Academic journal article Economic Commentary (Cleveland)

Manufacturing or Degree-Intensive Labor Markets: Where Do the Children of Non-College Graduates Earn More Degrees?

Academic journal article Economic Commentary (Cleveland)

Manufacturing or Degree-Intensive Labor Markets: Where Do the Children of Non-College Graduates Earn More Degrees?

Article excerpt

The recent national discussion of income inequality has raised awareness of the millions of Americans who have not been able to achieve upward mobility. For most young people, matching or exceeding their parent's standard of living requires that they complete high school or college. The environment in which young people grow up and pursue their educations has been radically reshaped by the change in the mix of industries in our economy since 1970. Specifically, the percent of adults employed in manufacturing has been declining while the shares of industries that employ more college graduates have been increasing. This raises the question whether children whose parents do not have college degrees are more or less likely to attain degrees if they grow up in a labor market that has lower shares of manufacturing employment. Likewise, when the children of nondegreed parents grow up surrounded by degree-intensive industries, do those children climb to the next rung of the educational ladder, or are they left behind?

Using the National Longitudinal Surveys of Youth (NLSY), this analysis documents the relationship between industrial composition and the educational attainment of children whose parents have only a high school education or less. The results show that the educational attainment of a region's youth is correlated with the region's industrial mix. contrary to popular belief, students who grow up in regions where manufacturing employs a larger share of the workforce are more likely to finish high school and college than those who grow up in regions without a high manufacturing share. If we compare regions that specialize in collegedegree-intensive industries, such as health care, with regions that do not specialize in these industries, we see a pattern that suggests continued inequality. In degreeintensive regions, cohorts of children born to non-collegegraduate parents have higher shares of both high school dropouts and college graduates.

Changing Industrial Composition

There has been growth in college-degree-intensive industries, which can be defined as industries in which an aboveaverage share of the employees hold college degrees.1 The largest degree-intensive industries include healthcare, education, finance, insurance, and real estate. Several non-degreeintensive industries have experienced declines in their share of jobs, but the manufacturing sector is of particular interest because it has historically paid high wages to workers without college degrees.

Figure 1 illustrates the national trends in degree-intensive and manufacturing employment. The third category, other non-degree-intensive, includes all other employment. over the past four and a half decades, the share of jobs in collegedegree-intensive industries has increased from 25 percent to 34 percent, while the share of jobs in manufacturing has declined from 25 percent to 12 percent. Some observers have celebrated this "rust belt to tech belt" transition.2 More recently, however, the "economic inclusion" movement has raised concerns that the growing industries do not provide enough work opportunities or middle-class incomes for people without college degrees.3

Among large metropolitan areas, Providence, Rhode Island, has had the most pronounced transition from manufacturing to degree-intensive industries. In 1980, 40 percent of workers in the Providence metro area worked in manufacturing and 25 percent worked in degree-intensive fields. By 2014, manufacturing had dropped to just 11 percent, and degree-intensive jobs had risen to 47 percent. Similar transitions have occurred in Milwaukee, Indianapolis, Cleveland, Pittsburgh, and Philadelphia.

Some metro areas are now dominated by degree-intensive industries, while others maintain a share of manufacturing employment that is above the national average. For example, at one extreme, 68 percent ofjobs in Washington DC, are in degree-intensive fields and only 3 percent are in manufacturing. …

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