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on Labor Markets - Supply, Demand, and Wages |
| By: | Pierre Brochu (University of Ottawa); Till Gross (Carleton University); Christopher Worswick (Carleton University) |
| Abstract: | The goal of our paper is to better understand the economic implications of Temporary Foreign Worker (TFW) programs as well as comprehend the underlying reasons for the rapid expansion of the number of TFWs hired by employers under the Canadian program brought to light in 2014. We present an efficiency wage model that allows for the possibility that a firm, unable to find a worker after advertising for a period of time, may hire a TFW at the advertised wage. Due to the assumed lower outside option for the TFW than the domestic worker, the TFW will exert higher effort than a domestic worker even if the TFW is paid the same wage as would have been paid to a domestic worker. In equilibrium, lower wage o ers are made to less-skilled domestic workers when a TFW program of this kind is in place. The model also implies higher unemployment rates for domestic workers after the introduction of a TFW program. Our empirical analysis is based on the confidential master files of the Canadian Census (1991-2006) and the Labor Force survey (2006-2013). We find that TFWs in Canada work longer hours, have lower rates of absenteeism, and are less likely to be laid off, consistent with higher effort in our model. Moreover, TFWs work at lower wage rates than domestic workers even for similar job characteristics, which is also a prediction of our model. |
| Keywords: | temporary foreign workers, guest workers, efficiency wage, hours, wages,absenteeism, job transitions |
| JEL: | J15 J24 J31 J61 J62 J71 |
| Date: | 2016–11 |
| URL: | http://d.repec.org/n?u=RePEc:crm:wpaper:1628&r=lma |
| By: | Justin R. Pierce; Peter K. Schott |
| Abstract: | We investigate the impact of a large economic shock on mortality. We find that counties more exposed to a plausibly exogenous trade liberalization exhibit higher rates of suicide and related causes of death, concentrated among whites, especially white males. These trends are consistent with our finding that more-exposed counties experience relative declines in manufacturing employment, a sector in which whites and males are disproportionately employed. We also examine other causes of death that might be related to labor market disruption and find both positive and negative relationships. More-exposed counties, for example, exhibit lower rates of fatal heart attacks. |
| JEL: | F1 F13 F16 I1 I18 J08 J21 J6 |
| Date: | 2016–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:22849&r=lma |
| By: | Alan L. Gustman; Thomas L. Steinmeier; Nahid Tabatabai |
| Abstract: | Using data from the Health and Retirement Study, we examine the effects of the Affordable Care Act (ACA) on retirement. We first calculate retirements (and in related analyses changes in expected ages of retirement and/or Social Security claiming) between 2010, before ACA, and 2014, after ACA, for those with health insurance at work but not in retirement. This group experienced the sharpest change in retirement incentives from ACA. We then compare retirement measures for those with health insurance at work but not in retirement with retirement measures for two other groups, those who, before ACA, had employer provided health insurance both at work and in retirement, and those who had no health insurance either at work or in retirement. To complete a difference-in-difference analysis, we make the same calculations for members of an older cohort over the same age span. We find no evidence that ACA increases the propensity to retire or changes the retirement expectations of those who, before ACA, had coverage when working but not when retired. An analysis based on a structural retirement model suggests that eventually ACA will increase the probability of retirement by those who initially had health insurance on the job but did not have employer provided retiree health insurance. But the retirement increase is quite small, only about half a percentage point at each year of age. The model also suggests that much of the effect of ACA on retirement will be realized within a few years of the change in the law. |
| JEL: | D91 E21 H55 I13 J14 J18 J26 J32 |
| Date: | 2016–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:22815&r=lma |
| By: | David Card; Ana Rute Cardoso; Jörg Heining; Patrick Kline |
