Does Manufacturing Still Matter?

Abstract

Although employment in the manufacturing sector has declined over the past few decades, it continues to play an important role in many regions of the U.S. Most studies have not examined the spatial effects of manufacturing employment on regional job quality. In this paper, we consider the spatial dependence and spatial variation of this relationship in the Midwest. This analysis suggests that it is important to take into consideration spatial effects when examining the implications of economic restructuring for regions. Labor market areas are not distinct spatial units and can be influenced significantly by nearby local labor markets. Once that spatial dependence is considered, manufacturing has a negative and significant effect on underemployment by low earnings, but its effect is not significant in labor hardship associated with work time and steadiness. At the same time, our analysis demonstrates that the effects of manufacturing employment vary across local labor markets. More specifically, these findings suggest that in those areas in the Midwest that have historically had higher concentrations of manufacturing jobs, the benefits of working in this sector are smaller. In regions that have not had a large manufacturing sector and have experienced some gains in recent years, the benefits of working in the manufacturing sector are larger.