nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2013‒12‒29
thirteen papers chosen by
Joseph Marchand
University of Alberta

  1. The US Labor Market in 2030: A Scenario Based on Current Trends in Supply and Demand By Edwards, Rebecca; Lange, Fabian
  2. Employment Polarization in Spain along the Cycle 1997-2012 By Anghel, Brindusa; de la Rica, Sara; Lacuesta, Aitor
  3. Wedges, Wages, and Productivity under the Affordable Care Act By Casey B. Mulligan; Trevor S. Gallen
  4. Labor Demand Effects of Rising Electricity Prices: Evidence for Germany By Cox, Michael; Peichl, Andreas; Pestel, Nico; Siegloch, Sebastian
  5. The Effects of Paid Family Leave in California on Labor Market Outcomes By Charles L. Baum; Christopher J. Ruhm
  6. Returns to Skills around the World: Evidence from PIAAC By Eric A. Hanushek; Guido Schwerdt; Simon Wiederhold; Ludger Woessmann
  7. Why firms avoid cutting wages: Survey evidence from European firms By Philip Du Caju; Theodora Kosma; Martina Lawless; Julian Messina; Tairi Rõõm
  8. What Drives the Urban Wage Premium? Evidence along the Wage Distribution By Matano, Alessia; Naticchioni, Paolo
  9. The effect of fragmentation on skill and industry wage premiums: Evidence from the European Union By Laura Márquez-Ramos
  10. Minimum Wages and Employment in China By Fang, Tony; Lin, Carl
  11. Wage effects of job-worker mismatches: Heterogeneous skills or institutional effects? By Velden R.K.W. van der; Badillo-Amador L.; Allen J.P.
  12. Informal Employment in Russia: Definitions, Incidence, Determinants and Labour Market Segmentation By Hartmut Lehmann; Anzelika Zaiceva
  13. Language Skills and Homophilous Hiring Discrimination: Evidence from Gender- and Racially-Differentiated Applications By Edo, Anthony; Jacquemet, Nicolas; Yannelis, Constantine

  1. By: Edwards, Rebecca (University of Sydney); Lange, Fabian (McGill University)
    Abstract: Three fundamental forces have shaped labor markets over the last 50 years: the secular increase in the returns to education, educational upgrading, and the integration of large numbers of women into the workforce. We modify the Katz and Murphy (1992) framework to predict the structure of the labor market in 2030. Even though the share of educated females in the workforce will grow rapidly, the supply response will not suffice to offset the trend in demand towards skilled, female labor. Wage growth over the next 20 years will continue to favor college educated workers and in particular college educated females.
    Keywords: wage growth, trends in labor demand and supply
    JEL: J11 J21 J22 J23 J31
    Date: 2013–12
  2. By: Anghel, Brindusa (FEDEA, Madrid); de la Rica, Sara (University of the Basque Country); Lacuesta, Aitor (Bank of Spain)
    Abstract: This article analyzes changes in the occupational employment share in Spain for the period 1997-2012 and the way particular sociodemographic adapt to those changes. There seems to be clear evidence of employment polarization between 1997 and 2012 that accelerates over the recession. Changes in the composition of the labour supply cannot explain the increase in the share of occupations at the low end of the wage distribution. Sector reallocation might have partially contributed to explain the polarization process in Spain during the years of expansion (1997-2007) but it is a minor factor during the recession. The polarization of occupations within sectors observed especially during the recession appear to be related to a decline in routine tasks which is compensated by an increase in occupations with non-routine service contents, which are found both in the low and high end of the wage distribution. Instead, jobs intensive in abstract contents do not appear to increase their share in total employment during these 15 years. The paper finds that this process has affected males more strongly than females because of their higher concentration in occupations more intensive in routine tasks. Among males, for workers under 30 years we find a decrease in the share of occupations with more routine tasks which turns into increases in others with more abstract content and particularly with more non-routine service content. Instead, male workers over 30 years seem to remain in declining occupations to a greater extent. Females of different ages are not affected by the abovementioned changes.
