Changes in the Demand for Skilled Labor within U. S. Manufacturing: Evidence from the Annual Survey of Manufactures

Abstract

This paper investigates the shift in demand away from unskilled and toward skilled labor in U. S. manufacturing over the 1980s. Production labor-saving technological change is the chief explanation for this shift. That conclusion is based on three facts: (1) the shift is due mostly to increased use of skilled workers within the 450 industries in U. S. manufacturing rather than to a reallocation of employment between industries, as would be implied by a shift in product demand due to trade or to a defense buildup; (2) trade-and defense-demand are associated with only small employment reallocation effects; (3) increased use of nonproduction workers is strongly correlated with investment in computers and in R&D.