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.
Document Tags and Keywords
Keywords
Keywords are automatically generated using KeyBERT, a powerful and innovative
keyword extraction tool that utilizes BERT embeddings to ensure high-quality and contextually relevant
keywords.
By analyzing the content of working papers, KeyBERT identifies terms and phrases that capture the essence of the
text, highlighting the most significant topics and trends. This approach not only enhances searchability but
provides connections that go beyond potentially domain-specific author-defined keywords.
:
labor,
hispanic,
recession,
tariff,
immigrant,
immigrated,
relocating,
workforce,
immigration,
unemployed,
disparity,
migrate,
migration,
migrating,
relocate,
immigrant workers
Tags
Tags are automatically generated using a pretrained language model from spaCy, which excels at
several tasks, including entity tagging.
The model is able to label words and phrases by part-of-speech,
including "organizations." By filtering for frequent words and phrases labeled as "organizations", papers are
identified to contain references to specific institutions, datasets, and other organizations.
:
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
Similar Working Papers
Similarity between working papers are determined by an unsupervised neural
network model
know as Doc2Vec.
Doc2Vec is a model that represents entire documents as fixed-length vectors, allowing for the
capture of semantic meaning in a way that relates to the context of words within the document. The model learns to
associate a unique vector with each document while simultaneously learning word vectors, enabling tasks such as
document classification, clustering, and similarity detection by preserving the order and structure of words. The
document vectors are compared using cosine similarity/distance to determine the most similar working papers.
Papers identified with đŸ”¥ are in the top 20% of similarity.
The 10 most similar working papers to the working paper 'Places versus People: The Ins and Outs of Labor Market Adjustment to Globalization' are listed below in order of similarity.
-
Working PaperTransitional Costs and the Decline of Coal: Worker-Level Evidence
September 2024
Working Paper Number:
CES-24-53
We examine the labor market impacts of the U.S. coal industry's decline using comprehensive administrative data on workers from 2005-2021. Coal workers most exposed to the industry's contraction experienced substantial earnings losses, equivalent to 1.6 years of predecline wages. These losses stem from both reduced employment duration (0.37 fewer years employed) and lower annual earnings (17 percent decline) between 2012-2019, relative to similar workers less exposed to coal's decline. Earnings reductions primarly occur when workers remain in local labor markets but are not employed in mining. While coal workers do not exhibit lower geographic mobility, relocation does not significantly mitigate their earnings losses.View Full Paper PDF
-
Working PaperThe China Shock Revisited: Job Reallocation and Industry Switching in U.S. Labor Markets
October 2024
Working Paper Number:
CES-24-65
Using confidential administrative data from the U.S. Census Bureau we revisit how the rise in Chinese import penetration has reshaped U.S. local labor markets. Local labor markets more exposed to the China shock experienced larger reallocation from manufacturing to services jobs. Most of this reallocation occurred within firms that simultaneously contracted manufacturing operations while expanding employment in services. Notably, about 40% of the manufacturing job loss effect is due to continuing establishments switching their primary activity from manufacturing to trade-related services such as research, management, and wholesale. The effects of Chinese import penetration vary by local labor market characteristics. In areas with high human capital, including much of the West Coast and large cities, job reallocation from manufacturing to services has been substantial. In areas with low human capital and a high initial manufacturing share, including much of the Midwest and the South, we find limited job reallocation. We estimate this differential response to the China shock accounts for half of the 1997-2007 job growth gap between these regions.View Full Paper PDF
-
Working PaperLocation, Location, Location
October 2021
Working Paper Number:
CES-21-32R
