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on Labour Economics |
| By: | Finn Martensen (Department of Economics, University of Konstanz, Germany) |
| Abstract: | The U.S. minimum wage declined in real terms since the late 1970s. In the same time, the wage of the least skilled workers fell in real terms, while the wage of the highest skilled workers increased. To shed light on these issues, I use a simple model of routinization. High-ability workers, after having received additional education, can substitute low-ability co-workers by machines. Technical progress results in more high-ability workers receiving additional education and in a declining wage for low-ability workers. A government opposes both unemployment and wage inequality. I calibrate the model and show that technical progress induces the government to lower the minimum wage. Hence, the model contributes to understand the decline in the U.S. minimum wage. |
| Keywords: | Minimum wage, Routinization, Education, Wage inequality, Unemployment |
| JEL: | E24 I24 J31 J88 |
| Date: | 2014–08–15 |
| URL: | http://d.repec.org/n?u=RePEc:knz:dpteco:1416&r=lab |
| By: | Bradbury, Katharine L. (Federal Reserve Bank of Boston) |
| Abstract: | Economists often expect unemployment insurance (UI) benefits to elevate unemployment rates because recipients may choose to remain unemployed in order to continue receiving benefits, instead of accepting a job or dropping out of the labor force. This paper uses individual data from the Current Population Survey for the period between 2005 and 2013 — a period during which the federal government extended and then reduced the length of benefit availability to varying degrees in different states — to investigate the influence of program parameters in the UI system on monthly transition rates of unemployed individuals. The main finding is that unemployed job losers tend to remain unemployed until they exhaust UI benefits, at which point they become more likely to drop out of the labor force; transitions to a job appear to be unaffected by UI benefit extensions. These findings imply that the longer periods of benefit eligibility under the federal programs EUC08 and EB — up to 99 weeks in many states in 2011 and 2012 — contributed to the elevated jobless rates observed during that period, but not via lower employment. By the same token, the sharp contraction of benefit weeks that occurred in 2012 and continued more gradually in 2013 likely contributed to declines in unemployment and participation rates beyond what one would expect based on the improving economy alone. Similarly, the December 28, 2013 sudden cutoff of federal UI payments to an estimated 1.3 million jobless Americans who had been looking for work for more than six months is adding to the pace of transitions from unemployment to dropping out of the labor force, thus reducing the unemployment rate and the labor force participation rate further in the first half of 2014, although very modestly. |
| Keywords: | unemployment insurance; federal benefit extensions; labor force participation |
| JEL: | E24 J22 J65 |
| Date: | 2014–07–09 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedbwp:14-2&r=lab |
| By: | Chris Dawson (University of Bath); Michail Veliziotis (University of the West of England, Bristol); Gail Pacheco (Auckland University of Technology); Don J Webber (University of the West of England, Bristol) |
| Abstract: | Mental health status often has a strong association with labour market outcomes. If people in temporary employment have poorer mental health than those in permanent employment then it is consistent with two mutually inclusive possibilities: temporary employment generates adverse mental health effects and/or individuals with poorer mental health select into temporary from permanent employment. We reveal that permanent workers with poor mental health appear to select into temporary employment thus signalling that prior cross sectional studies may overestimate the influence of employment type on mental health. We also reveal that this selection effect is significantly mitigated by job satisfaction. |
| Keywords: | Employment transitions; Psychological distress; Anxiety; Life satisfaction; Job satisfaction |
| JEL: | I12 I31 J23 |
| Date: | 2014–01–09 |
| URL: | http://d.repec.org/n?u=RePEc:uwe:wpaper:20141409&r=lab |
| By: | Altman, Morris |
| Abstract: | I discuss some key issues raised by behavioral economics for better understanding the working of the labor market. Amongst the key points in this paper are: (i) a revised modeling of the labor supply curve, with a specific focus on the target income approach (ii) elaborating on the importance of effort variability for understanding labor supply, including a narrative on efficiency wage and x-efficiency theory (includes the importance of fairness) (iii) building upon x-efficiency and efficiency wage theory to better understand the demand side of the labor market (iv) discussing some of the cognitive/informational/institutional factors affecting decision-making, including modeling the role of errors or biases in labor market decisions for both the supply and demand side of the labor market (v) insights of experimental economics for labor market behavior (vi) the importance behavioral economics for better understanding the stylizing facts of labor markets. This paper also compares conventional to behavioral theoretical approaches labor markets, their different underlying assumptions, and analytical predictions, with implications for public policy and institutional design. Also compared are the errors and biases and the bounded rationality approaches labor market analysis. They produce different analytical predictions as well as having different implications for public policy and institutional design. |
