nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2015‒07‒25
thirteen papers chosen by
Joseph Marchand
University of Alberta

  1. Not Working At Work: Loafing, Unemployment and Labor Productivity By Burda, Michael C; Genadek, Katie R.; Hamermesh, Daniel S.
  2. The Rise of Domestic Outsourcing and the Evolution of the German Wage Structure By Deborah Goldschmidt; Johannes F. Schmieder
  3. Can minimum wages close the gender wage gap ? evidence from Indonesia By Hallward-Driemeier,Mary C.; Rijkers,Bob; Waxman,Andrew R.
  4. Multidimensional Skill Mismatch By Fatih Guvenen; Burhanettin Kuruscu; Satoshi Tanaka; David Wiczer
  5. Employer downsizing and older workers’ health By Pierre-Carl Michaud; Italo A. Gutierrez
  6. Big Plant Closures and Agglomeration Economies By Jordi Jofri-Monseny; Maria Sánchez-Vidal; Elisabet Viladecans-Marsal
  7. Lessons for Public Pensions from Utah’s Move to Pension Choice By Robert L. Clark; Emma Hanson; Olivia S. Mitchell
  8. Does Protecting Older Workers from Discrimination Make It Harder to Get Hired? Evidence from Disability Discrimination Laws By David Neumark; Joanne Song; Patrick Button
  9. Does Worker Wellbeing Affect Workplace Performance? By Alex Bryson; John Forth; Lucy Stokes
  10. Raising competitiveness and long-term growth of the Slovenian economy By Urban Sila; Hermes Morgavi; Nataša Jemec
  11. Military Officer Quality in the All-Volunteer Force By Matthew F. Cancian; Michael W. Klein
  12. Clueless Politicians By Christopher Cotton; Cheng Li
  13. The Effect of the Earned Income Tax Credit in the District of Columbia on Poverty and Income Dynamics By Bradley L. Hardy; Daniel Muhammad; Rhucha Samudra

  1. By: Burda, Michael C; Genadek, Katie R.; Hamermesh, Daniel S.
    Abstract: Using the American Time Use Survey (ATUS) 2003-12, we estimate time spent by workers in non-work while on the job. Non-work time is substantial and varies positively with the local unemployment rate. While the average time spent by workers in non-work conditional on any positive non-work rises with the unemployment rate, the fraction of workers who report time in non-work varies pro-cyclically, declining in recessions. These results are consistent with a model in which heterogeneous workers are paid efficiency wages to refrain from loafing on the job. That model correctly predicts relationships of the incidence and conditional amounts of non-work with wage rates and measures of unemployment benefits in state data linked to the ATUS, and it is consistent with observed occupational differences in non-work.
    Keywords: efficiency wage; labor productivity; loafing; non-work; shirking; time use
    JEL: E24 J22
    Date: 2015–07
  2. By: Deborah Goldschmidt; Johannes F. Schmieder
    Abstract: The nature of the relationship between employers and employees has been changing over the last decades, with firms increasingly relying on contractors, temp agencies and franchises rather than hiring employees directly. We investigate the impact of this transformation on the wage structure by following jobs that are moved outside of the boundary of lead employers to contracting firms. For this end we develop a new method for identifying outsourcing of food, cleaning, security and logistics services in administrative data using the universe of social security records in Germany. We document a dramatic growth of domestic outsourcing in Germany since the early 1990s. Event-study analyses show that wages in outsourced jobs fall by approximately 10-15% relative to similar jobs that are not outsourced. We find evidence that the wage losses associated with outsourcing stem from a loss of firm-specific rents, suggesting that labor cost savings are an important reason why firms choose to contract out these services. Finally, we tie the increase in outsourcing activity to broader changes in the German wage structure, in particular showing that outsourcing of cleaning, security and logistics services alone accounts for around 10 percent of the increase in German wage inequality since the 1980s.
