Displacement Effects in Manufacturing

In this paper, we investigate wage losses from displacement in the manufacturing sector. We start by documenting that manufacturing firms traditionally employed low- and high-wage workers (measured as an AKM worker fixed effect) in similar proportions and paid substantial wage premiums (measured as an AKM firm fixed effect) to both types of workers. Over time, manufacturing jobs disproportionally disappeared over time, particularly so for low wage workers. We find that even though low and high wage workers suffer similar wage losses upon displacement on average, low wage workers experience substantially larger losses in their firm wage premiums, in part because they are more likely to move out of manufacturing and into low knowledge service sectors where firm wage premiums are low. Wage losses and losses in firm wage premiums upon displacement have increased over time especially for low wage workers, in part because low wage workers are increasingly re-employed in low knowledge service jobs.

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