    Keywords: routinization, job tasks, employment polarization, business cycle
    JEL: E24 J24 J62 O33
    Date: 2013–12
  3. By: Casey B. Mulligan; Trevor S. Gallen
    Abstract: Our paper documents the large labor market wedges created by taxes, subsidies, and regulations included in the Affordable Care Act. The law changes terms of trade in both goods and factor markets for firms offering health insurance coverage. We use a multi-sector (intra-national) trade model to predict and quantify consequences of the Affordable Care Act for the patterns of output, labor usage, and employee compensation. We find that the law will significantly redistribute from high-wage workers to low-wage workers and to non-workers, reduce total factor productivity about one percent, reduce per-capita labor hours about three percent (especially among low-skill workers), reduce output per capita about two percent, and reduce employment less for sectors that ultimately pay employer penalties.
    JEL: H3 I13 J2 J3
    Date: 2013–12
  4. By: Cox, Michael (IZA); Peichl, Andreas (ZEW Mannheim); Pestel, Nico (IZA); Siegloch, Sebastian (IZA)
    Abstract: Germany plays a pioneering role in replacing conventional power plants with renewable energy sources. While this is beneficial with respect to environmental quality, the energy turnaround implies increasing electricity prices for private households and firms. The extent to which this is associated with negative impacts on employment depends on the interrelationship between labor and electricity as input factors. In this paper, we estimate cross-price elasticities between electricity and heterogeneous labor for the German manufacturing sector. We use administrative linked employer-employee micro data combined with information on electricity prices and usage during the period 2003-2007. Our findings suggest that there is a weak substitutability between electricity and labor, when the production level is held constant. We find positive, but small conditional cross-price elasticities of labor demand with respect to electricity prices between 0.09 and 0.31. In case of adjustable output, we find moderate gross complementarity with negative unconditional cross-elasticities ranging between -0.06 and -0.69. Labor demand is affected differently across skill levels with low- and high-skilled workers being affected more than medium-skilled. Our estimates suggest that the announced increase of the EEG surcharge in 2014 would decrease overall employment in the manufacturing sector by 86,000 workers, a decline by 1.4 percent.
    Keywords: electricity prices, labor demand, employment, energy, Germany
    JEL: J08 J23 Q48 Q58
    Date: 2013–12
  5. By: Charles L. Baum; Christopher J. Ruhm
    Abstract: Using data from the 1997 cohort of the National Longitudinal Survey of Youth (NLSY-97), we examine the effects of California’s first in the nation government-mandated paid family leave program (CA-PFL) on mothers’ and fathers’ use of leave during the period surrounding child birth, and on the timing of mothers’ return to work, the probability of eventually returning to pre-childbirth jobs, and subsequent labor market outcomes. Our results show that CA-PFL raised leave-taking by around 2.4 weeks for the average mother and just under one week for the average father. The timing of the increased leave use – immediately after birth for men and around the time that temporary disability insurance benefits are exhausted for women – is consistent with causal effects of CA-PFL. Rights to paid leave are also associated with higher work and employment probabilities for mothers nine to twelve months after birth, possibly because they increase job continuity among those with relatively weak labor force attachments. We also find positive effects of California’s program on hours and weeks of work during their child’s second year of life and possibly also on wages.
    JEL: J1 J18 J2 J3
    Date: 2013–12
  6. By: Eric A. Hanushek; Guido Schwerdt; Simon Wiederhold; Ludger Woessmann
    Abstract: Existing estimates of the labor-market returns to human capital give a distorted picture of the role of skills across different economies. International comparisons of earnings analyses rely almost exclusively on school attainment measures of human capital, and evidence incorporating direct measures of cognitive skills is mostly restricted to early-career workers in the United States. Analysis of the new PIAAC survey of adult skills over the full lifecycle in 22 countries shows that the focus on early-career earnings leads to underestimating the lifetime returns to skills by about one quarter. On average, a one-standard- deviation increase in numeracy skills is associated with an 18 percent wage increase among prime-age workers. But this masks considerable heterogeneity across countries. Eight countries, including all Nordic countries, have returns between 12 and 15 percent, while six are above 21 percent with the largest return being 28 percent in the United States. Estimates are remarkably robust to different earnings and skill measures, additional controls, and various subgroups. Intriguingly, returns to skills are systematically lower in countries with higher union density, stricter employment protection, and larger public-sector shares.
