Industrial Classification, Bureau of Labor Statistics, National Bureau of Economic Research, County Business Patterns, North American Free Trade Agreement, Employer Identification Numbers, North American Industry Classification System, American Community Survey, Social Security Number, Longitudinal Employer Household Dynamics, Heckscher-Ohlin, Protected Identification Key, Employment History File, Employer Characteristics File, Census Bureau Disclosure Review Board, World Trade Organization, Person Validation System, Census Numident

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