We use data from the Longitudinal Employer-Household Dynamics program to study the causal effects of location on earnings. Starting from a model with employer and employee fixed effects, we estimate the average earnings premiums associated with jobs in different commuting zones (CZs) and different CZ-industry pairs. About half of the variation in mean wages across CZs is attributable to differences in worker ability (as measured by their fixed effects); the other half is attributable to place effects. We show that the place effects from a richly specified cross sectional wage model overstate the causal effects of place (due to unobserved worker ability), while those from a model that simply adds person fixed effects understate the causal effects (due to unobserved heterogeneity in the premiums paid by different firms in the same CZ). Local industry agglomerations are associated with higher wages, but overall differences in industry composition and in CZ-specific returns to industries explain only a small fraction of average place effects. Estimating separate place effects for college and non-college workers, we find that the college wage gap is bigger in larger and higher-wage places, but that two-thirds of this variation is attributable to differences in the relative skills of the two groups in different places. Most of the remaining variation reflects the enhanced sorting of more educated workers to higher-paying industries in larger and higher-wage CZs. Finally, we find that local housing costs at least fully offset local pay premiums, implying that workers who move to larger CZs have no higher net-of-housing consumption.View Full Paper PDF
-
Working PaperIndustry Wage Differentials: A Firm-Based Approach
August 2023
Working Paper Number:
CES-23-40
We revisit the estimation of industry wage differentials using linked employer-employee data from the U.S. LEHD program. Building on recent advances in the measurement of employer wage premiums, we define the industry wage effect as the employment-weighted average workplace premium in that industry. We show that cross-sectional estimates of industry differentials overstate the pay premiums due to unmeasured worker heterogeneity. Conversely, estimates based on industry movers understate the true premiums, due to unmeasured heterogeneity in pay premiums within industries. Industry movers who switch to higher-premium industries tend to leave firms in the origin sector that pay above-average premiums and move to firms in the destination sector with below-average premiums (and vice versa), attenuating the measured industry effects. Our preferred estimates reveal substantial heterogeneity in narrowly-defined industry premiums, with a standard deviation of 12%. On average, workers in higher-paying industries have higher observed and unobserved skills, widening between-industry wage inequality. There are also small but systematic differences in industry premiums across cities, with a wider distribution of pay premiums and more worker sorting in cities with more highpremium firms and high-skilled workers.View Full Paper PDF
-
Working PaperRecent Twists of the Wage Structure and Technology Diffusion
March 1994
Working Paper Number:
CES-94-05
This paper is an empirical study of the impact on U.S. wage structure of domestic technology, foreign technology, and import penetration. A model is presented which combines factor proportions theory with a version of growth theory. The model, which assumes two levels of skill, suggests that domestic technology raises both wages, while foreign technology, on a simple interpretation, lowers both. Trade at a constant technology, as usual, lowers the wage of that class of labor used intensively by the affected industry, and raises the other wage. The findings support the predictions of the model for domestic technology. On the other hand, they suggest that technological change, and perhaps other factors, have obscured the role of factor proportions in the data. Indeed, foreign technology and trade have the same effect on wages at different skill levels, not the opposite effects suggested by factor proportions. Finally, a simple diffusion story, in which foreign technology lowers all U.S. wages, is also rejected. Instead, uniformly higher U.S. wages, not lower, appear to be associated with the technology and trade of the oldest trading partners of the U.S., the economies of the West. Not so for Asia, especially the smaller countries which have recently accelerated their trade with the U.S. Their effects are uniformly negative on wages, suggesting a distinction between shock and long run effects of foreign technology and trade.View Full Paper PDF
-
Working PaperThe Mis-Measurement of Permanent Earnings: New Evidence from Social Security Earnings Data
May 2002
Working Paper Number:
CES-02-12
This study investigates the reliability of using short-term averages of earnings as a proxy for permanent earnings in empirical research. An earnings dynamics model is estimated on a large sample of men covering the period from 1983 to 1997 following the cohort-based methodology of Baker and Solon (1999). The analysis uses a unique dataset that matches men in the 1984, 1990 and 1996 Surveys of Income and Program Participation (SIPP) to the Social Security Administration's Summary Earnings Records (SER). The results confirm that using a short-term average of earnings can lead to spurious estimates of the effect of lifetime earnings on a particular outcome. In addition, the transitory variance appears to vary considerably over the lifecycle. The share of earnings variance due to transitory factors is higher among blacks and the persistence of transitory shocks appears to be greater for this group as well. Finally, the transitory variance appears to be a more important factor in explaining the overall earnings variance of college educated men than those without college.View Full Paper PDF