    JEL: I20 J31
    Date: 2013–12
  7. By: Philip Du Caju (National Bank of Belgium, Research Department); Theodora Kosma (Bank of Greece); Martina Lawless (Central Bank of Ireland); Julian Messina (World Bank; Universitat de Girona); Tairi Rõõm (Eesti Pank, Estonia)
    Abstract: The rarity with which firms reduce nominal wages has been frequently observed, even in the face of considerable negative economic shocks. This paper uses a unique survey of fourteen European countries to ask firms directly about the incidence of wage cuts and to assess the relevance of a range of potential reasons for why they avoid cutting wages. Concerns about the retention of productive staff and a lowering of morale and effort were reported as key reasons for downward wage rigidity across all countries and firm types. Restrictions created by collective bargaining were found to be an important consideration for firms in euro area countries but were one of the lowest ranked obstacles in non-euro area countries. The paper examines how firm characteristics and collective bargaining institutions affect the relevance of each of the common explanations put forward for the infrequency of wage cuts.
    Keywords: labour costs, wage rigidity, firm survey, wage cuts, European Union
    JEL: J30 J32 J33 J51 C81 P5
    Date: 2013–12
  8. By: Matano, Alessia (University of Barcelona); Naticchioni, Paolo (University of Rome 3)
    Abstract: This paper aims at disentangling the role played by different explanations on the urban wage premium along the wage distribution. We analyze the wage dynamics of migrants from lower to higher density areas in Italy, using quantile regressions and individual data. The results show that unskilled workers benefit more from a wage premium accruing over time, while skilled workers enjoy a wage premium when they migrate as well as a wage increase over time. Further, we find that for unskilled workers the wage growth over time is mainly due to human capital accumulation, consistently with the "learning" hypothesis, while for skilled workers it is the "coordination" hypothesis that matters.
    Keywords: urban wage premium, human capital, spatial sorting, wage distribution, quantile fixed effects
    JEL: J31 J61 R23
    Date: 2013–12
  9. By: Laura Márquez-Ramos (Department of Economics and Instituto de Economía Internacional, Universitat Jaume I, Castellón, Spain)
    Abstract: This paper hypotheses that diverging trends for skill premium might arise from fragmentation in countries at various stages of economic development. Then, individual wage data are brought directly to capture the evolution of high-skilled and low-skilled wages across industries in two EU countries that represent the "two faces" of fragmentation: an old-EU country (Germany) and a transition new- EU country (Slovenia). Results obtained provide evidence about the magnitude of potential losses suffered by low-skilled workers in high- skill-intensive industries in Germany. Otherwise, the relative wage of low-skilled workers in relation to high- skilled workers has increased with fragmentation in Slovenia. Furthermore, the consequences of increasing fragmentation are also reflected on industry wage premiums, as this paper shows that fragmentation reduces the wage premium in low-skill-intensive industries in Germany and Slovenia.
    Keywords: fragmentation, skill premium, industry premium, Germany, Slovenia, panel data
    JEL: F16 J31 C23
    Date: 2013
  10. By: Fang, Tony (Monash University); Lin, Carl (Beijing Normal University)
    Abstract: Since China promulgated new minimum wage regulations in 2004, the magnitude and frequency of changes in the minimum wage have been substantial, both over time and across jurisdictions. This paper uses county-level minimum wage panel data and a longitudinal household survey from 16 representative provinces to estimate the employment effects of minimum wage changes in China over the period of 2004 to 2009. In contrast to the mixed results of previous studies using provincial-level data, we present evidence that minimum wage changes have significant adverse effects on employment in the Eastern and Central regions of China, and result in disemployment for females, young adults, and low-skilled workers.
    Keywords: minimum wage, China, employment
    JEL: J38
    Date: 2013–12
  11. By: Velden R.K.W. van der; Badillo-Amador L.; Allen J.P. (GSBE)
    Abstract: The strong wage effects related to mismatches between a workers education and that required in the job are usually attributed to assignment theory. This theory asserts that productivity and wages depend on the education-job match, which determines the utilization of skills. However, recent research shows that educational mismatches are only weakly related to skill utilization, which in any case fails to account for the bulk of the wage effects. Two alternative theories have been put forward to explain the observed wage effects. One points to wage setting institutions that cause wages to be based on job characteristics regardless of individual performance, the other to the heterogeneity of skills within a given educational level. Both theories explain existing results, but have never been tested directly. In this paper we show that the former theory explains observed wage effects in the public sector, and the latter theory those in the private sector.
