Job flows and labor dynamics in the U.S. Rust Belt

Monthly Labor Review

Volumn 125, Issue 9, 2002, Pages 3-9

  Jason Faberman, R ^a  

^a BUREAU OF LABOR STATISTICS   (United States)

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EID: 11244283977     PISSN: 00981818     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (34)

1. For example, see Edward L. Glaeser, Hedi D. Kallal, Jose A. Scheinkman, and Andrei Schleifer, "Growth in Cities," Journal of Political Economy, December 1992, pp. 1126-52; and Edward L. Glaeser, Jose A. Scheinkman, and Andrei Schleifer, "Economic Growth in a Cross-Section of Cities," Journal of Monetary Economics, February 1995, pp. 117-43.
2. For example, see Edward L. Glaeser, Hedi D. Kallal, Jose A. Scheinkman, and Andrei Schleifer, "Growth in Cities," Journal of Political Economy, December 1992, pp. 1126-52; and Edward L. Glaeser, Jose A. Scheinkman, and Andrei Schleifer, "Economic Growth in a Cross-Section of Cities," Journal of Monetary Economics, February 1995, pp. 117-43.
3. For a review of the research findings, see Steven Davis and John C. Haltiwanger, "Gross Job Flows," in Orley Ashenfelter and David Card (eds.), Handbook of Labor Economics, vol. 3 (Amsterdam, Elsevier Science, 1999), pp. 2711-2805.
4. For the purposes of this article, "local labor market" generally refers to the labor market of a metropolitan area.
5. Conceptions of which States make up the Rust Belt vary. Most often, the five core Midwest States of Illinois, Indiana, Michigan, Ohio, and Wisconsin are defined as the Rust Belt. Some add Pennsylvania to the list, others include New York and New Jersey as well, and still others even count at least some of the New England States in the category. In this article, metropolitan areas from three representative Rust Belt States - Michigan, Ohio, and Pennsylvania - are examined.
6. On the basis of aggregate employment data from the BLS Current Employment Statistics program, growth in the United States averaged about 2.1 percent annually from 1970 to 2000. Growth in the Rust Belt States averaged 1.2 percent annually over the same period. For the United States, average annual employment growth was comparable in the 1970-84 and 1985-2000 periods. However, for the Rust Belt States, annual growth in the 1970-84 period averaged 0.7 percent (about one-third of the U.S. average), while growth in the 1985-2000 period averaged 1.7 percent (just over three-quarters of the U.S. average).
7. Most notably, Timothy Dunne, Mark J. Roberts, and Larry Samuelson, "Patterns of Firm Entry and Exit in U.S. Manufacturing Industries," RAND Journal of Economics, winter 1988, pp. 495-515; "Plant Turnover and Gross Employment Flows in the U.S. Manufacturing Sector," Journal of Labor Economics, January 1989, pp. 48-71; and "The Growth and Failure of U.S. Manufacturing Plants," Quarterly Journal of Economics, November 1989, pp. 671-98; and Steven Davis and John C. Haltiwanger, "Gross Job Creation and Destruction: Microeconomic Evidence and Macroeconomic Implications," in NBER Macroeconomics Annual 5 (Cambridge, MA, National Bureau of Economic Research, 1990), pp. 123-68; and "Gross Job Creation, Gross Job Destruction, and Employment Reallocation," Quarterly Journal of Economics, August 1992, pp. 819-63.
8. Most notably, Timothy Dunne, Mark J. Roberts, and Larry Samuelson, "Patterns of Firm Entry and Exit in U.S. Manufacturing Industries," RAND Journal of Economics, winter 1988, pp. 495-515; "Plant Turnover and Gross Employment Flows in the U.S. Manufacturing Sector," Journal of Labor Economics, January 1989, pp. 48-71; and "The Growth and Failure of U.S. Manufacturing Plants," Quarterly Journal of Economics, November 1989, pp. 671-98; and Steven Davis and John C. Haltiwanger, "Gross Job Creation and Destruction: Microeconomic Evidence and Macroeconomic Implications," in NBER Macroeconomics Annual 5 (Cambridge, MA, National Bureau of Economic Research, 1990), pp. 123-68; and "Gross Job Creation, Gross Job Destruction, and Employment Reallocation," Quarterly Journal of Economics, August 1992, pp. 819-63.
9. Most notably, Timothy Dunne, Mark J. Roberts, and Larry Samuelson, "Patterns of Firm Entry and Exit in U.S. Manufacturing Industries," RAND Journal of Economics, winter 1988, pp. 495-515; "Plant Turnover and Gross Employment Flows in the U.S. Manufacturing Sector," Journal of Labor Economics, January 1989, pp. 48-71; and "The Growth and Failure of U.S. Manufacturing Plants," Quarterly Journal of Economics, November 1989, pp. 671-98; and Steven Davis and John C. Haltiwanger, "Gross Job Creation and Destruction: Microeconomic Evidence and Macroeconomic Implications," in NBER Macroeconomics Annual 5 (Cambridge, MA, National Bureau of Economic Research, 1990), pp. 123-68; and "Gross Job Creation, Gross Job Destruction, and Employment Reallocation," Quarterly Journal of Economics, August 1992, pp. 819-63.
