nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2015‒03‒22
sixteen papers chosen by
Joseph Marchand
University of Alberta

  1. Scars of Recessions in a Rigid Labor Market By Cockx, Bart; Ghirelli, Corinna
  2. Educational Mismatch and Firm Productivity: Do Skills, Technology and Uncertainty Matter? By Mahy, Benoît; Rycx, Francois; Vermeylen, Guillaume
  3. Compulsory Military Service and Future Earnings: Evidence from a Quasi-Experiment By Asali, Muhammad
  4. Training Access, Reciprocity, and Expected Retirement Age By Montizaan, Raymond; de Grip, Andries; Fouarge, Didier
  5. Testing the Validity of Item Non-Response as a Proxy for Cognitive and Non-Cognitive Skills By Kassenboehmer, Sonja C.; Schurer, Stefanie; Leung, Felix
  6. The Effect of Georgia's HOPE Scholarship on College Major: A Focus on STEM By Sjoquist, David L.; Winters, John V.
  7. Why are American Workers getting Poorer? China, Trade and Offshoring By Avraham Ebenstein; Ann Harrison; Margaret McMillan
  8. Are America's Inner Cities Competitive? Evidence from the 2000s By Hartley, Daniel; Kaza, Nikhil; Lester, T. William
  9. The Educational Upgrading of Japanese Youth, 1982-2007: Are All Japanese Youth Ready for Structural Reforms? By Arai, Yoichi; Ichimura, Hidehiko; Kawaguchi, Daiji
  10. The Decentralization of Minimum Wage Setting in Russia Economies By Anna Lukiyanova; Nina Vishnevskaya
  12. Apprenticeship, Vocational Training and Early Labor Market Outcomes in East and West Germany By Riphahn, Regina T.; Zibrowius, Michael
  13. The Evolution of Hourly Compensation in Canada between 1980 and 2010 By Jean-Yves Duclos; Mathieu Pellerin
  14. "On the Determinants of Changes in Wage Inequality in Bolivia" By Gustavo Canavire-Bacarreza; Fernando Rios-Avila
  15. Worker Flows and the Impact of Labour Transitions on Earnings in Uganda By Susan Namirembe Kavuma; Oliver Morrissey; Richard Upward
  16. Skill Acquisition in the Informal Economy and Schooling Decisions: Evidence from Emerging Economies By Tumen, Semih

  1. By: Cockx, Bart (Ghent University); Ghirelli, Corinna (Ghent University)
    Abstract: We study the impact of graduating in a recession in Flanders (Belgium), i.e. in a rigid labor market. In the presence of a high minimum wage, a typical recession hardly influences the hourly wage of low educated men, but reduces working time and earnings by about 4.5% up to twelve years after graduation. For the high educated, the working time is not persistently affected, but the penalty on the hourly wage (and earnings) increases with experience, and attains roughly -6% ten years after labor market entry. We also contribute to the literature on inference with few clusters.
    Keywords: scars, graduating, labor market rigidity, recession, few clusters, cluster robust
    JEL: C12 C41 E32 I21 J22 J23 J31 J6
    Date: 2015–02
  2. By: Mahy, Benoît (University of Mons); Rycx, Francois (Free University of Brussels); Vermeylen, Guillaume (University of Mons)
    Abstract: The authors provide first evidence on whether the direct relationship between educational mismatch and firm productivity varies across working environments. Using detailed Belgian linked employer-employee panel data for 1999-2010, they find the existence of a significant, positive (negative) impact of over- (under-)education on firm productivity. Moreover, their results show that the effect of over-education on productivity is stronger among firms: (i) with a higher share of high-skilled jobs, (ii) belonging to high-tech/knowledge-intensive industries, and (iii) evolving in a more uncertain economic environment. Interaction effects between under-education and working environments are less clear-cut. However, economic uncertainty is systematically found to accentuate the detrimental effect of under-education on productivity.
    Keywords: educational mismatch, productivity, linked employer-employee panel data, working environments
    JEL: J21 J24
    Date: 2015–02
  3. By: Asali, Muhammad (ISET, Tbilisi State University)
    Abstract: Using Israeli census data, this study provides new evidence on the long-term effects of military service on the earnings of veterans. Among Druze men aged 25-34, we find an economically and statistically significant positive effect of 18% on their wages. The respective effect for the 35-44 age group is 23%. The positive effects are large and intensify with time. Skill-enhancement and usual human capital accumulation do not explain the positive effect of military service. Networking and widening the circle of contacts during service are suggested as the most likely explanations.