    JEL: J21 J23 J3 J31 J5 J81 L1 L11 L16 L22 L23 L24 M12 M13 M51 M52
    Date: 2015–07
  3. By: Hallward-Driemeier,Mary C.; Rijkers,Bob; Waxman,Andrew R.
    Abstract: Using manufacturing plant-level census data, this paper demonstrates that minimum wage increases in Indonesia reduced gender wage gaps among production workers, with heterogeneous impacts by level of education and position of the firm in the wage distribution. Paradoxically, educated women appear to have benefitted the most, particularly in the lower half of the firm average earnings distribution. By contrast, women who did not complete primary education did not benefit on average, and even lost ground in the upper end of the earnings distribution. Minimum wage increases were thus associated with exacerbated gender pay gaps among the least educated, and reduced gender gaps among the best educated production workers. Unconditional quantile regression analysis attests to wage compression and lighthouse effects. Changes in relative employment prospects were limited.
    Keywords: Labor Markets,Economic Theory&Research,Wages, Compensation&Benefits,Labor Policies,Gender and Development
    Date: 2015–07–13
  4. By: Fatih Guvenen; Burhanettin Kuruscu; Satoshi Tanaka; David Wiczer
    Abstract: What determines the earnings of a worker relative to his peers in the same occupation? What makes a worker fail in one occupation but succeed in another? More broadly, what are the factors that determine the productivity of a worker-occupation match? In this paper, we propose an empirical measure of skill mismatch for a worker-occupation match, which sheds light on these questions. This measure is based on the discrepancy between the portfolio of skills required by an occupation (for performing the tasks that produce output) and the portfolio of abilities possessed by a worker for learning those skills. This measure arises naturally in a dynamic model of occupational choice with multidimensional skills and Bayesian learning about one's ability to learn these skills. In this model, mismatch is central to the career outcomes of workers: it reduces the returns to occupational tenure, and it predicts occupational switching behavior. We construct our empirical analog by combining data from the Armed Services Vocational Aptitude Battery (ASVAB), O*NET, and National Longitudinal Survey of Youth 1979 (NLSY79). Our empirical results show that the effects of mismatch on wages are large and persistent: mismatch in occupations held early in life has a strong effect on wages in future occupations. Skill mismatch also significantly increases the probability of an occupational switch and predicts its direction in the skill space. These results provide fresh evidence on the importance of skill mismatch for the job search process.
    JEL: E24 J24 J31
    Date: 2015–07
  5. By: Pierre-Carl Michaud; Italo A. Gutierrez
    Abstract: We estimate the effects of employer downsizing on older workers’ health outcomes using different approaches to control for endogeneity and sample selection.  With the exception of the instrumental variables approach, which provides large imprecise estimates, our results suggest that employer downsizing increases the probability that older workers rate their health as fair or poor; increases the risk of showing symptoms of clinical depression; and increases the risk of being diagnosed with stroke, arthritis, and psychiatric or emotional problems. We find weaker evidence that downsizing increases the risk of showing high levels of C-reactive protein (CRP), a measure of general inflammation.  We find that downsizing affects health by increasing job insecurity and stress, but that its effects remain statistically significant after controlling for these pathways, suggesting that other mechanisms such as diminished morale and general demotivation also affect worker health. Our findings suggest that employers ought to consider actions to offset the detrimental health effects of reducing personnel on their remaining (older) workers.
    Keywords: Older workers, employer downsizing, health outcomes,
    JEL: I12 M51
    Date: 2015–07–15
  6. By: Jordi Jofri-Monseny; Maria Sánchez-Vidal; Elisabet Viladecans-Marsal
    Abstract: This paper analyses the effects of large manufacturing plant closures on local employment. Specifically, we estimate the net employment effects of the closure of 45 large manufacturing plants in Spain, which relocated abroad between 2001 and 2006. We run differences-in-differences specifications in which locations that experience a closure are matched to locations with similar pre-treatment employment levels and trends. The results show that when a plant closes, for each job directly lost in the plant closure, between 0.3 and 0.6 jobs are actually lost in the local economy. The adjustment is concentrated in incumbent firms in the industry that suffered the closure, providing indirect evidence of labor market pooling effects. We find no employment effects in the rest of manufacturing industries or in the services sectors. These findings suggest that traditional input-output analyses tend to overstate the net employment losses of large plant closures.
