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on Labour Economics |
| By: | Richard B. Freeman |
| Abstract: | The Great Recession tested the ability of the “great U.S. jobs machine” to limit the severity of unemployment in a major economic downturn and to restore full employment quickly afterward. In the crisis the American labor market failed to live up to expectations. The level and duration of unemployment increased substantially in the downturn and the growth of jobs was slow and anemic in the recovery. This article documents these failures and their consequences for workers. The U.S. performance in the Great Recession contravenes conventional views of the virtues of market-driven flexibility compared to institution-driven labor adjustments and the notion that weak labor institutions and greater market flexibility offer the best road to economic success in a modern capitalist economy. |
| JEL: | J0 J01 J08 J64 |
| Date: | 2013–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:19587&r=lab |
| By: | Paige Ouimet; Rebecca Zarutskie |
| Abstract: | Young firms disproportionately employ young workers, controlling for firm size, industry, geography and time. The same positive correlation between young firms and young employees holds when we look just at new hires. On average, young employees in young firms earn higher wages than young employees in older firms. Further, young employees disproportionately join young firms with greater innovation potential and that exhibit higher growth, conditional on survival. These facts are consistent with the argument that the skills, risk tolerance, and career dynamics of young workers are contributing factors to their disproportionate share of employment in young firms. Finally, we show that an increase in the regional supply of young workers is positively related to the rate of new firm creation, especially in high tech industries, suggesting a causal link between the supply of young workers and new firm creation. |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2013-75&r=lab |
| By: | Joao Paulo Pessoa; John Van Reenen |
| Abstract: | It is widely believed that in the US wage growth has fallen massively behind productivity growth. Recently, it has also been suggested that the UK is starting to follow the same path. Analysts point to the much faster growth of GDP per hour than median wages. We distinguish between "net decoupling" - the difference in growth of GDP per hour deflated by the GDP deflator and average compensation deflated by the same index - and "gross decoupling" - the difference in growth of GDP per hour deflated by the GDP deflator and median wages deflated by a measure of consumer price inflation. We would expect that over the long-run real compensation growth deflated by the producer price (the labour costs that employers face) should track real labour productivity growth (value added per hour), so net decoupling should only occur if labour's share falls as a proportion of gross GDP, something that rarely happens over sustained periods. We show that over the past 40 years that there is almost no net decoupling in the UK, although there is evidence of substantial gross decoupling in the US and, to a lesser extent, in the UK. This difference between gross and net decoupling can be accounted for essentially three factors (i) compensation inequality (which means the average compensation is growing faster than the median compensation), (ii) the wedge between compensation (which includes employer-provided benefits like pensions and health insurance) and wages which do not and (iii) differences in the GDP deflator and the consumer price deflator (i.e. producer wages and consumption wages). These three factors explain basically ALL of the gross decoupling leaving only a small amount of "net decoupling". The first two factors are important in both countries, whereas the difference in price deflators is only important in the US. |
| Keywords: | Decoupling, Wages, Productivity, Compensation, Labour Income Share. |
| JEL: | E24 J20 J30 |
| Date: | 2013–10 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1246&r=lab |
| By: | Albrecht Glitz |
| Abstract: | This paper studies the role coworker-based networks play for individual labour market outcomes. I analyse how the provision of labour market relevant information by former coworkers affects the employment probabilities and, if hired, the wages of male workers who have previously become unemployed as the result of an establishment closure. To identify the causal effect of an individual worker's network on labour market outcomes, I exploit exogenous variation in the strength of these networks that is due to the occurrence of mass-layoffs in the establishments of former coworkers. The empirical analysis is based on administrative data that comprise the universe of workers employed in Germany between 1980 and 2001. The results suggest a strong positive effect of a higher employment rate in a worker's network of former coworkers on his re-employment probability after displacement: a 10 percentage point increase in the prevailing employment rate in the network increases the re-employment probability by 7.5 percentage points. In contrast, there is no evidence of a statistically significant effect on wages. |
| Keywords: | networks, labor markets, employment, wages |
| JEL: | J63 J64 |
| Date: | 2013–05 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:731&r=lab |
| By: | Kelly, Elish; McGuinness, Seamus; O'Connell, Philip J.; Haugh, David; Pandiella, Alberto González |