    Keywords: military service, future earnings, social capital
    JEL: J24 J31 J45
    Date: 2015–02
  4. By: Montizaan, Raymond (ROA, Maastricht University); de Grip, Andries (ROA, Maastricht University); Fouarge, Didier (ROA, Maastricht University)
    Abstract: This paper investigates whether employers can induce employees to postpone retirement by offering access to training courses that maintain job proficiency. We use unique, matched employer–employee surveys for the Dutch public sector, which include detailed information on a wide range of HR practices applied in the organization, as well as the expected retirement age of its employees. We find that training policies, as reported by employers, are significantly positively related to employee expected retirement age, irrespective of whether employees actually participate in training. We show that this positive relationship is driven by employees' positive reciprocal inclinations, indicating that provision of training may serve as a tool to motivate older employees in their job and consequently to retire later. The provision of training access may therefore complement existing pension reforms in many industrialized countries that aim to increase labor-force participation of older workers. Robustness analyses indicate that the relationship between offering training access and expected age of retirement is unlikely to be driven by reverse causality, self-selection, or the presence of other organizational characteristics.
    Keywords: training access, reciprocity and retirement
    JEL: J24 J31 I2
    Date: 2015–02
  5. By: Kassenboehmer, Sonja C. (Monash University); Schurer, Stefanie (University of Sydney); Leung, Felix (University of Sydney)
    Abstract: Cognitive and non-cognitive skills are important determinants of labor market outcomes, but are often unobserved. We propose a proxy for these skills derived from item non-response information and a procedure to test its validity. Exploiting a unique data-collection feature of an Australian survey, we find that fraction answered on a self-completion questionnaire fulfils all necessary requirements to be a valid proxy for cognitive skills and outperforms alternative proxies derived from paradata. Fraction answered captures a third of the effect of cognitive ability on wages and education. We provide a simple solution to reduce omitted-variable biases by up to 11%.
    Keywords: paradata, item non-response, proxy-variable approach, cognitive ability, non-cognitive skills, wages, education
    JEL: J24 C18 C83 I20 J30
    Date: 2015–02
  6. By: Sjoquist, David L. (Georgia State University); Winters, John V. (Oklahoma State University)
    Abstract: There is growing concern in the U.S. that the nation is producing too few college graduates in science, technology, engineering, and mathematics (STEM) fields and there is a desire to understand how various policies affect college major decisions. This paper first uses student administrative records from the University System of Georgia to examine whether Georgia's HOPE Scholarship has affected students' college major decisions, with a focus on STEM majors. We find consistent evidence that HOPE reduced the likelihood that a USG student earned a degree with a major in a STEM field. The paper explores alternative reasons why HOPE reduced the likelihood of earning a STEM major.
    Keywords: merit aid, HOPE Scholarship, college major, STEM
    JEL: I23 J24
    Date: 2015–02
  7. By: Avraham Ebenstein; Ann Harrison; Margaret McMillan
    Abstract: We suggest that the impact of globalization on wages has been missed because its effects must be captured by analyzing occupational exposure to globalization. In this paper, we extend our previous work to include recent years (2003-2008), a period of increasing import penetration, China’s entry into the WTO, and growing US multinational employment abroad. We find significant effects of globalization, with offshoring to low wage countries and imports both associated with wage declines for US workers. We present evidence that globalization has led to the reallocation of workers away from high wage manufacturing jobs into other sectors and other occupations, with large declines in wages among workers who switch, explaining the large differences between industry and occupational analyses. While other research has focused primarily on China’s trade, we find that offshoring to China has also contributed to wage declines among US workers. However, the role of trade is quantitatively much more important. We also explore the impact of trade and offshoring on labor force participation rates. While offshoring to China has a negative impact on US labor force participation, other factors such as increasing computer use and substitution of capital for labor are significantly more important determinants of US employment rates across occupations.
