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Disappearing Routine Occupations and Declining Prime-Age Labor Force Participation

System Working Paper 19-13 | Published December 19, 2019

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Author

Didem Tüzemen Federal Reserve Bank of Kansas City

Disappearing Routine Occupations and Declining Prime-Age Labor Force Participation

Abstract

Using several data sources I study the link between disappearing routine occupations and the decline in the labor force participation rate of prime-age individuals since the 1990s. First, I exploit state-level variation and show that states with lower shares of prime-age individuals employed in routine occupations also have lower prime-age participation rates. Second, I narrow the geographic unit to local labor markets and highlight that changes in routine employment and changes in the labor market outcomes of prime-age individuals show great variation across local labor markets (commuting zones) in the United States. My estimation results indicate that commuting zones with larger declines in prime-age routine employment experienced larger declines in the prime-age labor force participation rates between 1990 and 2016. Moreover, disappearing routine employment has mainly reduced the labor force participation rates of prime-age men and women without a bachelor's degree. Lastly, I show that the declines in routine employment were not limited to blue-collar jobs in the manufacturing industries, but were also observed in the non-manufacturing industries.