Why De-Industrialization Increased AFDC Caseloads: A Comparison of Family Structure and Earnings Effects

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The U.S. economy has undergone tremendous restructuring over the last 40 years. Throughout the 1950s, manufacturing was the largest sector of the economy and consistently employed more than one-third of the nation's workers. By 1996, the manufacturing sector employed less than 16% of all workers in the country, as international competition and technological change eroded job opportunities. These job losses have tended to be permanent, to involve low-skilled men disproportionately, and to severely hurt the local economies affected. However, the possible effects on low-skilled women and their children have been largely ignored. In the proposed research, the investigators consider how the decline in economic opportunities for low-skilled men in the steel and coal mining industries ultimately affected low-skilled women. The employment shocks in these industries could not have had strong direct effects on the earnings of women as only 8% of workers in primary metal manufacturing were women and less than 3% of workers in coal mining were women in 1970. However, participants in the AFDC program are overwhelmingly poor, single women and their children. Did employment shocks to these industries alter women's AFDC participation? The objective of the proposed research is to explore this question and expand the investigation to employment shocks in manufacturing more generally. By definition, women enter and exit the AFDC program either through changes in family composition or through changes in earnings opportunities. Since these economic shocks substantially altered the economic prospects of low-skilled men, they would have affected the attractiveness of these men as marriage partners. Therefore, an economic boom would presumably increase men's attractiveness as husbands and increase marriage rates. This would reduce the number of women eligible for AFDC. An economic bust would, by the same logic, decrease marriage rates, leaving more women unmarried. To the extent that these unmarried women are poor and have children, more of them would be at risk for AFDC. Because AFDC is a means-tested program, changes in women's earnings also affect AFDC participation. It is very likely that these large shocks to employment of low-skilled men created a spillover effect that changed the earnings opportunities of low-skilled women. This is particularly true in the small towns that developed around single manufacturing plants. In 1970, there were counties with as up to 38% of their men employed in the primary metal industry. This suggests that job losses in manufacturing would have substantially lowered the demand for services from sectors employing low-skilled women. In addition, the men that were displaced by the loss of manufacturing jobs would presumably have then competed for jobs previously held by women. This project examines the mechanisms by which large, permanent shocks to male-dominated industries affected women's AFDC participation. As a result of these employment shocks did women become more likely to bear children out-of-wedlock and less likely to become and remain married? Or did the spillover effects lower the employment and earnings prospects of low-skilled women? The project uses confidential data on the location and timing of plant closings, and on changes in employment, earnings, marriage and fertility by demographic group at the county level. These data enable the researchers to investigate the impact of manufacturing job destruction on the local community in ways that were previously impossible.