| Keywords: | Behavioral economics, Bounded rationality, Efficiency wages, Effort discretion, Errors and biases, Fairness, Information asymmetries, Target income approach, Involuntary employment, |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:vuw:vuwecf:3466&r=lab |
| By: | Hirsch, Barry (Georgia State University); Manzella, Julia (Georgia State University) |
| Abstract: | Economists and sociologists have proposed arguments for why there can exist wage penalties for work involving helping and caring for others, penalties borne disproportionately by women. Evidence on wage penalties is neither abundant nor compelling. We examine wage differentials associated with caring jobs using multiple years of Current Population Survey (CPS) earnings files matched to O*NET job descriptors that provide continuous measures of 'assisting and caring' and 'concern' for others across all occupations. This approach differs from prior studies that assume occupations either do or do not require a high level of caring. Cross-section and longitudinal analyses are used to examine wage differences associated with the level of caring, conditioned on worker, location, and job attributes. Wage level estimates suggest substantive caring penalties, particularly among men. Longitudinal estimates based on wage changes among job switchers indicate smaller wage penalties, our preferred estimate being a 2 percent wage penalty resulting from a one standard deviation increase in our caring index. We find little difference in caring wage gaps across the earnings distribution. Measuring mean levels of caring across the U.S. labor market over nearly thirty years, we find a steady upward trend, but overall changes are small and there is no evidence of convergence between women and men. |
| Keywords: | caring wage penalties, occupational job attributes, gender wage gaps |
| JEL: | J16 J31 |
| Date: | 2014–08 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp8388&r=lab |
| By: | Laura Hospido (Banco de España and IZA); Enrique Moral-Benito (Banco de España) |
| Abstract: | This paper studies the public sector wage gap in Spain by gender, skill level and type of contract, using recent administrative data from tax records. We estimate wage distributions in the presence of covariates separately for men and women in the public and in the private sectors, and we take advantage of the longitudinal structure of the data to control for selection. We find a positive public wage premium for men and women even after accounting for characteristics and endogenous selection; the observed average gap in hourly wages of 35 log points is reduced to 20 when accounting for observed characteristics, and to 10 once endogenous selection is also taken into consideration. We also find substantial variation in the public premium along the wage distribution once observed characteristics are accounted for. This variation, however, is offset by opposite patterns of selection into the public sector: while we observe positive selection into the public sector at the bottom of the wage distribution, workers at the top of the distribution select negatively into the public sector. |
| Keywords: | public sector wage gap, quantile regression, wage distribution, panel data |
| JEL: | C21 C23 J31 J45 |
| Date: | 2014–08 |
| URL: | http://d.repec.org/n?u=RePEc:bde:wpaper:1422&r=lab |
| By: | Matthias Giesecke; Sarah Okoampah |
| Abstract: | We quantify differences in the retirement age between manual and non-manual workers and evaluate these differences in the context of the literature on equality of opportunity. The focus is on the question how individual background during childhood transmits through physical demands of occupations on retirement ages. Individual retrospective data from the German Socio-Economic Panel are used to analyse labour force dynamics over the years 1984 to 2011. Discrete time duration models suggest that retirement ages differ substantially between manual and non-manual workers. To elaborate how such differences are explained by individual background characteristics on the one hand and eff ort and luck on the other hand, we make use of tests for stochastic dominance and a Blinder-Oaxaca decomposition. The result is that individual background characteristics explain a share of about one third of inequality in retirement ages as transmitted through physical demands of occupations. |
| Keywords: | Retirement age; inequality of opportunity; physical job demands; blinderoaxaca-decomposition |
| JEL: | D63 J26 J62 C14 |
| Date: | 2014–06 |
| URL: | http://d.repec.org/n?u=RePEc:rwi:repape:0492&r=lab |
| By: | Fairlie, Robert |