10. Most notably, Timothy Dunne, Mark J. Roberts, and Larry Samuelson, "Patterns of Firm Entry and Exit in U.S. Manufacturing Industries," RAND Journal of Economics, winter 1988, pp. 495-515; "Plant Turnover and Gross Employment Flows in the U.S. Manufacturing Sector," Journal of Labor Economics, January 1989, pp. 48-71; and "The Growth and Failure of U.S. Manufacturing Plants," Quarterly Journal of Economics, November 1989, pp. 671-98; and Steven Davis and John C. Haltiwanger, "Gross Job Creation and Destruction: Microeconomic Evidence and Macroeconomic Implications," in NBER Macroeconomics Annual 5 (Cambridge, MA, National Bureau of Economic Research, 1990), pp. 123-68; and "Gross Job Creation, Gross Job Destruction, and Employment Reallocation," Quarterly Journal of Economics, August 1992, pp. 819-63.
11. Most notably, Timothy Dunne, Mark J. Roberts, and Larry Samuelson, "Patterns of Firm Entry and Exit in U.S. Manufacturing Industries," RAND Journal of Economics, winter 1988, pp. 495-515; "Plant Turnover and Gross Employment Flows in the U.S. Manufacturing Sector," Journal of Labor Economics, January 1989, pp. 48-71; and "The Growth and Failure of U.S. Manufacturing Plants," Quarterly Journal of Economics, November 1989, pp. 671-98; and Steven Davis and John C. Haltiwanger, "Gross Job Creation and Destruction: Microeconomic Evidence and Macroeconomic Implications," in NBER Macroeconomics Annual 5 (Cambridge, MA, National Bureau of Economic Research, 1990), pp. 123-68; and "Gross Job Creation, Gross Job Destruction, and Employment Reallocation," Quarterly Journal of Economics, August 1992, pp. 819-63.
12. Job flows in this context deal with changes in employment at the place of work. These changes are associated with the startup or closing of an establishment, as well as the expansion or contraction of an establishment's workforce. Such flows are in contrast to what are often referred to as "worker flows" - changes in employment from the perspective of the worker (that is, hires and separations associated with employment, unemployment, and job vacancies).
13. Randall W. Eberts and Edward Montgomery, "Cyclical versus Secular Movements in Employment Creation and Destruction," NBER Working Paper No. 5162 (National Bureau of Economic Research, 1995), is the most notable, using establishment microdata to explore State-level job flows.
14. For a definition of MSA, see Revised Statistical Definitions of Metropolitan Areas (MAs) and Guidance on Uses of MA Definitions, Bulletin 99-04 (Office of Management and Budget, 1999).
15. A detailed description of the LDB, its creation, and its uses is given in Timothy R. Pivetz, Michael A. Searson, and James R. Spletzer, "Measuring job and establishment flows with BLS longitudinal microdata," Monthly Labor Review, April 2001, pp. 13-20.
16. Among several other studies that have appealed to the LDB at various stages of its development are David Card and Alan B. Krueger, Minimum Wages and Emploment: A Case Study of the Fast-Food Industry in New Jersey and Pennyslvania: Reply," American Economic Review, December 2000, pp. 1397-1420; James R. Spletzer, "The Contribution of Establishment Births and Deaths to Employment Growth," Journal of Business and Economic Statistics, January 2000, pp. 113-26; and R. Jason Faberman, "Job creation and destruction within Washington and Baltimore," Monthly Labor Review, September 2001, pp. 24-31.
17. Among several other studies that have appealed to the LDB at various stages of its development are David Card and Alan B. Krueger, Minimum Wages and Emploment: A Case Study of the Fast-Food Industry in New Jersey and Pennyslvania: Reply," American Economic Review, December 2000, pp. 1397-1420; James R. Spletzer, "The Contribution of Establishment Births and Deaths to Employment Growth," Journal of Business and Economic Statistics, January 2000, pp. 113-26; and R. Jason Faberman, "Job creation and destruction within Washington and Baltimore," Monthly Labor Review, September 2001, pp. 24-31.
18. Among several other studies that have appealed to the LDB at various stages of its development are David Card and Alan B. Krueger, Minimum Wages and Emploment: A Case Study of the Fast-Food Industry in New Jersey and Pennyslvania: Reply," American Economic Review, December 2000, pp. 1397-1420; James R. Spletzer, "The Contribution of Establishment Births and Deaths to Employment Growth," Journal of Business and Economic Statistics, January 2000, pp. 113-26; and R. Jason Faberman, "Job creation and destruction within Washington and Baltimore," Monthly Labor Review, September 2001, pp. 24-31.
19. These MSA'S also include primary metropolitan statistical areas (PMSA'S) - MSA'S that are subregions of larger metropolitan areas. If an MSA crosses State boundaries, the State it is identified with is the one in which the majority of its employment (either employees or establishments) resides. For those MSA'S which cross the boundaries of States outside of the three studied (namely, the Philadelphia, PA-NJ, PMSA; Cincinnati, OH-KY-IN, PMSA; and Steubenville-Weirton, OH-WV, MSA), the relevant data from the outlying States are appended to the sample.