| Abstract: | We survey two growing bodies of research on firm-level drivers of labor market inequality. The first examines how wages are affected by differences in employer productivity. Studies that focus on firm-specific productivity shocks and control for the non-random sorting of workers to firms typically find that a 10% increase in value-added per worker leads to somewhere between a 0.5% and 1.5% increase in wages. Given the wide variation in firm-specific productivity, elasticities of this size suggest that a significant fraction of wage inequality is tied to firm performance. A second literature estimates two-way fixed effects models that rely on the wage changes of people who move between firms to identify firm-specific wage premiums. This literature also concludes that firm pay setting is important for wage inequality, with many studies finding that firm wage effects contribute approximately 20% of the overall variance of wages. To interpret these findings, we develop a model of firm wage setting in which workers have idiosyncratic tastes for different workplaces. We show that simple versions of this model can rationalize the standard two-way fixed effects specification proposed by Abowd, Kramarz and Margolis (1999), and can also match the typical “rent-sharing” elasticities estimated in the literature. Extended versions of the model can potentially explain differences in the wage premiums paid by a given employer to different subgroups of workers. |
| JEL: | D24 J31 J42 |
| Date: | 2016–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:22850&r=lma |
| By: | Patrick Bayer; Kerwin Kofi Charles |
| Abstract: | Studying working and non-working men, we find that, after closing substantially from 1940 to the mid-1970s, the median black-white earnings gap has since returned to its 1950 level, while the positional rank the median black man would hold in the white distribution has remained little changed since 1940. By contrast, higher quantile black men have experienced substantial gains in both relative earnings levels and their positional rank in the white earnings distribution. Using a new decomposition method that extends existing approaches to account for non-participation, we show that the gains of black men at higher quantiles have been driven primarily by positional gains within education level due to forces like improved access to quality schools and declining occupational exclusion. At the median and below, strong racial convergence in educational attainment has been counteracted by the rising returns to education in the labor market, which have disproportionately disadvantaged the shrinking but still substantial share of blacks with lower education. |
| JEL: | J15 J31 J71 K42 N32 N92 |
| Date: | 2016–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:22797&r=lma |
| By: | Marcelo Arbex (Department of Economics, University of Windsor); Ricardo Freguglia (Department of Economics, Federal University of Juiz de Fora); Rafael Siano (Department of Economics, Federal University of Juiz de Fora) |
| Abstract: | Network centrality measures how important an individual is for his network overall. We construct a novel measure of network centrality that takes into account a worker’s and coworkers’ tenure in the same occupation and firm. Using a linked employer-employee data source - the Brazilian Annual Social Information Report (RAIS) - we follow Brazilian workers in the formal labor market and we estimate the effects of a worker’s network centrality on their wages. For the period 2008-2013, we identify job networks and calculate a centrality index for workers in the city of São Paulo – Brazil. We present empirical evidence that job network relevance, measure by our centrality index, is important to explain wage differentials in the labor market. The wage returns are shown to be higher for those workers employed in larger companies, as well as for workers who have higher tenure. We also identify a positive relationship between a worker’s centrality index and his wage, which suggests that an increase of a worker’s relative relevance in his network is associated to higher wages. We believe that our study sheds light on the extent to which a worker’s importance in his job network can influence his wage over time. |
| Keywords: | Network centrality, Wage differentials, Peer effects, Labor markets |
| JEL: | J24 J31 D85 |
| Date: | 2016–11 |
| URL: | http://d.repec.org/n?u=RePEc:wis:wpaper:1609&r=lma |
| By: | Aart Gerritsen (Max Planck Institute for Tax Law and Public Finance, Germany); Bas Jacobs (Erasmus University Rotterdam, The Netherlands) |
| Abstract: | We analyze the redistributional (dis)advantages of a minimum wage over income taxation in competitive labor markets, without imposing assumptions on the (in)efficiency of labor rationing. Compared to a distributionally equivalent tax change, a minimum-wage increase raises involuntary unemployment, but also raises skill formation as some individuals avoid unemployment. A minimum wage is an appropriate instrument for redistribution if and only if the public revenue gains from additional skill formation outweigh both the public revenue losses from additional unemployment and the utility losses of inefficient labor rationing. We show that this critically depends on how labor rationing is distributed among workers. A necessary condition for the desirability of a minimum-wage increase is that the public revenue gains from higher skill formation outweigh the revenue losses from higher unemployment. We write this condition in terms of measurable sufficient statistics. Our empirical analysis suggests that a minimum-wage increase is undesirable in nearly all OECD countries. A reduction in the minimum wage, along with tax adjustments that keep net incomes constant, would yield a Pareto improvement. |
