Davide Usula (Sant'Anna School of Advanced Studies)
This paper investigates the decline of the U.S. manufacturing labor share through a novel micro-industrial lens: the hierarchical composition of the workforce and the asymmetric intra-labor power relations it embeds. Using 6-digit NAICS data for 361 manufacturing industries over 1989--2016, we document a striking macro-micro paradox: while the aggregate trend suggests a positive relationship between the production-to-non-production worker ratio and the labor share, the within-industry relationship is robustly negative. A 1\% increase in the production-to-non-production worker ratio reduces the payroll share by 0.18\%. We provide a power-based explanation: production workers, occupying structurally weaker positions in the corporate hierarchy, have systematically lower capacity to translate productivity gains into wages. We construct a pre-determined, industry-specific measure of this power asymmetry-- the historical wage-productivity pass-through ratio $m_j$. We show that it acts as a distributional shield, attenuating the effect of workforce composition on the labor share in industries where production workers historically retained stronger bargaining power. Using a granular shift-share IV based on foreign import demand shocks, we show that the same power structure governs the short-run distributive response to demand expansions: when demand grows and the surplus increases, whether workers capture a larger share depends not on cyclical conditions but on their pre-existing positional power. The labor share decline reflects not only \textit{who} works, but the structural position they occupy in the organizational hierarchy.