Disappearing Routine Occupations and Declining Prime-Age Labor Force Participation

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RWP 19-03, September 2019

I study the effect of disappearing routine occupations on the decline in the labor force participation rate of prime-age individuals since the 1990s. I use multiple data sources and empirical models to study this relationship. First, I exploit state-level variation and show that the long-term trends of declining routine employment and prime-age labor force participation are highly correlated. Second, I narrow the geographic unit to local labor markets and quantify the causal effect of declining routine employment on the labor market outcomes of prime-age individuals. My results imply that the decline in routine employment was an important contributor to the declines in the labor force participation rate and employment-to-population ratio since the 1990s, especially for prime-age individuals without a bachelor's degree. Additionally, I show that the decline in routine employment was not limited to prime-age men in the manufacturing industries, but was observed across most major industries and affected women as well. More strikingly, disappearing routine employment had a larger negative effect on the labor force participation rate of prime-age women without a bachelor's degree than their male counterparts.

JEL Classification: E24, E32, J21, J24, J62