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on Labor Markets - Supply, Demand, and Wages |
| By: | Alexander Plum (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg) |
| Abstract: | Are low wages an instrument for the unemployed to switch to high-paying jobs within a medium-term period? Using data from the British Household Panel Survey (BHPS), the labor market dynamics of men are analyzed up to six years after entering unemployment. An alternative econometric approach is presented that allows for correlated random effects between the three labor market states (high-paid employed, low-paid employed and unemployed). The results show that low wages help to significantly reduce the risk of future unemployment. Indications of a “springboard effect” of low wages are found, especially for men without post-secondary education. However, the calculated probability of obtaining a high-paying job is noticeably influenced by the monetary level of the low-wage threshold. |
| Keywords: | low-pay dynamics, simulated correlated multivariate random effects probit model, state dependence, unobserved heterogeneity |
| JEL: | J64 J62 J31 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:mag:wpaper:140004&r=lma |
| By: | Artheya, Kartik (Federal Reserve Bank of Richmond); Reilly, Devin (University of Pennsylvania); Simpson, Nicole B. (Colgate University) |
| Abstract: | The Earned Income Tax Credit (EITC) is the single most important transfer program in place in the United States. An aspect of the EITC that has received little attention thus far is its role as a public insurance program. Yet, the structure of the EITC necessarily protects its primary class of recipients, unskilled single mothers, against major risks they face to both wages and changes in family structure. Our study provides the first quantitative statement about the insurance provided by the EITC. We study a dynamic model of consumption, savings, and labor supply in which households face wage and demographic risk, but have only limited self-insurance capacity. We use the model to compare outcomes under the EITC to the counterfactual in which it is completely eliminated. We find that the EITC provides substantial insurance to unskilled single mothers: The program reduces consumption volatility, as measured by the coefficient of the variation, by 12 percentage points or more, even as it allows these households to save less. Importantly, this insurance provision may not be compromising incentives to work: The model suggests that the EITC increases the labor supply of unskilled single mothers substantially at the extensive margin. |
| Keywords: | Taxation and Subsidies; Labor Supply; Insurance |
| JEL: | H22 H24 J22 |
| Date: | 2014–04–14 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedrwp:14-11&r=lma |
| By: | Kluve, Jochen (Humboldt University Berlin, RWI); Schmitz, Sebastian (Freie Universität Berlin) |
| Abstract: | Increasing mothers' labor supply is a key policy challenge in many OECD countries. Germany recently introduced a generous parental benefit that allows for strong consumption smoothing after childbirth and, by taking into account opportunity costs of childbearing, incentivizes working women to become mothers and return to the labor force rapidly. Using a sharp regression discontinuity design, we estimate policy impacts for up to 5 years after childbirth and find significant and striking patterns. First, medium-run effects on mothers' employment probability are positive, significant and large, for some subgroups ranging up to 10 per cent. The effects are driven by gains in part-time but not full-time employment. We also find significant increases in working hours. Second, the probability of job continuity rises significantly, i.e. mothers return to their pre-childbirth employer at higher rates. Third, employers reward this return to work by raising job quality significantly and substantially. We argue that the policy generated a profound change in social norms: the new parental benefit defines an "anchor", i.e. a societally preferred point in time at which mothers return to work after childbirth. |
| Keywords: | regression discontinuity, female labor supply, parental benefits |
| JEL: | H31 J13 J22 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp8115&r=lma |
| By: | Kunze, Astrid (Norwegian School of Economics) |
| Abstract: | This study reconsiders the empirical question of whether men's earnings increase because of children. Large Norwegian register data are used for brother and twin pairs who are followed over their life cycle from their first entry into the labour market. The data permit family-fixed effects to be modeled in various ways, as well as observing earnings growth before and after having children. The simple conditional correlation between children and earnings is positive. When only variation from between-sibling differences is used, the earnings effect post entry into first-fatherhood declines. The effect becomes small and non-significant when we use twins. |
| Keywords: | children, earnings, men, siblings, twins |
| JEL: | J22 J24 J31 J13 J16 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp8113&r=lma |
| By: | Massimo Baldini; Costanza Torricelli; Maria Cesira Urzì Brancati |