| Keywords: | minimum wage; optimal redistribution; unemployment; skill formation |
| JEL: | D61 H21 J21 J24 J38 |
| Date: | 2016–11–17 |
| URL: | http://d.repec.org/n?u=RePEc:tin:wpaper:20160100&r=lma |
| By: | Cristina Fernández; Leonardo Villar |
| Abstract: | A taxonomy of the informal labor market is extremely important to understand and handle informality, particularly in a country as Colombia where this phenomenon is large and heterogeneous. As we will argue in this paper, it is possible to identify four different types of informality, according to the reasons to be informal: low productivity of the worker (subsistence informality), barriers to formality (induced informality), choice (voluntary informality) and both choice and low productivity (mixed informality). The policy recommendations to handle informality varies according to the target type of informality. While induced informality might be reduced by the removal of formal employment barriers or by the implementation of active policies to reduce segregation in society, structural informality requires other kinds of policies, such as a focus on improving educational outcomes. Similarly, in the case of voluntary informality, providing economic incentives to formalize and controlling informality might be more effective, whereas mixed informality is more related to wrong incentives created by social benefits. In this paper we propose a methodology to identify the four types of informality to the case of Colombia that follows what we did in Fernandez et al. (2016) but with greater emphasis on the education level. Although the correspondence is far from perfect, we show that in general terms, informal workers with primary education or less can be classified in the Subsistence informality group, informal workers with secondary education can be included in the Induced informality group, informal workers with tertiary education or more can be treated as Voluntary informal workers and informal workers with middle school education can cover mixed informality. Hence, the policy recommendations to handle informality among each education group are different. |
| Keywords: | Informalidad, Nivel educativo, Mercado Laboral, Recomendaciones de política, Colombia |
| JEL: | J21 J68 I24 |
| Date: | 2016–11–17 |
| URL: | http://d.repec.org/n?u=RePEc:col:000123:015227&r=lma |
| By: | Lalive, Rafael (University of Lausanne); Parrotta, Pierpaolo (ICN Business School) |
| Abstract: | Many OECD countries are reforming their pension systems. We investigate how pension eligibility affects labor supply in couples. Inspired by a theoretical framework, we measure how the sharp change in the pension eligibility of both partners affects labor force participation. We find that both partners leave the labor force as they become eligible for a pension. The effect of their own pension eligibility is 12 percentage points for women and 28 percentage points for men. Women also reduce their labor force participation by 2 to 3 percentage points as their partner reaches pension eligibility. For men, the effect of their partner's eligibility is smaller and not significantly different from zero. For women and men with low education, the effect of their own eligibility is strong. Regardless of education level, the partner eligibility effect is strong in homogamous couples. Studying joint labor supply, we find that pension eligibility reduces labor supply in couples by 44 percentage points, approximately 4 percentage points more than in a model that ignores partner eligibility effects. |
| Keywords: | couple labor supply, pension eligibility, full retirement age, household decisions |
| JEL: | J26 J14 C40 D10 |
| Date: | 2016–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp10361&r=lma |
| By: | Cain Polidano (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne); Chris Ryan (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne) |