| Abstract: | Young people have been hit hard by unemployment during the Irish recession. While much research has been undertaken to study the effects of the recession on overall labour market dynamics, little is known about the specific effects on youth unemployment and the associated challenges. This paper attempts to fill this gap by comparing the profile of transitions to work before the recession (2006) and as the economy emerged from the recession (2011). The results indicate that the rate of transition of the youth from unemployment to employment fell dramatically. The fall is not due to changes in the composition or the characteristics of the unemployed group but to changes in the external environment. These changes imply that the impact of certain individual characteristics changed over the course of the recession. In particular, for youth, education and nationality have become more important for finding a job in Ireland. |
| Keywords: | education/employment/Ireland/labour market/Nationality/recession/unemployment |
| Date: | 2013–09 |
| URL: | http://d.repec.org/n?u=RePEc:esr:wpaper:wpaper466&r=lab |
| By: | Pedro S. Martins, Matloob Piracha and José Varejão |
| Abstract: | Using matched employer-employee data, we analyse the impact of immigrants on natives’ employment in Portugal. Using different model specifications, we show that the natives and immigrants are ‘complements’ at most occupation levels, in the sense that both types are hired when the number of immigrants is increasing. Controlling for different skill-level groups as well as for temporary and permanent jobs, the estimates show that, contrary to the evidence from some existing literature, the natives at the lower end of the skills spectrum are not affected by the presence of immigrants as well. There is, however, some evidence that when the number of immigrants in the firm is decreasing, natives tend to replace immigrants. |
| Keywords: | matched employer-employee data, displacement, immigrants. |
| JEL: | J15 J61 |
| Date: | 2013–10 |
| URL: | http://d.repec.org/n?u=RePEc:cgs:wpaper:44&r=lab |
| By: | Bargain, Olivier; Peichl, Andreas |
| Abstract: | Previous reviews of static labor supply estimations concentrate mainly on the evidence from the 1980s and 1990s, Anglo-Saxon countries and early generations of labor supply modeling. This paper provides a fresh characterization of steady-state labor supply elasticities for Western Europe and the US. We also investigate the relative contribution of different methodological choices in explaining the large variation in elasticity size observed across studies. While some recent studies show that genuine preference heterogeneity across countries explains only a modest share of this variation (Bargain et al., 2013), we focus here on time changes and estimation methods as key contributors of the differences across studies. Both factors can explain larger elasticities in older studies (i.e. an increase in female labor market attachment over time and a switch from the Hausman estimation approach to discrete-choice models with tax-benefit simulations). Meta-analysis evidence suggests that smaller elasticities in the recent period may be due to the time factor, i.e. a likely change in work preferences, both in the US and in Europe. -- |
| Keywords: | household labor supply,elasticity,taxation,Europe,US |
| JEL: | C25 C52 H31 J22 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:13084&r=lab |
| By: | Regis Barnichon; Andrew Figura |
| Abstract: | The matching function - a key building block in models of labor market frictions - implies that the job finding rate depends only on labor market tightness. We estimate such a matching function and …find that the relation, although remarkably stable over 1967-2007, broke down spectacularly after 2007. We argue that labor market heterogeneities are not fully captured by the standard matching function, but that a generalized matching function that explicitly takes into account worker heterogeneity and market segmentation is fully consistent with the behavior of the job finding rate. The standard matching function can break down when, as in the Great Recession, the average characteristics of the unemployed change too much, or when dispersion in labor market conditions - the extent to which some labor markets fare worse than others–increases too much. |
| Keywords: | job finding, aggregate, composition, dispersion |
| JEL: | J6 E24 E32 |
| Date: | 2013–10 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:727&r=lab |
| By: | Robert L. Clark; Jennifer A. Maki; Melinda Sandler Morrill |
| Abstract: | We report results from a field experiment in which a randomized subset of newly hired workers at a large financial institution received a flyer containing information about the employer’s 401(k) plan and the value of contributions compounding over a career. Younger workers who received the flyer were significantly more likely to begin contributing to the plan relative to their peers in the control group. Many workers do not participate in their employers’ supplemental retirement savings programs, even though these programs offer substantial tax advantages and immediate returns due to matching contributions. From a survey of new hires we find that many workers choose not to contribute to the plan because they have other financial priorities. However, some non-participants lack the financial literacy to appreciate the benefit. These findings indicate that simple informational interventions can nudge workers to participate in retirement saving plans and enhance individual well-being and retirement income security. |