| Abstract: | In this paper we analyse household members’ reactions in case of unforeseen negative income shocks due to a transition into unemployment and/or into income support. More specifically, we estimate the impact of an income loss suffered by one household member on the probability that another household member – not necessarily the wife - transit from out of the labour force into employment or into workforce. Since in a lifecycle setting the labour supply of secondary workers is also affected by credit constraints, we take into account financial wealth and liabilities as well as a measure of household illiquidity due to housing. To perform our analyses, we use a discrete choice model and data drawn from the Bank of Italy Survey on Household Income and Wealth (SHIW) over the period 2004-2012, so as to include the effects of the Great Recession. Even after accounting for standard socio-economic controls, results show significant reactions to income shocks, especially during the recession. As for portfolio controls, we find a significant difference (mostly in terms of intercept, but also of slope) between the level of illiquidity and labour market participation for households hit/not hit by a shock. |
| Keywords: | household labour decisions, household portfolios, discrete-choice models |
| JEL: | D12 D14 J22 C25 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:mod:wcefin:14104&r=lma |
| By: | Saniter, Nils (DIW Berlin); Siedler, Thomas (University of Hamburg) |
| Abstract: | This study examines the causal link between individuals' occupational knowledge, educational choices, and labor market outcomes. We proxy occupational knowledge with mandatory visits to job information centers (JICs) in Germany while still attending school. Exogenous variation in the location and timing of JIC openings allow estimating causal effects in a difference-in-difference setup. Combining linked survey-administrative data with data on JICs permits to detect whether individuals benefited from the comprehensive information service when they were young. The results suggest that individuals, who went to school in administrative districts with a JIC, have higher educational attainments and a smoother transfer to the labor market than students who did not have access to these facilities. However, we find no effects on individuals' earnings in their first job or later in life. Overall, our results confirm the importance of policies that promote occupational knowledge among young adults. |
| Keywords: | education, uncertainty, job matching, information, job information centers |
| JEL: | I2 J24 J31 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp8100&r=lma |
| By: | Hartog, Joop (University of Amsterdam); Diaz-Serrano, Luis (Universitat Rovira i Virgili) |
| Abstract: | While uncertainty abounds in almost any decision on investment in schooling, it is mostly ignored in research and virtually absent in labour economics text books. This paper documents the scope for risk, discusses the tough disentanglement of heterogeneity and risk, surveys the analytical models, laments the absence of a good workhorse model and points out the challenges worth tackling: document ex ante risk that investors face, develop a tractable and malleable analytical model and integrate the option of consumption smoothing in analytical and empirical work. Hedging labour market risk in the stock market can be safely ignored. |
| Keywords: | schooling, risk, human capital, labour supply |
| JEL: | I21 J22 J24 J31 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp8110&r=lma |
| By: | Gibbs, Michael (University of Chicago); Neckermann, Susanne (Erasmus University Rotterdam); Siemroth, Christoph (University of Mannheim) |
| Abstract: | We study the effects of a field experiment designed to motivate employee ideas, at a large technology company. Employees were encouraged to submit ideas on process and product improvements via an online system. In the experiment, the company randomized 19 account teams into treatment and control groups. Employees in treatment teams received rewards if their ideas were approved. Nothing changed for employees in control teams. Our main finding is that rewards substantially increased the quality of ideas submitted. Further, rewards increased participation in the suggestion system, but decreased the number of ideas per participating employee, with zero net effect on the total quantity of ideas. The broader participation base persisted even after the reward was discontinued, suggesting habituation. We find no evidence for motivational crowding out. Our findings suggest that rewards can improve innovation and creativity, and that there may be a tradeoff between the quantity and quality of ideas. |
| Keywords: | innovation, creativity, intrinsic motivation, incentives |
| JEL: | C93 J24 M52 O32 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp8096&r=lma |
| By: | Bossler, Mario (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]) |
| Abstract: | "Using new and unique linked employer-employee data from Germany, I examine the extent to which immigrants sort into worse-paying establishments and worse job positions within establishments. The results demonstrate that recent immigrants are particularly likely to work at low-paying workplaces. Similarly, when examining job positions within establishments, I find that immigrants are employed in lower hierarchical positions. Both the non-random sorting across establishments and the hierarchical sorting within establishments explain much of the immigrant-native wage differential. Policy measures designed to address the wage differential should therefore address immigrants' access to well-paying workplaces and job positions. With respect to career development, immigrant participation in performance assessments is low, and immigrants feel disadvantaged in personnel decisions, which in turn might be relevant channels that explain immigrants' under-representation in well-paid positions." (Author's abstract, IAB-Doku) ((en)) |
| JEL: | J31 J61 |
| Date: | 2014–04–15 |
| URL: | http://d.repec.org/n?u=RePEc:iab:iabdpa:201410&r=lma |