    JEL: F16
    Date: 2015–03
  8. By: Hartley, Daniel (Federal Reserve Bank of Cleveland); Kaza, Nikhil (University of North Carolina at Chapel Hill); Lester, T. William (University of North Carolina at Chapel Hill)
    Abstract: In the years since Michael Porter’s paper about the potential competitiveness of inner cities there has been growing evidence of a residential resurgence in urban neighborhoods. Yet, there is less evidence on the competitiveness of inner cities for employment. We document the trends in net employment growth and find that inner cities gained over 1.8 million jobs between 2002 and 2011 at a rate comparable to suburban areas. We also find a significant number of inner cities are competitive over this period—increasing their share of metropolitan employment in 120 out of 281 MSAs. We also describe the pattern of job growth within the inner city, finding that tracts that grew faster tended to be closer to downtown, with access to transit, and adjacent to areas with higher population growth. However, tracts with higher poverty rates experienced less job growth, indicating that barriers still exist in the inner city.
    Keywords: Urban Labor Markets; City and Suburban Employment
    JEL: O18 R12
    Date: 2015–03–11
  9. By: Arai, Yoichi (National Graduate Institute for Policy Studies Japan); Ichimura, Hidehiko (University of Tokyo); Kawaguchi, Daiji (RIETI, Hitotsubashi University)
    Abstract: Are all Japanese youth ready for the structural reforms proposed as a supply-side policy of Abenomics? To answer this question, we assess how well Japanese youth have coped with the labor market's long-term structural changes, induced primarily by deepening interdependence with emerging economies and rapid technological progress over the last three decades. We examine the role of educational upgrading on the labor-market outcomes of youth between the ages of 25 and 29, using six waves of micro data from the Employment Status Survey spanning from 1982 to 2007. The analysis demonstrates that the demand growth for skilled labor relative to unskilled labor has been met by the educational upgrading of youth through the expansion of tertiary education, including education in vocational schools. Youth left behind the trend of educational upgrading, however, have suffered significantly from decreasing employment opportunities and deteriorating working conditions.
    Keywords: tertiary education, youth employment, Japan
    JEL: I23 J21
    Date: 2015–02
  10. By: Anna Lukiyanova (National Research University Higher School of Economics); Nina Vishnevskaya (National Research University Higher School of Economics)
    Abstract: In this paper, we study the minimum wage reform in Russia, which aimed to decentralize the fixing of the minimum wage and to increase the involvement of social partners in this process. The old system of the minimum wage setting was based on a single nation-wide minimum wage, which was differentiated across regions and occupations via a cumbersome framework of coefficients. The new system is a mixture of a government-legislated minimum wage at the federal level and collective agreements at regional levels. We show that the system of minimum wage setting has become more flexible. The reform succeeded in raising the real value of the minimum wage and increasing earnings of low paid workers without causing considerable negative effects in terms of employment. However, the reform did not lead to greater regional variation of minimum wages. It introduced some new imbalances: an unintended consequence of the reform was the emergence of separate regional wage sub-minima for private and public sector workers in many regions. The major challenge in coming years is to strengthen the institutions of collective bargaining, introduce evidence-based evaluation and boost the capacities of government and non-government monitoring agencies
    Keywords: minimum wage, wage policy, Russia, decentralization
    JEL: J31 J38 D33
    Date: 2015
  11. By: Francesco Bogliacino.; Matteo Lucchesex
    Abstract: In this article we use the unification of Germany in 1990 to test the hypothesis that an increase in the supply of a production factor generates skill biased technical change. We test for this mechanism in the context of the model presented by Acemoglu and Autor (2011) that allows endogenous assignment of skills to tasks in the economy. We use cohorts of workers from comparable countries as a control group. After discussing the possible confounding factors, we conclude that this effect is absent. The differential pattern among the countries seems to be determined by labor market flexibilization and tax reform.
    Keywords: Skill Biased Technological Change, Polarization, Natural Experiment.
    JEL: J31 O33 O52
    Date: 2015–03–06
  12. By: Riphahn, Regina T. (University of Erlangen-Nuremberg); Zibrowius, Michael (Cologne Institute for Economic Research)
    Abstract: We study the returns to apprenticeship and vocational training for three early labor market outcomes all measured at age 25 for East and West German youths: non-employment (i.e., unemployment or out of the labor force), permanent fulltime employment, and wages. We find strong positive effects of apprenticeship and vocational training. There are no significant differences for different types of vocational training, minor differences between East and West Germany and males and females, and no significant changes in the returns over time. Instrumental variable estimations confirm the regression results. The positive returns hold up even in poor labor market situations.