| JEL: | J26 J32 |
| Date: | 2013–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:19591&r=lab |
| By: | Daniel A. Kamhöfer; Hendrik Schmitz |
| Abstract: | We analyze the effect of education on wages using German Socio-Economic Panel data and regional variation in mandatory years of schooling and the supply of schools. This allows us to estimate more than one local average treatment effect and heterogeneous effects for different groups of compliers. Our results are in line with previous studies that do not find an effect of compulsory schooling on wages in Germany. We go beyond these studies and test a potential reason for it, namely that basic skills are learned earlier in Germany and additional years of schooling are not effective anymore. This is done by also estimating the effect of education on cognitive skills. The results suggest that education after the eighth year does not seem to have a causal effect on cognitive skills in Germany. This is consistent with the explanation for zero effects of schooling on earnings. |
| Keywords: | Returns to education, Skills, IV estimation |
| JEL: | I21 J24 C26 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwsop:diw_sp598&r=lab |
| By: | Pia M. Orrenius; Madeline Zavodny |
| Abstract: | Immigrants supply skills that are in relatively short supply in the U.S. labor market and account for almost half of labor force growth since the mid-1990s. Migrant inflows have been concentrated at the low and high ends of the skill distribution. Large-scale unauthorized immigration has fueled growth of the low-skill labor force, which has had modest adverse fiscal and labor market effects on taxpayers and U.S.-born workers. High-skilled immigration has been beneficial in most every way, fueling innovation and spurring entrepreneurship in the high tech sector. Highly skilled immigrants have had a positive fiscal impact, contributing more in tax payments than they use in public services. Immigration reform appears to be on the horizon, and policies such as a legalization initiative, a guest-worker program and more permanent visas for high-skilled workers would likely be an improvement over the status quo. |
| Keywords: | Business cycles ; Minorities - Employment ; Public policy |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:fip:feddwp:1306&r=lab |
| By: | Kelly, Elish; McGuinness, Seamus |
| Abstract: | The labour market consequences of the severe fall in economic activity that took place in Ireland after the recent global recession were quite stark, especially for young people. One particularly disquieting development has been the rise in the number of young people not in employment, education or training (NEET), which increased from 11.8 per cent in 2006 to 24 per cent in 2011 (Eurostat, 2013). Very little is known about NEET individuals in Ireland, either in terms of their profile or their labour market transitions, i.e., the extent to which youth NEETs have transitioned into employment. Given this information gap, and particularly its importance for the design of effective activation measures to assist young NEETs, this paper uses newly available longitudinal data from the Quarterly National Household Survey to examine the extent to which transitions to employment among NEETs and prime-aged unemployed changed over the recent recession in Ireland. The paper found that the rate of transition to employment fell dramatically for both groups between 2006 and 2011. The results from the analysis also revealed that the drop in the transition rates of NEET and prime-aged unemployed individuals' was not due to changes in the underlying sub-group population structures but to changes in external factors that have had an impact on individuals possessing certain characteristics during the recession. From a policy perspective, the results would seem to support a greater emphasis on higher levels of human capital (i.e., third-level qualifications) for young NEETs, and the redesign of vocational-type qualifications (i.e., Post Leaving Cert level courses) to increase their relevance to those areas of the labour market where jobs are emerging. |
| Keywords: | data/education/employment/human capital/Individuals/Ireland/labour market/Policy/population/recession |
| Date: | 2013–09 |
| URL: | http://d.repec.org/n?u=RePEc:esr:wpaper:wpaper465&r=lab |
| By: | Hutter, Christian (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]); Weber, Enzo (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]) |
| Abstract: | "The paper investigates the predictive power of a new survey implemented by the Federal Employment Agency (FEA) for forecasting German unemployment in the short run. Every month, the CEOs of the FEA's regional agencies are asked about their expectations of future labor market developments. We generate an aggregate unemployment leading indicator that exploits serial correlation in response behavior through identifying and adjusting temporarily unreliable predictions. We use out-of-sample tests suitable in nested model environments to compare forecasting performance of models including the new indicator to that of purely autoregressive benchmarks. For all investigated forecast horizons (1, 2, 3 and 6 months), test results show that models enhanced by the new leading indicator significantly outperform their benchmark counterparts. To compare our indicator to potential competitors we employ the model confidence set. Results reveal that models including the new indicator perform very well." (Author's abstract, IAB-Doku) ((en)) |
