nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2013‒08‒05
fourteen papers chosen by
Erik Jonasson
National Institute of Economic Research

  1. The sources of wage variation: a three-way high-dimensional fixed effects regression model By Sónia Torres; Pedro Portugal; John T. Addison; Paulo Guimarães
  2. Mind the gap! The relative wages of immigrants in the Portuguese labour market By Sónia Cabral; Cláudia Duarte
  3. HUMAN CAPITAL LOSS IN CORPORATE BANKRUPTCY By John R. Graham; Hyunseob Kim; Si Li; Jiaping Qiu
  4. Minimum Wage and the Average Wage in France: A Circular Relationship? By Cette, Gilbert; Chouard, Valérie; Verdugo, Gregory
  5. Has Education Paid Off for Black Workers? By John Schmitt; Janelle Jones
  6. Do Minimum Wages Affect Firms’ Labor and Capital? Evidence from Vietnam By Nguyen, Cuong
  7. Effects of the Minimum Wage on Employment Dynamics By Jonathan Meer; Jeremy West
  8. The Impact of Within and Between Occupational Inequalities on People's Justice Perceptions towards Their Own Earnings By Carsten Sauer; Peter Valet; Stefan Liebig
  9. The family size effects on female employment. Evidence from the “natural experiments” related to human reproduction By Anna Baranowska
  10. Productivity and age: Evidence from work teams at the assembly line By Weiss M.; Börsch-Supan A.
  11. Racial and Ethnic Differences in Nonwage Compensation By Ritter, Joseph A.
  12. Immigrants Equilibrate Local Labor Markets: Evidence from the Great Recession By Brian C. Cadena; Brian K. Kovak
  13. Endophilia or exophobia: beyond discrimination By Salamanca Acosta N.; Hamermesh D.; Feld J.F.
  14. Defined Benefit Pension Plans and Job Lock: Evidence from the Education Sector By Cory Koedel; Shawn Ni; Michael Podgursky; Jason A. Grissom

  1. By: Sónia Torres; Pedro Portugal; John T. Addison; Paulo Guimarães
    Abstract: This paper estimates a wage equation with three high-dimensional fixed effects, using a longitudinal matched employer-employee dataset covering virtually all Portuguese wage earners over a little more than two decades. The variation in log real hourly wages is decomposed into different components related to worker, firm, and job title characteristics (both observed and unobserved) and a residual component. It is found that worker permanent heterogeneity is the most important source of wage variation (36.0 percent) and that the unobserved component plays a more important role (21.0 percent) than the observed component (15.0 percent) in explaining wage differentials. Firm permanent effects are less important overall (28.7 percent) and are due in almost equal parts to the unobserved component and the observed component. Job title effects emerge as the least important dimension but they still explain close to 10 percent of wage variation. Equally important, we found definitive evidence of positive assortative matching.
    JEL: J2 J41
    Date: 2013
  2. By: Sónia Cabral; Cláudia Duarte
    Abstract: Using matched employer-employee data, we examine the wage gaps between immigrant and native workers in the Portuguese labour market in the 2002-2008 period. We use the relation between the Gelbach’s and Oaxaca-Blinder’s decompositions to split the unconditional average wage gap as the sum of a composition effect and a wage structure effect. Most of the wage gap is not due to worst endowments of the immigrants but to differences in the returns to those characteristics and to the immigrant status effect. In particular, education and foreign experience of the average immigrants are significantly less valued in the Portuguese labour market. Overall, the wages of immigrants do not fully converge to those of comparable natives as experience in the Portuguese labour market increases. The assimilation rates tend to be stronger in the first years after migration and for immigrants with higher levels of pre-immigration experience. Total immigrants are a heterogeneous group of different nationalities, with immigrants from the EU15 and China starring as the two extreme cases.
    JEL: F22 J31 J61
    Date: 2013
  3. By: John R. Graham; Hyunseob Kim; Si Li; Jiaping Qiu
    Abstract: This paper quantifies the “human costs of bankruptcy” by estimating employee wage losses induced by the bankruptcy filing of employers using employee-employer matched data from the U.S. Census Bureau’s LEHD program. We find that employee wages begin to deteriorate one year prior to bankruptcy. One year after bankruptcy, the magnitude of the decline in annual wages is 30% of pre-bankruptcy wages. The decrease in wages persists (at least) for five years post-bankruptcy. The present value of wage losses summed up to five years after bankruptcy amounts to 29-49% of the average pre-bankruptcy market value of firm. Furthermore, we find that the ex-ante wage premium to compensate for the ex-post wage loss due to bankruptcy can be of similar magnitude with that of the tax benefits of debt.
