nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2017‒05‒07
eighteen papers chosen by
Joseph Marchand
University of Alberta

  1. Does a Bachelor's degree pay off? Labor market outcomes of academic versus vocational education after Bologna By Neugebauer, Martin; Weiss, Felix
  2. 35 Years of Reforms: A Panel Analysis of the Incidence of, and Employee and Employer Responses to, Social Security Contributions in the UK By Stuart Adam; David Phillips; Barra Roantree
  3. War, Migration and the Origins of the Thai Sex Industry By Brodeur, Abel; Lekfuangfu, Warn N.; Zylberberg, Yanos
  4. Closing Routes to Retirement: How Do People Respond? By Geyer, Johannes; Welteke, Clara
  5. Returns to Postgraduate Education in Portugal: Holding on to a Higher Ground? By Almeida, Andre; Figueiredo, Hugo; Cerejeira, João; Portela, Miguel; Sá, Carla; Teixeira, Pedro N.
  6. Wage Rigidities in Colombia: Measurement, Causes, and Policy Implications By Agudelo, Sonia A.; Sala, Hector
  7. NAFTA and the Gender Wage Gap By Shushanik Hakobyan; John McLaren
  8. The Effect of Labor Market Information on Community College Students’ Major Choice By Rachel Baker; Eric Bettinger; Brian Jacob; Ioana Marinescu
  9. Egalitarianism under Pressure: Toward Lower Economic Mobility in the Knowledge Economy? By Markussen, Simen; Røed, Knut
  10. Evolving Wage Cyclicality in Latin America By Gambetti, Luca; Messina, Julián
  11. Unreal Wages? Real Income and Economic Growth in England, 1260-1850 By Humphries, Jane; Weisdorf, Jacob
  12. Agricultural Returns to Labor and the Origins of Work Ethics By Fouka, Vasiliki; Schlaepfer, Alain
  13. Ageing Poorly? Accounting for the Decline in Earnings Inequality in Brazil, 1995-2012 By Ferreira, Francisco H. G.; Firpo, Sergio; Messina, Julián
  14. Differences in positions along a hierarchy: Counterfactuals based on an assignment model By Gobillon, Laurent; Meurs, Dominique; Roux, Sébastien
  15. Using your ties to get a worse job? The differential effects of social networks on quality of employment: Evidence from Colombia By Deguilhem, Thibaud; Berrou, Jean-Philippe; Combarnous, François
  16. The Structure of the Wage Gap for Temporary Workers: Evidence from Australian Panel Data By Lass, Inga; Wooden, Mark
  17. Is the Gender Pay Gap in the US Just the Result of Gender Segregation at Work? By Meara, Katie; Pastore, Francesco; Webster, Allan
  18. Be a man or become a nurse: Comparing gender discrimination by employers across a wide variety of professions By Kübler, Dorothea; Schmid, Julia; Stüber, Robert

  1. By: Neugebauer, Martin; Weiss, Felix
    Abstract: Academic education is generally rewarded by employers, but what happens to graduates if they are trained for two years less and have to compete with vocationally trained labor market entrants in a similar field of study? Focusing on Germany, we analyze labor market entries of individuals eligible for higher education, who either opted for newly introduced short bachelor's degrees, or for well-established vocational degrees. Based on Microcensus data, we find that bachelor's degrees from classical universities are associated with higher earnings and more prestigious jobs than initial vocational training degrees, and with higher prestige (but similar earnings) than further vocational degrees. However, bachelor's degrees from universities are also related to higher risks of unemployment or fixed-term employment. Universities of applied sciences, which combine academic and practical training, offer both high earnings and prestigious jobs as well as low risks of unemployment or fixed-term employment at the bachelor's and the master's level. Overall, 'general' academic education provides advantages over vocational education, despite these structural changes. Variations by field of study are reported.