20. Data from this program are available on the Internet at the BLS website, http://www.bls.gov. The data include, among other things, monthly estimates of employment, unemployment, the labor force, and the unemployment rate for all States and MSA'S back to 1991.
21. In this study, "startup" establishments are establishments with positive employment in the current quarter of observation after having either zero or missing employment reported in the data for at least three previous quarters. Analogously, "shutdown" establishments are establishments with positive employment in the previous quarter and with either zero or missing employment reported for three subsequent quarters. These definitions differ from their BLS counterparts.
22. This methodology is identical to that employed by Steven Davis, John C. Haltiwanger, and Scott Schuh, Job Creation and Destruction (Cambridge, MA, MIT Press, 1996).
23. The age of an establishment is calculated from the "Initial Date of Liability" recorded on each establishment's record. For missing values, an age is assigned to all establishments that were classified as startups during the sample period. The age is assigned by simply noting the first quarter in which the establishment's entry appeared. For those establishments already in operation when they entered the sample, it is assumed that they had an age equal to the mean age of establishments with reported age data in the first quarter of 1992 for their State.
24. The weighting is done with average employment (for employment growth, wages, job creation, and job destruction), establishments (for average size and age), or labor force (for unemployment). Wage growth is recalculated on the basis of the weighted average wage.
25. The correlation between employment growth and average size is 0.33, while the correlation between employment growth and average age is -0.50. Both Pearson correlation coefficients are statistically significant.
26. See Davis, Haltiwanger, and Schuh, Job Creation and Destruction, 1996; and Davis and Haltiwanger, "Gross Job Flows," 1999.
27. See Davis, Haltiwanger, and Schuh, Job Creation and Destruction, 1996; and Davis and Haltiwanger, "Gross Job Flows," 1999.
28. See, for example, Patricia Anderson and Bruce Meyer, "The Extent and Consequences of Job Turnover," Brookings Papers on Economic Activity: Microeconomics (Washington, DC, Brookings Institution, 1994), pp. 177-249; Christopher Foote, "Trend Employment Growth and the Bunching of Job Creation and Destruction," Quarterly Journal of Economics, August 1998, pp. 809-34; and Simon Burgess, Julia Lane, and David Stevens, "Job Flows, Worker Flows, and Churning," Journal of Labor Economics, July 2000, pp. 473-502.
29. See, for example, Patricia Anderson and Bruce Meyer, "The Extent and Consequences of Job Turnover," Brookings Papers on Economic Activity: Microeconomics (Washington, DC, Brookings Institution, 1994), pp. 177-249; Christopher Foote, "Trend Employment Growth and the Bunching of Job Creation and Destruction," Quarterly Journal of Economics, August 1998, pp. 809-34; and Simon Burgess, Julia Lane, and David Stevens, "Job Flows, Worker Flows, and Churning," Journal of Labor Economics, July 2000, pp. 473-502.
30. See, for example, Patricia Anderson and Bruce Meyer, "The Extent and Consequences of Job Turnover," Brookings Papers on Economic Activity: Microeconomics (Washington, DC, Brookings Institution, 1994), pp. 177-249; Christopher Foote, "Trend Employment Growth and the Bunching of Job Creation and Destruction," Quarterly Journal of Economics, August 1998, pp. 809-34; and Simon Burgess, Julia Lane, and David Stevens, "Job Flows, Worker Flows, and Churning," Journal of Labor Economics, July 2000, pp. 473-502.
31. A summary of this approach is in Peter Nijkamp, Piet Reitveld, and Folke Snickars, "Regional and Multiregional Economic Models: A Survey," in Peter Nijkamp and Edwin S. Mills (eds.), Handbook of Regional and Urban Economics, vol. 1 (Amsterdam, Elsevier, 1987), pp. 257-94.
32. Weights are referred to as employment weights only for simplicity. See note 17 for the actual weight used for a particular statistic.
33. The decomposition illustrated here follows that of Eli Berman, John Bound, and Zvi Griliches, "Changes in the Demand for Skilled Labor within U.S. Manufacturing: Evidence from the Annual Survey of Manufactures," Quarterly Journal of Economics, May 1994, pp. 367-97, except that it decomposes variables across areas, rather than across time.
34. In the sample, 964 four-digit industries are represented. The decomposition was also done at the one-digit level; the results were qualitatively similar and so are not reported.