    Keywords: Bankruptcy; Costs of financial distress; Human capital; Wage loss; Capital structure
    JEL: G3 G32 G33 J24 J31 J33
    Date: 2013–07
  4. By: Cette, Gilbert (Bank of France); Chouard, Valérie (Bank of France); Verdugo, Gregory (Bank of France)
    Abstract: This paper investigates whether increases in the minimum wage in France have the same impact on the average wage when intended to preserve the purchasing power of the minimum wage as when intended to raise it. We find that the impact of the minimum wage on the average wage is strong, but differs depending on the indexation factor. We also find some empirical evidence of circularity between the average wage and the minimum wage.
    Keywords: minimum wage, average wage, France
    JEL: E24 J31 J58
    Date: 2013–07
  5. By: John Schmitt; Janelle Jones
    Abstract: Over the past three decades, the “human capital” of the employed black workforce has increased enormously. In 1979, only one-in-ten (10.4 percent) black workers had a four-year college degree or more. By 2011, more than one in four (26.2 percent) had a college education or more. Over the same period, the share of black workers with less than a high school degree fell from almost one-third (31.6 percent) to only about one in 20 (5.3 percent). The black workforce has also grown considerably older. In 1979, the median employed black worker was 33 years old; today, the median is 39. Economists expect that increases in education and work experience will increase workers' productivity and translate into higher compensation. But, the share of black workers in a “good job” – one that pays at least $19 per hour (in inflation-adjusted 2011 dollars), has employer-provided health insurance, and an employer-sponsored retirement plan – has actually declined. This paper looks at this trend and policies that would have a large, positive impact on the quality of jobs for black workers.
    Keywords: black workers, good jobs, retirement, pensions, health insurance, wages, labor, education, bad jobs, gender, pay equity
    JEL: J J3 J31 J32 J38 J5 J1 J11 J15 I I2 I24 I25
    Date: 2013–06
  6. By: Nguyen, Cuong
    Abstract: This study measures the effect of minimum wage increases on firm outcomes using fixed-effects regression and panel data from Vietnam Enterprise Censuses during 2008-2010. It is found that minimum wages reduce firms’ labor size, albeit at a small magnitude. A one percent increase in real minimum wages leads to a 0.1 percent reduction in the number of workers of firms. Firms are more likely to reduce male workers and those without social insurance. As a result, the proportion of female workers and workers with social insurance in firms increases due to minimum wages. Interestingly, under pressure of minimum wages, firms tend to increase assets, especially fixed assets, for labor substitution.
    Keywords: Minimum wages, firms, impact evaluation, panel data, Vietnam
    JEL: J31 L25
    Date: 2012–06–25
  7. By: Jonathan Meer; Jeremy West
    Abstract: The voluminous literature on minimum wages offers little consensus on the extent to which a wage floor impacts employment. For both theoretical and econometric reasons, we argue that the effect of the minimum wage should be more apparent in new employment growth than in employment levels. In addition, we conduct a simulation showing that the common practice of including state-specific time trends will attenuate the measured effects of the minimum wage on employment if the true effect is in fact on the rate of job growth. Using a long state-year panel on the population of private-sector employers in the United States, we find that the minimum wage reduces net job growth, primarily through its effect on job creation by expanding establishments.
    JEL: J21 J23 J38
    Date: 2013–07
  8. By: Carsten Sauer; Peter Valet; Stefan Liebig
    Abstract: This paper investigates justice perceptions of employees towards their own earnings. Earnings are decomposed into three components: (1) In returns based on human capital endowments, (2) in returns based on individual residual differences and (3) in returns based on differences between occupations. The legitimacy of these earnings components is measured via the justice assessments of employees. Based on theoretical models from justice research and class theory it is hypothesized that earnings inequality resulting from human capital factors is evaluated as just, whereas residual inequality and occupational inequality are perceived as unjust. The hypotheses are tested by using data from a German longitudinal panel study (SOEP) of the years 2005 to 2011. These data allow studying changes of individual earnings and justice evaluations in a household panel over the time span of six years (with four biennial measurement points). The findings support our hypotheses indicating that losses or gains in earnings which are due to changes in human capital endowments do not affect justice perceptions of own earnings. Losses or gains stemming from changes of a person's earnings position within the occupational group or the position of a person's occupational group within the earnings hierarchy of a society, however, affect justice perceptions remarkably. Thus, we can show that justice evaluations of own earnings do not solely depend on compensation for individual investments but also on residual differences in earnings within and between occupational groups.