| Abstract: | This study uses longitudinal data from the Household, Income and Labour Dynamics in Australia (HILDA) survey to study the long-run effects of completing vocational education and training (VET) on a set of labour market outcomes (employment, wages, earnings, hours and occupational status). It uses two novel approaches. First, it uses fixed effects regression methods to estimate effects from acquiring new qualifications. Second, it measures effects of acquiring qualifications at lower, the same and at higher levels than previously attained. This is important, since one half of the VET qualifications observed being completed in the HILDA data are at the same or lower levels. The use of fixed effects generates estimates that differ from those found previously in the literature, at least by gender. Here, the estimated improvements in outcomes for females following the completion of a VET qualification are often larger than they are for males. In the longer term, these results point to considerable stability in estimated effects – significant effects apparent in the first year after course completion tend to remain evident up to five years later. Completed qualifications that are not higher than those already held by individuals do not consistently improve the labour market outcomes studied here, but may provide other benefits. |
| Keywords: | Vocational education, qualification outcomes, all qualifications |
| JEL: | I21 I26 J21 |
| Date: | 2016–11 |
| URL: | http://d.repec.org/n?u=RePEc:iae:iaewps:wp2016n35&r=lma |
| By: | Lorenzo Cappellari (Università Cattolica del Sacro Cuore; Dipartimento di Economia e Finanza, Università Cattolica del Sacro Cuore); Paolo Castelnovo; Daniele Checchi; Marco Leonardi |
| Abstract: | We use OECD-PIAAC data to estimate the earnings effects of both years of education and of numerical skills. Our identification strategy exploits differential exposure to educational reforms across birth cohorts and countries. We find that education has the strongest earnings effect. A one standard deviation increase in years of education raises earnings by almost 22 percentage points (corresponding to a return to education above 7 percentage points), which compares with a lower percentage points return to an equivalent increase in numerical skills. Our results suggest that the same set of unobservables drives the accumulation of both formal years of education and numeracy skills. OLS estimates underestimate returns to human capital, consistently with the idea that educational reforms favour the human capital acquisition of abler children from disadvantaged parental backgrounds. When we consider numerical skills alone education reforms cannot identify any significant effect of skills on wages, however, when we jointly consider schooling and skills as endogenous factors in a recursive structure we find a significant role for skills in determining wages. |
| Keywords: | Returns to human capital, cognitive skills, educational reforms, PIAAC. |
| JEL: | I21 I24 I26 J24 J31 |
| Date: | 2016–11 |
| URL: | http://d.repec.org/n?u=RePEc:ctc:serie1:def053&r=lma |
| By: | Gee, Laura Katherine (Tufts University) |
| Abstract: | This paper presents the results from a 2.3 million person field experiment that varies whether or not a job seeker sees the number of applicants for a job posting on a large job posting website, LinkedIn. This intervention increases the likelihood that a person will finish an application by 3.5%. Women have a larger increase in their likelihood of finishing an application than men. Overall, adding this information to a job posting may offer a light-touch way to both increase application rates and alter the diversity of the applicant pool. |
| Keywords: | field experiment, labor search, social information, big data, gender, risk aversion, ambiguity aversion, uncertainty, herding, competition |
| JEL: | C93 D01 D83 J21 J22 |
| Date: | 2016–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp10372&r=lma |
| By: | Ben Sand (York University); Chris Bidner (Simon Fraser University) |
| Abstract: | Are differences in the quality of workers' prospects outside of their current employment relationship influential in generating pay differentials? We consider the role of an economy's industrial structure in generating differences in outside prospects, and apply our analysis to the gender pay gap in the U.S. during the 1980-2010 period. We develop a formal search and matching model that connects outside prospects, industrial structure and wage gaps and use it to guide our subsequent empirical analysis of local labor markets. Our results suggest that an economy's within-industry gender pay gap-which also controls for human capital characteristics-is substantially influenced by gender differences in the quality of outside prospects generated by the economy's industrial structure. Our analysis reveals that the relatively sharp narrowing of the gender pay gap during the 1980s is accounted for by the relatively sharp decline in the outside prospects of men during this period. |
| Keywords: | Gender Pay Gap, Search Frictions, Industrial Structure |
| JEL: | J31 J71 |
| Date: | 2016–11–21 |
| URL: | http://d.repec.org/n?u=RePEc:sfu:sfudps:dp16-14&r=lma |
| By: | HAURET Laetitia; MARTIN Ludivine; OMRANI Nessrine; WILLIAMS Donald R. |