| JEL: | C22 C52 C53 E24 |
| Date: | 2013–10–21 |
| URL: | http://d.repec.org/n?u=RePEc:iab:iabdpa:201317&r=lab |
| By: | Blazevski, Nikica Mojsoska; Petreski, Marjan; Petreska, Despina |
| Abstract: | The objective of this paper is to simulate the effects of two alternative social policies individual and family in-work benefits on labour market choices in Macedonia, with special focus on the poor and females. To that end, we use ex-ante analysis relying on a combination of a tax and benefit micro-simulation model for Macedonia (MAKMOD) and a structural model for labour supply, both utilising the 2011 Survey of Income and Labour Conditions. Results suggest that the proposed reforms will have a considerable effect on the working choices of Macedonians. The family in-work benefit is found to be more effective for singles and would potentially increase employment by 6 percentage points. On the other hand, the individual in-work benefit works better for couples where employment would increase by 2.5 percentage points. In addition, the effects are found to be larger for the poor and for females, the categories that are most prone to inactivity in Macedonia. |
| Date: | 2013–10–31 |
| URL: | http://d.repec.org/n?u=RePEc:ese:emodwp:em16-13&r=lab |
| By: | Lindahl L.; Golsteyn B.H.H.; Grönqvist H. (GSBE) |
| Abstract: | This paper investigates the relationship between time preferences and lifetime social and economic behavior. We use a Swedish longitudinal dataset that links information from a large survey on childrens time preferences at age 13 to administrative registers spanning over four decades. Our results indicate a substantial adverse relationship between high discount rates and school performance, health, labor supply, and lifetime income. Males and high ability children gain significantly more from being future-oriented. These discrepancies are largest regarding outcomes later in life. We also show that the relationship between time preferences and long-run outcomes operates through early human capital investments. |
| Keywords: | Behavioral Economics: Underlying Principles; Intertemporal Consumer Choice; Life Cycle Models and Saving; Labor Economics: General; |
| JEL: | D03 D91 J01 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:umagsb:2013065&r=lab |
| By: | Lawrence J. Christiano; Martin S. Eichenbaum; Mathias Trabandt |
| Abstract: | We develop and estimate a general equilibrium model that accounts for key business cycle properties of macroeconomic aggregates, including labor market variables. In sharp contrast to leading New Keynesian models, wages are not subject to exogenous nominal rigidities. Instead we derive wage inertia from our specification of how firms and workers interact when negotiating wages. Our model outperforms the standard Diamond-Mortensen-Pissarides model both statistically and in terms of the plausibility of the estimated structural parameter values. Our model also outperforms an estimated sticky wage model. |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgif:1089&r=lab |
| By: | Yoske Igarashi (Department of Economics, University of Exeter) |
| Abstract: | How would a policy that bans the use of networks in hiring (e.g., anti-old boy network laws) affect welfare? To answer this question, we examine a variant of Galenianos (2013), a version of a random search model with two matching technologies: a standard matching function and worker networks. Our model has two types of workers, networked workers and non-networked workers. It is shown that the effects of such a policy on non-networked workers can be either positive or negative, depending on model parameters. In our calibration such a policy would make non-networked workers slightly worse off and networked workers substantially worse off. |
| Keywords: | random search, network, referral, policy analysis, welfare, dynamics. |
| JEL: | C78 E24 E60 I3 J20 J30 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:exe:wpaper:1309&r=lab |
| By: | Murgai, Rinku; Ravallion, Martin; van de Walle, Dominique |
| Abstract: | Workfare schemes impose work requirements on beneficiaries. This has seemed an attractive idea for self-targeting transfers to poor people. This incentive argument does not imply, however, that workfare is more cost-effective against poverty than even poorly-targeted options, given hidden costs of participation. In particular, even poor workfare participants in a labor-surplus economy can be expected to have some forgone income when they take up such a scheme. A survey-based method is used to assess the cost-effectiveness of India's Employment Guarantee Scheme in Bihar. Participants are found to have forgone earnings, although these fall well short of market wages on average. Factoring in these hidden costs, the paper finds that for the same budget, workfare has less impact on poverty than either a basic-income scheme (providing the same transfer to all) or uniform transfers based on the government's below-poverty-line ration cards. For workfare to dominate other options, it would have to work better in practice. Reforms would need to reduce the substantial unmet demand for work, close the gap between stipulated wages and wages received, and ensure that workfare is productive -- that the assets created are of value to poor people. Cost-effectiveness would need to be reassessed at the implied higher levels of funding. |
| Keywords: | Rural Poverty Reduction,Labor Markets,Labor Policies,Banks&Banking Reform,Income |
| Date: | 2013–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:6673&r=lab |