    Keywords: Earnings inequality, fairness of earnings, decomposition of justice evaluations, group identification, panel regression
    Date: 2013
  9. By: Anna Baranowska (Institute of Statistics and Demography, Warsaw School of Economics)
    Abstract: The “natural experiments” related to human reproduction are an increasingly often applied strategy for assessment of the family size effects on female employment. The aim of this paper is to review theoretical concepts and the available empirical evidence on studies that implement this methodological approach. Most studies confirm that the number of children does have a negative effect on female employment, net of the impact of women’s preferences regarding involvement in home-based versus paid work. Research provides consistent evidence on the way in which the effect of the number of children depends on parity and weakens over time, as the child becomes older. There is no consensus on the way that individual resources and preferences moderate the effect of family size on employment, however. Surprisingly little attention has been paid so far to the variation in the magnitude of family size effect according to living arrangements and country-specific contexts.
    Keywords: family size, female labour supply, causality
    JEL: J13 J22
    Date: 2013
  10. By: Weiss M.; Börsch-Supan A. (ROA)
    Abstract: We study the relation between workers age and their productivity in work teams, based on a new and unique data set that combines data on errors occurring in the production process of a large car manufacturer with detailed information on the personal characteristics of workers related to the errors. We correct for non-random sample selection and the potential endogeneity of the age-composition in work teams. Our results suggest that productivity in this plant which is typical for large-scale manufacturing does not decline at least up to age 60.
    Keywords: Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity; Economics of the Elderly; Economics of the Handicapped; Non-labor Market Discrimination; Human Capital; Skills; Occupational Choice; Labor Productivity;
    JEL: D24 J14 J24
    Date: 2013
  11. By: Ritter, Joseph A.
    Abstract: Previous research has found that, after controlling for test scores, measured black-white wage gaps are small but unemployment gaps remain large. This paper complements this previous research by examining the incidence of employer-provided benefits from the same premarket perspective. However, marriage rates differ substantially by race, and the possibility of health-insurance coverage through a spouse’s employer therefore distorts how the distribution of benefits available in the market to an individual is expressed in the distribution of benefits received. Two imputation strategies are used to address this complication. The evidence suggests that benefit availability gaps are small.
    Keywords: Labor and Human Capital, Public Economics,
    Date: 2013–06
  12. By: Brian C. Cadena; Brian K. Kovak
    Abstract: This paper demonstrates that low-skilled Mexican-born immigrants' location choices in the U.S. respond strongly to changes in local labor demand, and that this geographic elasticity helps equalize spatial differences in labor market outcomes for low-skilled native workers, who are much less responsive. We leverage the wage rigidity that occurred during Great Recession to identify the severity of local downturns, and our results confirm the standard finding that high-skilled populations are quite geographically responsive to employment opportunities while low-skilled populations are much less so. However, low-skilled immigrants, primarily those from Mexico, respond even more strongly than high-skilled native-born workers. These results are robust to a wide variety of controls, a pre-recession falsification test, and two instrumental variables strategies. A novel empirical test reveals that natives living in cities with a substantial Mexican-born population are insulated from the effects of local labor demand shocks compared to those in cities with few Mexicans. The reallocation of the Mexican-born workforce among these cities reduced the incidence of local demand shocks on low-skilled natives' employment outcomes by more than 40 percent.
    JEL: F22 J21 J61 R23
    Date: 2013–07
  13. By: Salamanca Acosta N.; Hamermesh D.; Feld J.F. (ROA)
    Abstract: The immense literature on discrimination treats outcomes as relative One group suffers compared to another. But does a difference arise because agents discriminate against othersare exophobicor because they favor their own kindare endophilic This difference matters, as the relative importance of the types of discrimination and their inter-relation affect market outcomes. Using a field experiment in which graders at one university were randomly assigned students exams that did or did not contain the students names, on average we find favoritism but no discrimination by nationality, and neither favoritism nor discrimination by gender, findings that are robust to a wide variety of potential concerns. We observe heterogeneity in both discrimination and favoritism by nationality and by gender in the distributions of graders preferences. We show that a changing correlation between endophilia and exophobia can generate perverse predictions for observed market discrimination.
    Keywords: Economic Methodology: General; Education and Inequality; Labor Discrimination;
    JEL: J71 I24 B40
    Date: 2013
  14. By: Cory Koedel (Department of Economics, University of Missouri-Columbia); Shawn Ni (Department of Economics, University of Missouri-Columbia); Michael Podgursky (Department of Economics, University of Missouri-Columbia); Jason A. Grissom
    Abstract: Despite their declining presence in the private sector, defined benefit (DB) pension plans still cover most public-sector workers. A distinguishing feature of these plans is that they impose severe penalties on worker mobility. We use administrative panel data from the largest public-sector occupation in the United States – teaching – to empirically examine the job-lock effects of DB pension plans. Our findings indicate that worker mobility is significantly reduced by pension borders. As expected, the effects are largest for individuals who face the steepest mobility penalties.
    Keywords: public pensions, defined benefit pensions, retirement benefits, job lock, pension job lock
    JEL: H75 J45 I20
    Date: 2013–07–29

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