| Abstract: | Existing evidence on Human Resource Management (HRM) strategy has been limited to separate analyses of the relationship between exposure to or participation in HRM and employee attitudes which affect overall firm performance. This paper is the first to integrate the two perspectives in a single analysis. Using employer-employee matched data with both exposure and participation measures, we find that a high exposure to HRM is not sufficient to improve employee attitudes when the level of employee participation in HRM is taken into account. Furthermore, based on a Blinder-Oaxaca decomposition, the results suggest that employee involvement in HRM practices affects the value employees place on their personal, occupational and workplace characteristics. |
| Keywords: | job satisfaction; commitment; Human Resources Management; exposure; participation; employee |
| JEL: | J28 M12 R23 |
| Date: | 2016–11 |
| URL: | http://d.repec.org/n?u=RePEc:irs:cepswp:2016-16&r=lma |
| By: | Vahagn Jerbashian |
| Abstract: | Using data from 10 Western European countries, I provide evidence that the fall in prices of information technologies (IT) is associated with a lower share of employment in middle wage occupations and a higher share of employment in high wage occupations. The decline in IT prices has no robust effect on the share of employment in the lowest paid occupations. Similar results hold within gender, age and education-level groups, with notable differences in these groups. For instance, the share of employment in high wage occupations among females has increased more than among males with the fall in IT prices. This is consistent with arguments that women hold a comparative advantage in communication and social skills, which are complementary to IT and in demand in high wage occupations. |
| Keywords: | job polarization; information technologies; gender; age; education-level |
| JEL: | J23 J24 O33 |
| Date: | 2016–11 |
| URL: | http://d.repec.org/n?u=RePEc:cer:papers:wp576&r=lma |
| By: | Dachs, Bernhard; Hud, Martin; Koehler, Christian; Peters, Bettina |
| Abstract: | A growing literature investigates how firms' innovation input reacts to changes in the business cycle. However, so far there is no evidence whether there is cyclicality in the effects of innovation on firm performance as well. In this paper, we investigate the employment effects of innovations over the business cycle. Our analysis employs a large data set of manufacturing firms from 26 European countries over the period from 1998 to 2010. Using the structural model of Harrison et al. (2014), our empirical analysis reveals four important findings: First, the net effect of product innovation on employment growth is pro-cyclical. It turns out to be positive in all business cycle phases except for the recession. Second, product innovators are more resilient to recessions than non-product innovators. Even during recessions they are able to substitute demand losses from old products by demand gains of new products to a substantial degree. As a result their net employment losses are significantly lower in recessions than those of non-product innovators. Third, we only find resilience for SMEs but not for large firms. Fourth, process and organizational innovations displace labor primarily during upturn and downturn periods. |
| Keywords: | innovation,employment,business cycle,resilience,Europe |
| JEL: | O33 J23 C26 D2 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:16076&r=lma |
| By: | Müller, Bettina; Murmann, Martin |
| Abstract: | We investigate the extent to which complementarities between technical and business skills of founders and employees matter for the generation of market novelties by new ventures. Using data about German start-ups, we find that there are no complementarities between technical and business skills within the group of founders, but that there are significant complementarities between technically trained founders and employees who have business skills. This suggests that the innovation potential of start-ups by technically trained founders is best explored by hiring employees who are trained in business. However, a reverse relationship does not exist: There are no complementarities between founders with business skills and employees with technical skills. |
| Keywords: | Entrepreneurship,Innovation,Human Capital,Skills,Complementarity |
| JEL: | J24 L23 L26 M13 M51 Q31 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:16074&r=lma |
| By: | Christopher Flinn (New York University); Ahu Gemici (Royal Holloway, University of London); Steven Laufer (Federal Reserve Board) |
| Abstract: | We estimate a partial and general equilibrium search model in which firms and workers choose how much time to invest in both general and match-specific human capital. To help identify the model parameters, we use NLSY data on worker training and we match moments that relate the incidence and timing of observed training episodes to outcomes such as wage growth and job-to-job transitions. We use our model to offer a novel interpretation of standard Mincer wage regressions in terms of search frictions and returns to training. Finally, we show how a minimum wage can reduce training opportunities and decrease the amount of human capital in the economy. |
