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Labor share decline across US manufacturing sub-sectors: 1979-2019

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  • Swayamsiddha Sarangi

Abstract

This paper studies the sub-sectoral contributions to aggregate manufacturing labor share decline in the US between 1979 and 2019. Using the Log Mean Divisia index (LMDI) decomposition, the decline in the manufacturing sector’s labor share is decomposed into contributions from real wage growth, labor productivity growth, changes in employment shares, and relative prices arising from the constituent subsectors across three business cycles. The primary findings of the paper suggest that the downward decoupling of real wages from labor productivity is the primary contributor to the labor share decline in manufacturing. Moreover, low labor share sub-sectors (especially Chemical products, Food and Beverage and Tobacco products, and Petroleum and Coal products) have experienced an increase in their employment shares, contributing negatively to aggregate manufacturing labor share. Despite some similarities between manufacturing sub-sectors, this paper emphasizes the heterogeneity across sub-sectors to understand the possible mechanisms behind the decline of labor share.

Suggested Citation

  • Swayamsiddha Sarangi, 2023. "Labor share decline across US manufacturing sub-sectors: 1979-2019," Working Paper Series, Department of Economics, University of Utah 2023_07, University of Utah, Department of Economics.
    • Handle: RePEc:uta:papers:2023_07
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    More about this item

    Keywords

    laborshare; manufacturing; subsectors; Divisia decomposition JEL Classification: J30; J31; E24; L6;
    All these keywords.

    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • L6 - Industrial Organization - - Industry Studies: Manufacturing

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