    Keywords: labor market outcomes,Bologna Process,vocational education,higher education,Germany
    JEL: I26 I23 J24 J31
    Date: 2017
  2. By: Stuart Adam; David Phillips; Barra Roantree
    Abstract: We exploit variation in National Insurance contributions (NICs) – the UK’s system of social security contributions – and a large panel dataset to examine the effects of 35 years of employee and employer NICs reforms on labour cost (gross earnings plus employer NICs), hours of work and labour cost per hour, both immediately (0–6 months) after reforms are implemented and in the slightly longer term (12–18 months). We consider assumptions under which the estimated coefficients on net-of-marginal and net-of-average tax rates in a panel regression can be interpreted as behavioural elasticities or as reflecting incidence. We find a compensated elasticity of taxable earnings with respect to the marginal rate of employee NICs of about 0.2–0.3, operating largely through hours of work, while that with respect to the marginal rate of employer NICs is not statistically significantly different from zero. We also find that labour cost falls by a much larger amount when the average rate of employer NICs is reduced than when the average rate of employee NICs is reduced, which is consistent with the economic incidence of NICs being strongly affected by its formal legal incidence. Estimates from the hours and hourly labour cost regressions provide further support to this interpretation of the findings, and also suggest the presence of substantial income effects – though also, after 1999, a puzzling effect of average employer NICs rates on hours of work. Each of these results remains true after 12–18 months (if anything, coefficients on lagged changes in NICs rates strengthen these findings), implying that any shifting of employer NICs changes to the individual employees concerned (and vice versa for employee NICs) does not begin over this time horizon. These results are similar to those found by Lehmann et al. (2013) for France but represent an extension of that work by considering hours as well as labour cost responses and second-year as well as immediate effects.
    JEL: H2 J2 J3
    Date: 2017–04
  3. By: Brodeur, Abel (University of Ottawa); Lekfuangfu, Warn N. (Chulalongkorn University); Zylberberg, Yanos (University of Bristol)
    Abstract: This paper analyzes the determinants behind the spatial distribution of the sex industry in Thailand. We relate the development of the sex industry to an early temporary demand shock, i.e., U.S. military presence during the Vietnam War. Comparing the surroundings of Thai military bases used by the U.S. army to districts close to unused Thai bases, we find that there are currently 5 times more commercial sex workers in districts near former U.S. bases. The development of the sex industry is also explained by a high price elasticity of supply due to female migration from regions affected by an agricultural crisis. Finally, we study a consequence induced by the large numbers of sex workers in few red-light districts: the HIV outbreak in the early 1990s.
    Keywords: sex industry, industry location, persistence, HIV/AIDS
    JEL: O17 O18 N15 J46 J47 I28
    Date: 2017–03
  4. By: Geyer, Johannes (DIW Berlin); Welteke, Clara (DIW Berlin)
    Abstract: We present quasi-experimental evidence on the employment effects of an unprecedented large increase in the early retirement age (ERA). Raising the ERA has the potential to extend contribution periods and to reduce the number of pension beneficiaries at the same time, if employment exits are successfully delayed. However, workers may not be able to work longer or may choose other social support programs as exit routes from employment. We study the effects of the ERA increase on employment and potential program substitution in a regression-discontinuity framework. Germany abolished an important early retirement program for women born after 1951, effectively raising the ERA for women by three years. We analyze the effects of this huge increase on employment, unemployment, disability pensions, and inactivity rates. Our results suggest that the reform increased both employment and unemployment rates of women age 60 and over. However, we do not find evidence for active program substitution from employment into alternative social support programs. Instead employed women remained employed and unemployed women remained unemployed. The results suggest an increase in inequality within the affected cohorts.
    Keywords: retirement age, early retirement, regression discontinuity, pension reform, unemployment, labor supply, disability pension
    JEL: J14 J18 J22 J26
    Date: 2017–03
  5. By: Almeida, Andre (CIPES – Centre for Research in Higher Education Policies); Figueiredo, Hugo (CIPES – Centre for Research in Higher Education Policies); Cerejeira, João (University of Minho); Portela, Miguel (University of Minho); Sá, Carla (University of Minho); Teixeira, Pedro N. (University of Porto)
    Abstract: In this paper we use a large official employer-employee dataset, which includes almost the whole universe of business firms, to document and decompose the rising graduates postgraduates' wage differentials in Portugal. Using a non-parametric matching exercise, we pay particular attention to differences in the assignment of these two groups of workers across occupations and tasks. This allows us to disentangle different sources of postgraduates' relative earnings and look at the creation of postgraduate jobs. We further look, however, at displacement and deskilling effects due to relative demand inertia as possible sources of such evolution of the relative earnings. Our results show that both displacement and deskilling effects, particularly of graduates with only a first-degree, appear to be at least as important as direct productivity effects in explaining postgraduates premiums. We also conclude that the relative importance of the former has been steadily increasing overtime and that, on the contrary, the net creation of high-paying, postgraduate-only jobs has been relatively modest. This suggests that postgraduate degrees have largely worked as a way of holding on to a higher ground in the labour market.