    Keywords: youth unemployment, school-to-work transition, returns to education, vocational training, transition economics
    JEL: J40 J24 I29
    Date: 2015–03
  13. By: Jean-Yves Duclos; Mathieu Pellerin
    Abstract: We consider changes in the distribution of hourly compensation in Canada using confidential census data and the recent National Household Survey over the last three decades. We find that the coefficient of variation of wages among full-time workers has almost doubled between 1980 and 2010. The rapid growth of the 99.9th percentile is the main driver of that increase. Changes in the composition of the workforce explain less than 25% of the rise in wage inequality. However, composition changes explain most of the increase in average hourly compensation over those three decades, wile wages stagnate within skill groups.
    Keywords: Wage distribution, Inequality, Canada, Composition effects
    JEL: J11 J31
    Date: 2015
  14. By: Gustavo Canavire-Bacarreza; Fernando Rios-Avila
    Abstract: In recent years, Bolivia has experienced a series of economic and political transformations that have directly affected the labor markets, particularly the salaried urban sector. Real wages have shown strong increases across the distribution, while also presenting a decrease in inequality. Using an intertemporal decomposition approach, we find evidence that changes in demographic and labor market characteristics can explain only a small portion of the observed inequality decline. Instead, the results indicate that the decline in wage inequality was driven by the faster wage growth of usually low-paid jobs, and wage stagnation of jobs that require higher education or are in traditionally highly paid fields. While the evidence shows that the reduction in inequality is significant, we suggest that such an improvement might not be sustainable in the long run, since structural factors associated with productivity, such as workers’ level of education, explain only a small portion of these wage changes.
    Keywords: Bolivia; Decomposition; Wage Inequality
    JEL: D63 I31 J31
    Date: 2015–03
  15. By: Susan Namirembe Kavuma; Oliver Morrissey; Richard Upward
    Abstract: The paper examines the flow of workers between employment states, the role of education in these transitions and the impact of the transitions on earnings. It uses panel data for three waves (2005/06, 2009/10 and 2010/11) of household surveys in Uganda. We estimate transition probability matrices and find bi-directional transitions between formal and informal employment but with a higher tendency of workers to transition from formal to informal than in the opposite direction. When we investigate the relation between education and transitions using probit models, we find the transition from informal to formal increases with education but the movement from formal to informal employment and switching from not working to working declines with education. We further investigate the impact of the transitions on the worker’s welfare by estimating wage equations and find evidence for a decline in monthly wages for workers moving from formal to informal employment and a wage gain for workers moving in the reverse direction. We suggest that transitions from informal to formal employment are induced by higher wage offers, while transitions in the opposite direction are more likely to be due to losing a job.
    Keywords: formal and informal sector employment, labour transitions JEL Classifications: J23, J40, O17, O55,
  16. By: Tumen, Semih
    Abstract: Informal jobs offer skill acquisition opportunities that may facilitate a future switch to formal employment for young workers. In this sense, informal training on the job may be a viable alternative to formal schooling in an economy with a large and diverse informal sector. In this paper, I investigate if these considerations are relevant for the schooling decisions of young individuals using panel data on 17 Latin American countries as well as micro-level data for Turkey. Specifically, I ask if the prevalence of informal jobs distort schooling attainment. I concentrate on three measures of schooling outcomes: (1) secondary education enrollment rate, (2) out-of-school rate for lower secondary school, and (3) tertiary education graduation rate. I find that the secondary education enrollment rate is negatively correlated with the size of the informal economy, while the out-of-school rate is positively correlated. This means that informal training on the job may be crowding out school education in developing countries. The tertiary education graduation rate, however, is positively correlated with the size of informal sector, which implies that a large informal economy induces college attendance for those who are more likely to succeed. Policies that can potentially affect the size of the informal sector should take into consideration these second-round effects on aggregate schooling outcomes.
    Keywords: Informal economy; skill acquisition; schooling outcomes; Latin America; Turkey.
    JEL: E26 I21 J24 O17
    Date: 2015–03–16

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