    Keywords: Wage Level and Structure; Wage Differentials; Public Sector Labor Markets; Labor-Management Relations, Trade Unions, and Collective Bargaining: General;
    JEL: J31 J45 J50
    Date: 2013
  12. By: Hartmut Lehmann; Anzelika Zaiceva
    Abstract: This paper takes stock of informal employment in Russia analysing its incidence and determinants. Using the regular 2003-11 waves and an informality supplement of the Russian Longitudinal Monitoring Survey (RLMS) it develops several measures of informal employment and demonstrates that the incidence varies widely across the different definitions. We also show that the determinants of informal employment are roughly stable across the different measures: workers who are males, relatively young, unskilled and employed in construction and trade and related services have a higher likelihood to have an informal job. We also take a look at the issue of labour market segmentation along the informal-formal divide by estimating an informal-formal wage gap at the means and across the entire wage distributions. We find only weak evidence for labour market segmentation in Russia when estimating an informal-formal wage gap for salaried workers at the mean. The results of quantile regressions show a wage penalty in the lower half of the distribution and no gap in the upper half for informal employees. In contrast, informal self-employed and entrepreneurs have conditional mean wages that are higher than the mean wages for the formally employed. Across the entire wage distribution, however, we find a negative wage gap in the lowest quartile and a strongly positive wage gap in the highest quartile, pointing to a segmented informal sector with a lower free entry tier and an upper rationed tier. This Working Paper relates to the 2014 OECD Economic Survey of the Russian Federation ( L'emploi informel en Russie : Définitions, incidence, déterminants et segmentation du marché du travail Ce document de travail propose un bilan sur l'emploi informel en Russie et analyse son incidence et ses déterminants. En utilisant les données régulières 2003-11 et un supplément sur l'informalité de l'Enquête "Russian Longitudinal Monitoring Survey" (RLMS), nous suggérons plusieurs mesures de l'emploi informel et démontrons que l'incidence varie considérablement selon les différentes définitions. Nous montrons également que les déterminants de l'emploi informel sont à peu près stables avec les différentes mesures: les travailleurs hommes, relativement jeunes, non qualifiés et employés dans la construction et le commerce et les services connexes ont une probabilité plus élevée d'avoir un emploi informel. Nous examinons également la question de la segmentation du marché du travail en terme de division entre marché formel et informel en estimant l'écart de salaire entre secteurs en moyenne et sur l'ensemble de la distribution des salaires. Nous ne trouvons que de faibles signes de segmentation du marché du travail en Russie pour l'estimation à la moyenne. Les résultats des régressions par quantile montrent une pénalité salariale pour les employés informels dans la moitié inférieure de la distribution et pas de différence dans la moitié supérieure. En revanche, les indépendants et les entrepreneurs du secteur informel ont des salaires moyens conditionnels plus élevés que les salaires moyens pour l'emploi formel. Sur l'ensemble de la distribution des salaires, cependant, nous constatons un écart salarial négatif dans le quartile inférieur et un écart salarial fortement positive dans le quartile le plus élevé, indiquant un secteur informel segmenté avec libre entrée dans le bas et du rationnement dans le haut. Ce Document de travail se rapporte à l’Étude économique de l’OCDE 2014 sur la Fédération de Russie (
    JEL: J31 J40 P23
    Date: 2013–12–04
  13. By: Edo, Anthony; Jacquemet, Nicolas; Yannelis, Constantine
    Abstract: This paper investigates the importance of ethnic homophily in the hiring discrimination process, and provides a novel test for statistical discrimination. Our evidence comes from a correspondence test performed in France, in which we use three different kinds of ethnic identification: French sounding names, North African sounding names, and “foreign” sounding names with no clear ethnic association. Within both male and female groups, we show that all non-French applicants are equally discriminated against when compared to French applicants. This indicates that racial discrimination in employment is directed against members of non-majority ethnic groups, and highlights the importance of favoritism for in-group members. Moreover we find direct evidence of homophily: recruiters with European names are more likely to call back French named applicants and female recruiters are more likely to call back women. The paper also directly tests for statistical discrimination by adding a signal related to language skill ability in all resumes sent to half the job offers. Although the signal inclusion significantly impacts the discrimination experienced by non-French females, it is much weaker for male minorities.
    Keywords: correspondence testing; gender discrimination; racial discrimination; ethnic homophily; language skills
    JEL: J15 J64 J71
    Date: 2013–12

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