| Keywords: | wage regression, Mincer, minimum wage, training |
| JEL: | J24 D58 D83 |
| Date: | 2016–11 |
| URL: | http://d.repec.org/n?u=RePEc:hka:wpaper:2016-023&r=lma |
| By: | Juan C. Palomino (Universidad Complutense de Madrid, EQUALITAS and CEDESOG, Spain); Gustavo A. Marrero (Universidad de la Laguna, EQUALITAS and CEDESOG, Spain); Juan G. Rodriguez (Universidad Complutense de Madrid, EQUALITAS and CEDESOG, Spain) |
| Abstract: | This paper studies the contribution of individual education and occupation to individual opportunity in Europe. Although the differences in inequality of opportunity (IO) among European countries are significant, no systematic approach has yet been proposed to analyse the channels through which different individual circumstances turn into different income levels. Here, we propose a simple two-step method to quantify the contribution to IO of individual education and occupation across Europe in 2004 and 2010. We find that the level of education channels up to 30\% of total IO, with important differences across Europe but no clear patterns of change over time. Moreover, we observe a negative correlation between the share of IO channelled through education and the share of the population with tertiary education. Once education is taken into account, the occupational category of individuals explains less than 5\% of total IO in most European countries. |
| Keywords: | Inequality of opportunity, education, occupation, Europe. |
| JEL: | D63 I24 J24 |
| Date: | 2016–10 |
| URL: | http://d.repec.org/n?u=RePEc:inq:inqwps:ecineq2016-411&r=lma |
| By: | Gozde Corekcioglu (European University Institute) |
| Abstract: | Do religiously conservative governments enact policies that limit opportunities for women? This study addresses this general question in a specific context: whether pro-Islamist politicians’ preferences for traditional gender roles translate into discriminatory employment practices in Turkish municipalities. I combine data from 2009 municipal elections with a unique dataset of municipal personnel. Comparing close races for the mayor, who appoints municipal personnel, I find no evidence of gender bias with mayors from the pro-Islamist party. Conditioning on the type of incumbent, I find that the share of females among white-collars decreases in municipalities where a pro-Islamist mayor replaced a secular mayor. |
| Keywords: | Political Islam, Regression Discontinuity, Female Employment, Discrimination, Turkey. |
| JEL: | D72 H75 J71 |
| Date: | 2016–11 |
| URL: | http://d.repec.org/n?u=RePEc:koc:wpaper:1613&r=lma |
| By: | Dachs, Bernhard; Hud, Martin; Koehler, Christian; Peters, Bettina |
| Abstract: | The shift of employment from lower to higher productive firms is an important driver for structural change and industry dynamics. We investigate this reallocation in terms of employment gains and losses from innovation. New employment created by product innovation may be offset by employment losses in related products, known as 'cannibalisation' or 'business stealing' effects in the literature, by employment losses from process and organisational innovation and by general productivity increases. The paper investigates this effect empirically with a large dataset from the European Community Innovation Survey (CIS). We find that employment gains and losses increase with technology intensity of the sector. High-technology manufacturing shows the strongest employment gains and losses from innovation, followed by knowledge-intensive services, low-technology manufacturing and less knowledge-intensive services. The net contribution of innovation to employment growth is mostly positive, an exception being manufacturing industries in recession periods. |
| Keywords: | innovation,employment,reallocation,technology intensity,compensation effect,displacement effect,cannibalisation effect |
| JEL: | O33 J23 C26 D2 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:16077&r=lma |
| By: | Yaping Shan (School of Economics, University of Adelaide) |
| Abstract: | We study the agency problem between a firm and its research employees under several scenarios characterized by different R&D unit setups. In a multiagent dynamic contracting setting, we describe the precise pattern of the optimal contract. We illustrate that the optimal incentive regime is a function of how agents' efforts interact with one another; relative performance evaluation is used when their efforts are substitutes whereas joint performance evaluation is used when their efforts are complements. The optimal contract pattern provides a theoretical justification for the compensation policies used by firms that rely on R&D. |
| Keywords: | Dynamic Contract, Repeated Moral Hazard, Multiagent Incentive, R&D, Employee Compensation |
| JEL: | D23 D82 D86 J33 L22 O32 |
| Date: | 2016–11 |
| URL: | http://d.repec.org/n?u=RePEc:adl:wpaper:2016-14&r=lma |