    Keywords: Local employment, plant closures, input-output, agglomeration economies
    JEL: R12 R23 R58 J23
    Date: 2015–07
  7. By: Robert L. Clark; Emma Hanson; Olivia S. Mitchell
    Abstract: We explore what happened when the state of Utah moved away from its traditional defined benefit pension. In its place, it offered new hires a choice between a conventional defined contribution plan and a hybrid plan option, where the latter has both a guaranteed benefit component and a defined contribution plan where employees bear investment risk. We show that around 60 percent of new hires failed to make any active choice and, as a result, were automatically defaulted into the hybrid plan. Slightly more than half of those who made an active choice elected the hybrid plan. Post-reform, employees who failed to actively elect a primary retirement plan were also far less likely to enroll in a supplemental retirement account, compared to new hires who actively selected a plan. We also find that employees hired following the reform were more likely to leave public employment, resulting in higher separation rates. This could reflect a reduction in the desirability of public employment under the new pension design and an improving economic climate in the state. Our results imply that public pension reformers must consider employee responses in addition to potential cost savings, when developing and enacting major pension plan changes.
    JEL: H55 H75 J26 J38
    Date: 2015–07
  8. By: David Neumark; Joanne Song; Patrick Button
    Abstract: We explore the effects of disability discrimination laws on hiring of older workers. A concern with anti-discrimination laws is that they may reduce hiring by raising the cost of terminations and – in the specific case of disability discrimination laws – raising the cost of employment because of the need to accommodate disabled workers. Moreover, disability discrimination laws can affect non-disabled older workers because they are fairly likely to develop work-related disabilities, yet are not protected by these laws. Using state variation in disability discrimination protections, we find little or no evidence that stronger disability discrimination laws lower the hiring of non-disabled older workers. We similarly find no evidence of adverse effects of disability discrimination laws on hiring of disabled older workers.
    JEL: J14 J71 J78
    Date: 2015–07
  9. By: Alex Bryson; John Forth; Lucy Stokes
    Abstract: This paper uses linked employer-employee data to investigate the relationship between employees' subjective well-being and workplace performance in Britain. The analyses show a clear, positive and statistically-significant relationship between the average level of job satisfaction at the workplace and workplace performance. This finding is present in both cross-sectional and panel analyses and is robust to various estimation methods and model specifications. In contrast, we find no association between levels of job-related affect and workplace performance.
    Keywords: Subjective well being, job satisfaction, job-related affect, workplace performance
    JEL: J28
    Date: 2015–07
  10. By: Urban Sila; Hermes Morgavi; Nataša Jemec
    Abstract: The rapid growth after independence stopped in 2008 as the global crisis exposed important structural weaknesses. Large state involvement and rigid labour and product markets lowered productivity. Weak corporate governance and easy credit before the crisis led to high indebtedness and overinvestment. Slovenia was slow to deal with the underlying structural problems. Gradually, important reforms have been implemented which raised credibility of Slovenia in the financial markets and boosted confidence. But economic recovery has been sluggish, many people are unemployed and living standards still remain below the pre-crisis levels. Cost competitiveness and export market performance deteriorated, and there have been marked improvements only recently. Better corporate governance and management practices in the state owned sector and privatisations can attract FDI and raise efficiency. Low innovative activity could be boosted by more FDI, stronger framework for entrepreneurial activity and better start-up support. Relatively high minimum wage is potentially reducing employment opportunities of low-skilled workers. Limiting the minimum wage growth, and lowering the high tax wedge on labour income could boost employment. Efficiency should be raised in early and tertiary education to enhance skills. Despite generous public support, overall students’ performance could be improved and there are marked differences between students from different socioeconomic backgrounds. This Working Paper relates to the 2015 OECD Economic Survey of Slovenia (<P>Renforcer la compétitivité et la croissance à long terme de l'économie Slovène<BR>La croissance rapide suite à l'indépendance s'est arrêtée en 2008 alors que la crise mondiale a révélé d'importantes faiblesses structurelles. La participation de l'État et des marchés du travail rigides ont abaissé la productivité. Une faible gouvernance des entreprises et une facilité d'accès au crédit avant la crise ont conduit à un endettement élevé et au surinvestissement. La Slovénie a été lente à traiter les problèmes structurels sous-jacents. Peu à peu, des réformes importantes ont été mises en oeuvre qui ont amélioré la crédibilité de la Slovénie dans les marchés financiers et ont renforcé la confiance. Mais la reprise économique a été lente, beaucoup de gens sont au chômage et les conditions de vie restent toujours en dessous des niveaux d'avant-crise. La compétitivité des coûts et la performance des marchés d'exportation se sont détériorées, il y a eu des améliorations marquées que récemment. Des meilleures pratiques de gouvernance d'entreprise et de gestion des secteurs conduits par l'État et les privatisations peuvent attirer l'IDE et augmenter l'efficacité. Une faible activité innovante pourrait être stimulée d'avantage par l'IDE, en créant un environnement plus solide pour l'activité entrepreneuriale et un meilleur support pour de nouvelles entreprises de petite taille. Le salaire minimum relativement élevé réduit potentiellement les possibilités d’emploi de travailleurs peu qualifiés. Limiter la croissance du salaire minimum, et l'abaissement de la charge fiscale sur les revenus du travail pourrait stimuler l'emploi. L'efficacité doit être soulevée dans l'éducation précoce et tertiaire pour améliorer les compétences. Malgré le soutien public, la performance de l'ensemble des étudiants pourrait être améliorée et il y a des différences marquées entre les élèves de différents milieux socio-économiques. Ce Document de travail se rapporte à l’Étude économique de l’OCDE de la Slovénie, 2015 ( ique-slovenie.htm).