-
Working PaperLocal and National Concentration Trends in Jobs and Sales: The Role of Structural Transformation
November 2023
Working Paper Number:
CES-23-59
National U.S. industrial concentration rose between 1992-2017. Simultaneously, the Herfindhahl Index of local (six-digit-NAICS by county) employment concentration fell. This divergence between national and local employment concentration is due to structural transformation. Both sales and employment concentration rose within industry-by-county cells. But activity shifted from concentrated Manufacturing towards relatively un-concentrated Services. A stronger between-sector shift in employment relative to sales explains the fall in local employment concentration. Had sectoral employment shares remained at their 1992 levels, average local employment concentration would have risen by 9% by 2017 rather than falling by 7%.View Full Paper PDF
-
Working PaperRe-assessing the Spatial Mismatch Hypothesis
April 2025
Working Paper Number:
CES-25-23
We use detailed location information from the Longitudinal Employer-Household Dynamics (LEHD) database to develop new evidence on the effects of spatial mismatch on the relative earnings of Black workers in large US cities. We classify workplaces by the size of the pay premiums they offer in a two-way fixed effects model, providing a simple metric for defining 'good' jobs. We show that: (a) Black workers earn nearly the same average wage premiums as whites; (b) in most cities Black workers live closer to jobs, and closer to good jobs, than do whites; (c) Black workers typically commute shorter distances than whites; and (d) people who commute further earn higher average pay premiums, but the elasticity with respect to distance traveled is slightly lower for Black workers. We conclude that geographic proximity to good jobs is unlikely to be a major source of the racial earnings gaps in major U.S. cities today.View Full Paper PDF
-
Working PaperDid Timing Matter? Life Cycle Differences in Effects of Exposure to the Great Recession
September 2019
Working Paper Number:
CES-19-25
Exposure to a recession can have persistent, negative consequences, but does the severity of those consequences depend on when in the life cycle a person is exposed? I estimate the effects of exposure to the Great Recession on employment and earnings outcomes for groups defined by year of birth over the ten years following the beginning of the recession. With the exception of the oldest workers, all groups experience reductions in earnings and employment due to local unemployment rate shocks during the recession. Younger workers experience the largest earnings losses in percent terms (up to 13 percent), in part because recession exposure makes them persistently less likely to work for high-paying employers even as their overall employment recovers more quickly than older workers'. Younger workers also experience reductions in earnings and employment due to changes in local labor market structure associated with the recession. These effects are substantially smaller in magnitude but more persistent than the effects of unemployment rate increases.View Full Paper PDF
-
Working PaperEvery Breath You Take, Every Dollar You'll Make: The Long-Term Consequences of the Clean Air Act of 1970
September 2013
Working Paper Number:
CES-13-52
This paper examines the long-term impacts of in-utero and early childhood exposure to ambient air pollution on adult labor market outcomes. We take advantage of a new administrative data set that is uniquely suited for addressing this question because it combines information on individuals' quarterly earnings together with their counties and dates of birth. We use the sharp changes in ambient air pollution concentrations driven by the implementation of the 1970 Clean Air Act Amendments as a source of identifying variation, and we compare cohorts born in counties that experienced large changes in total suspended particulate (TSP) exposure to cohorts born in counties that had minimal or no changes. We nd a signi cant relationship between TSP exposure in the year of birth and adult labor market outcomes. A 10 unit decrease in TSP in the year of birth is associated with a 1 percent increase in annual earnings for workers aged 29-31. Most, but not all, of this effect is driven by an increase in labor force participation. In present value, the gains from being born into a county affected by the 1970 Clean Air Act amount to about $4,300 in lifetime income for the 1.5 million individuals born into these counties each year.View Full Paper PDF