    Keywords: postgraduate, wage differentials, inequality, polarization, skills
    JEL: C21 J24 J31
    Date: 2017–03
  6. By: Agudelo, Sonia A. (Universitat Autònoma de Barcelona); Sala, Hector (Universitat Autònoma de Barcelona)
    Abstract: This paper evaluates the extent of wage rigidities in Colombia over a period, 2002-2014, in which the fall in unemployment was relatively slow with respect to sustained economic growth. Following Holden and Wulfsberg (2009), we compute a measure of downward real wage rigidity (DRWR) of 12.09%, four times bigger than their aggregate estimate for the OECD economies. Moreover, in contrast to the evidence for the advanced economies, the determinants of such rigidities show no connection to the wage bargaining system. Amid the absence of effective labor market institutions to make rigidities less prevalent, economic growth appears as the most powerful mechanism to ward them off. Under this light, we provide a stylized description of the wage setting rule in Colombia, compare it with the common one in the advanced economies, and call for a far-reaching reform of the Colombian wage bargaining setup.
    Keywords: downward real wage rigidity, wage bargaining, minimum wage, informality, unemployment
    JEL: E24 J3 J48 J58
    Date: 2017–03
  7. By: Shushanik Hakobyan (Fordham University); John McLaren (University of Virginia)
    Abstract: Using U.S. Census data for 1990–2000, we estimate effects of NAFTA on U.S. wages, focusing on differences by gender. We find that NAFTA tariff reductions are associated with substantially reduced wage growth for married blue-collar women, much larger than the effect for other demographic groups. We investigate several possible explanations for this finding. It is not explained by differential sensitivity of female-dominated occupations to trade shocks, or by household bargaining that makes married female workers less able to change their industry of employment than other workers. We find some support for an explanation based on an equilibrium theory of selective non-participation in the labor market, whereby some of the higher-wage married female workers in their industry drop out of the labor market in response to their industry’s loss of tariff. However, this does not fully explain the findings, so we are left with a puzzle.
    Keywords: NAFTA, gender wage gap, local labor markets
    JEL: F16 F13 J31
  8. By: Rachel Baker; Eric Bettinger; Brian Jacob; Ioana Marinescu
    Abstract: An important goal of community colleges is to prepare students for the labor market. But are students aware of the labor market outcomes in different majors? And how much do students weigh labor market outcomes when choosing a major? In this study we find that less than 40% of a sample of community college students in California rank broad categories of majors accurately in terms of labor market outcomes. However, students believe that salaries are 13 percent higher than they actually are, on average, and students underestimate the probability of being employed by almost 25 percent. We find that the main determinants of major choice are beliefs about course enjoyment and grades, but expected labor market outcomes also matter. Experimental estimates of the impact of expected labor market outcomes are larger than OLS estimates and show that a 1% increase in salary is associated with a 1.4 to 1.8% increase in the probability of choosing a specific category of majors.
    JEL: I0 I21 I23 J01 J18 J30
    Date: 2017–04
  9. By: Markussen, Simen (Ragnar Frisch Centre for Economic Research); Røed, Knut (Ragnar Frisch Centre for Economic Research)
    Abstract: Based on complete population data, with the exact same definitions of family class background and economic outcomes for a large number of birth cohorts, we examine post‐war trends in intergenerational economic mobility in Norway. Despite only mild fluctuations in standard rank‐based summary statistics, we show that men and women born into the lowest parts of the parental earnings rank distribution have fallen considerably behind in terms of several quality‐of‐life outcomes, such as earnings rank, earnings share, employment propensity, educational attainment, and the establishment of a family. In particular, the prime-age employment rates of lower class sons have declined spectacularly, both because their rank outcomes have deteriorated and because the lowest ranks to an increasing extent have become associated with non-employment rather than low‐wage employment. We provide suggestive evidence that higher educational requirements in the labor market has increased the importance of parental encouragement and support and thus enlarged the handicap of being born into a less resourceful family. There is no evidence whatsoever of a relative decline in the lower classes' cognitive abilities.