    Keywords: taxation, education, innovation, labour market, productivity, R&D, fiscalité, marchés du travail, innovation, éducation
    JEL: E24 F21 G3 H2 I2 J24 K2 L26 L33 O3
    Date: 2015–07–15
  11. By: Matthew F. Cancian; Michael W. Klein
    Abstract: We show a statistically significant and quantitatively meaningful decline in the quality of commissioned officers from 1980 to 2014 as measured by the scores of Marine officers on the General Classification Test (GCT), using data obtained from a Freedom of Information Act request. This test has been shown to be a good predictor of success in the military. This result differs from the widely-studied increase in the quality of enlisted personnel since 1973 when conscription ended and the All-Volunteer Force (AVF) began. We consider a range of possible causes for this decline. We focus on the fact that, during this period, Marine officers had to have a four-year college degree and there has been an expansion of the pool of young Americans in college. We find that other factors, such as the increasing diversity of the pool of incoming officers, have not contributed in any meaningful way to the decline in average annual GCT scores.
    JEL: H56 J4
    Date: 2015–07
  12. By: Christopher Cotton (Queen's University); Cheng Li (Mississippi State University)
    Abstract: We develop a model of policymaking in which a politician decides how much expertise to acquire or how informed to become about issues before interest groups engage in monetary lobbying. For a range of issues, the policymaker prefers to remain clueless about the merits of reform, even when acquiring expertise or better information is costless. Such a strategy leads to intense lobbying competition and larger political contributions. We identify a novel benefit of campaign finance reform, showing how contribution limits decrease the incentives that policymakers have to remain uninformed or ignorant of the issues on which they vote.
    Keywords: lobbying, strategic ignorance, campaign finance, rent seeking
    JEL: C72 D72
    Date: 2015–07
  13. By: Bradley L. Hardy (American University); Daniel Muhammad (District of Columbia Government); Rhucha Samudra (American University)
    Abstract: Using unique longitudinal administrative tax panel data for the District of Columbia (DC), we assess the combined effect of the DC supplemental earned income tax credit (EITC) and the federal EITC on poverty and income dynamics within Washington, DC, from 2001 to 2011. The EITC in DC merits investigation, as the DC supplement to the federal credit is the largest in the nation. The supplemental DC EITC was enacted in 2000, and has been expanded from 10 percent of the federal credit in 2001 to 40 percent as of 2009. To implement the study, we estimate least squares models with 0/1 dependent variables to estimate the likelihood of net-EITC income above poverty and near-poverty thresholds. We also estimate the likelihood of earnings growth and income stabilization from the EITC. To identify the effect of the EITC, we exploit variation in the EITC subsidy rate from 2008 to 2009, when an additional EITC bracket of 45 percent was added for workers with three or more dependent children, up from 40 percent in the previous year for workers with two or more children. We also estimate a model examining the impact of city-level changes to the EITC. The structure and richness of our data enable us to control for tax filer fixed effects, an important innovation from many previous EITC studies. Overall, we find that the combined EITC raises the likelihood of net-EITC income above poverty and near poverty by as much as 9 percent, with the largest consistent effects accruing to single-parent families.
    Keywords: Poverty, Social Welfare Policy, Tax Expenditures, Labor Supply
    JEL: I38 H24 J38
    Date: 2015–06

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