| Abstract: | Employer-provided health insurance may restrict job mobility, resulting in “job lock.â€Â Previous research on job lock finds mixed results using several methodologies. We take a new approach to examine job-lock by exploiting the discontinuity created at age 65 through the qualification for Medicare. Using a novel procedure for identifying age in months from matched monthly CPS data and a relatively unexplored administration measure of job mobility, we compare job mobility among male workers in the months just prior to turning age 65 to job mobility in the months just after turning age 65. We find no evidence that job mobility increases at the age 65 threshold when Medicare eligibility starts. We also do not find evidence that other factors such as retirement, reduction in hours worked, social security eligibility, pension eligibility, and sample changes confound the results on job mobility in the month individuals turn 65. |
| Keywords: | Social and Behavioral Sciences, Job lock; health insurance; Medicare |
| Date: | 2014–08–15 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:ucscec:qt4947535x&r=lab |
| By: | Junankar, Pramod N. (Raja) (University of New South Wales); Jayanthakumaran, Muhunthan (University of New South Wales) |
| Abstract: | This paper provides a critique of Faccini (2014) that allegedly shows that temporary contracts lead to lower unemployment in Europe. Using Faccini's data and his estimation methods, we show that the Fixed Effects estimation results collapse when we make slight alterations in the sample size or the independent variables used. The Arellano-Bond estimates are meaningless since the number of instruments is almost equal to the number of observations. To conclude we find that there is no evidence to support the conclusion that greater use of temporary contracts would decrease unemployment. |
| Keywords: | unemployment, temporary contracts, employment protection |
| JEL: | J64 J01 J08 J21 |
| Date: | 2014–08 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp8385&r=lab |
| By: | Clémence Berson (Centre d'Economie de la Sorbonne et Banque de France); Nicolas Ferrari (Direction Générale du Trésor) |
| Abstract: | The French labor market is divided between workers in permanent jobs and those who alternate fixed-term contracts with unemployment spells. Among other public policies aiming at reducing this duality, financial incentives could induce employers to lengthen contract duration or favor permanent contracts. This article develops a matching model fitted to the French labor-market characteristics and calibrated on French data. A gradual decrease in unemployment contributions or a firing tax reduces the duality but increases market rigidity and lowers labor productivity. However, decreasing unemployment contributions gradually is less favorable for new entrants than a firing tax and lengthens unemployment spells. An additional contribution levied on short-term contracts to finance a bonus for permanent-contract hirings also decreases labor-market duality and increases activity but without negative impacts on labor-market flexibility and productivity. |
| Keywords: | Duality, public policies. |
| JEL: | J41 J42 J48 |
| Date: | 2014–07 |
| URL: | http://d.repec.org/n?u=RePEc:mse:cesdoc:14061&r=lab |
| By: | Messina, Julian; Gambetti, Luca |
| Abstract: | A vector autoregression model with time-varying coefficients is used to examine the evolution of wage cyclicality in four Latin American economies: Brazil, Chile, Colombia and Mexico, during the period 1980-2010. Wages are highly pro-cyclical in all countries up to the mid-1990s except in Chile. Wage cyclicality declines thereafter, especially in Brazil and Colombia. This decline in wage cyclicality is in accordance with declining real-wage flexibility in a low-inflation environment. Controlling for compositional effects caused by changes in labor force participation along the business cycle does not alter these results. |
| Keywords: | Labor Policies,Environmental Economics&Policies,Labor Markets,Youth and Governance,Economic Theory&Research |
| Date: | 2014–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:6978&r=lab |
| By: | Stracke, Rudi (University of Munich); Sunde, Uwe (University of Munich) |
| Abstract: | This paper shows that the incentive effects of heterogeneity may be positive rather than negative in dynamic contests with multiple stages. In particular, the well-studied adverse effects of heterogeneity in static interactions are compensated by positive continuation-value and selection effects. Due to these positive dynamic incentive effects of heterogeneity that increase the incentives of relatively more able workers, heterogeneity is unlikely to be as detrimental as commonly perceived for incentives in organizations with multiple hierarchy levels. Heterogeneity of the workforce may even be optimal from the perspective of a firm that provides incentives using a multi-stage promotion contest. |
| Keywords: | incentive provision, multiple-stages, promotion contest, heterogeneity |
| JEL: | M52 J33 |
| Date: | 2014–08 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp8368&r=lab |
| By: | Peter Cappelli |
| Abstract: | Concerns that there are problems with the supply of skills, especially education-related skills, in the US labor force have exploded in recent years with a series of reports from employer-associated organizations but also from independent and even government sources making similar claims. These complaints about skills are driving much of the debate around labor force and education policy, yet they have not been examined carefully. The discussion below examines the range of these charges as well as other evidence about skills in the labor force. There is very little evidence consistent with the complaints about skills and a wide range of evidence suggesting that they are not true. Indeed, a reasonable conclusion is that over-education remains the persistent and even growing situation of the US labor force with respect to skills. I consider three possible explanations for the employer complaints as well as the implications associated with those changes. |
| JEL: | J08 J23 J24 |
| Date: | 2014–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20382&r=lab |
| By: | Doerr, Annabelle; Strittmatter, Anthony |
| Abstract: | We analyze the effectiveness of further training for unemployed under two different regulatory regimes, which are featured by different assignment mechanisms and selection criteria. The first regime is characterized by a strong influence of caseworkers, because they can assign unemployed to training courses directly. Under the new regime a voucher system is implemented. Further, new selection criteria instruct caseworkers to assign training to unemployed with high employment probabilities after training. Our results show that assignment and selection criteria do not alter the effectiveness of further training in the longrun. However, changing compositions of program types and durations under the voucher regime lead to a higher effectiveness of training in the short-run. In the medium-run, training is less effective under the voucher regime. A decomposition of the effects of the stricter selection criteria reveals interesting insights about opposing forces that cancel out each other on average. |
| Keywords: | Active Labor Market Policies, Treatment Effects Evaluation, Administrative Data, Voucher |
| JEL: | J68 H43 C21 |
| Date: | 2014–08 |
| URL: | http://d.repec.org/n?u=RePEc:usg:econwp:2014:21&r=lab |
| By: | Siemer, Michael (Board of Governors of the Federal Reserve System (U.S.)) |
| Abstract: | The 2007-2009 recession is characterized by: a large drop in employment, an unprecedented decline in firm entry, and a slow recovery. Using confidential firm-level data, I show that financial constraints reduced employment growth in small relative to large firms by 4.8 to 10.5 percentage points. The effect of financial constraints is robust to controlling for aggregate demand and is particularly strong in small young firms. I show in a heterogeneous firms model with endogenous firm entry and financial constraints that a large financial shock results in a long-lasting recession caused by a "missing generation" of entrants. |
| Keywords: | Employment; firm entry; financial crisis; small business; financial friction; slow recovery; start-ups |
| JEL: | E24 E32 E44 G01 J20 L25 |
| Date: | 2014–07–30 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2014-56&r=lab |
| By: | Dawson Chris (University of Bath); Veliziotis Michail (University of the West of England, Bristol); Hopkins Benjamin (University of Aberystwyth) |
| Abstract: | Over the last decade the UK has experienced unprecedented increases in migration associated with the 2004 A8 expansion of the EU. This paper studies the work ethic of these recent migrants by analysing worker absence data from the Labour Force Survey for the period 2005-2012. The results show that when A8 migrant workers first arrive in the UK they have substantially lower absenteeism than native workers, but importantly migrant absence levels assimilate within 4-7 years. If UK employers use this information to make hiring decisions, then unusually productive native workers will suffer, this is however only likely to occur in the short term. |
| Keywords: | Migration, assimilation, absenteeism |
| JEL: | J61 |
| Date: | 2014–01–07 |
| URL: | http://d.repec.org/n?u=RePEc:uwe:wpaper:20141407&r=lab |
| By: | Krause, Annabelle (IZA); Rinne, Ulf (IZA); Zimmermann, Klaus F. (IZA and University of Bonn) |
| Abstract: | A Single European Labor Market, particularly involving the free movement of workers within Europe, has been a goal of the European community since the 1950s. Whereas it may entail opportunities and drawbacks alike, the benefits – such as greater economic welfare for most citizens – are supposed to outweigh the losses. However, over fifty years after the aim was first established, a Single European Labor Market has not yet been achieved. This paper gives an overview of current European macroeconomic trends, with a particular focus on the Great Recession, and also explores the drivers of and obstacles to labor mobility. Complementarily, it analyzes the results of a unique opinion survey among labor market experts, as well as formulates policy recommendations to enhance mobility. The development of a Single European Labor Market is also discussed in relation to the German model. |
| Keywords: | European labor market integration, worker mobility, economic crisis, economic migration, German model |
| JEL: | J40 J61 J68 |
| Date: | 2014–08 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp8383&r=lab |