    Keywords: intergenerational mobility, inequality, cognitive ability
    JEL: J62 D63 J24
    Date: 2017–03
  10. By: Gambetti, Luca (Autonomous University of Barcelona); Messina, Julián (Inter-American Development Bank)
    Abstract: Examines the evolution of the cyclicality of real wages and employment in four Latin American economies: Brazil, Chile, Colombia and Mexico, during the period 1980-2010. Wages are highly pro-cyclical during the 1980s and early 1990s, a period characterized by high inflation. As inflation declined wages became less pro-cyclical, a feature that is consistent with emerging downward wage rigidities in a low inflation environment. Compositional effects associated with changes in labor participation along the business cycle appear to matter less for estimates of wage cyclicality than in developed economies.
    Keywords: downward wage rigidity, indexation, real wage cyclicality, vector autoregression, time varying coefficients, Bayesian estimation
    JEL: E24
    Date: 2017–03
  11. By: Humphries, Jane; Weisdorf, Jacob
    Abstract: Existing accounts of workers' earnings in the past suffer from the fundamental problem that annual incomes are inferred from day wages without knowing the length of the working year. We circumvent this problem by presenting a novel income series for male workers employed on annual contracts. We use evidence of labour market arbitrage to argue that existing estimates of annual incomes in England are badly off target, because they overestimate the medieval working year but underestimate the working year during the industrial revolution. Our revised income estimates suggests that modern economic growth began more than two centuries earlier than commonly thought and was driven by an early and continuing "Industrious Revolution".
    Keywords: England; Industrial Revolution; Industrious Revolution; Labour Supply; Living standards; Malthusian Model; Real Wages
    JEL: J3 J4 J5 J6 J7 J8 N33
    Date: 2017–04
  12. By: Fouka, Vasiliki; Schlaepfer, Alain
    Abstract: We examine the historical determinants of differences in preferences for work across societies today. Our hypothesis is that a society’s work ethic depends on the role that labor has played in it historically, as an input in agricultural production: societies that have for centuries depended on the cultivation of crops with high returns to labor effort will work longer hours and develop a preference for working hard. We formalize this prediction in the context of a model of endogenous preference formation, with altruistic parents that can invest in reducing their offsprings’ disutility from work. To empirically found our model, we construct an index of potential agricultural labor intensity, that captures the suitability of a location for the cultivation of crops with high estimated returns to labor in their production. We find that this index positively predicts work hours and attitudes towards work in contemporary European regions. We find support for the hypothesis of cultural transmission, by examining the correlation between potential labor intensity in the parents’ country of origin and hours worked by children of European immigrants in the US.
    Keywords: Agriculture, Labor Productivity, Hours of Work, Culture
    JEL: J22 J24 N30 N50 Z10
    Date: 2017–03
  13. By: Ferreira, Francisco H. G. (World Bank); Firpo, Sergio (Insper, São Paulo); Messina, Julián (Inter-American Development Bank)
    Abstract: The Gini coefficient of labor earnings in Brazil fell by nearly a fifth between 1995 and 2012, from 0.50 to 0.41. The decline in earnings inequality was even larger by other measures, with the 90-10 percentile ratio falling by almost 40 percent. Although the conventional explanation of a falling education premium did play a role, an RIF regression-based decomposition analysis suggests that the decline in returns to potential experience was the main factor behind lower wage disparities during the period. Substantial reductions in the gender, race, informality and urban-rural wage gaps, conditional on human capital and institutional variables, also contributed to the decline. Although rising minimum wages were equalizing during 2003-2012, they had the opposite effects during 1995-2003, because of declining compliance. Over the entire period, the direct effect of minimum wages on inequality was muted.
    Keywords: earnings inequality, Brazil, RIF regressions
    JEL: D31 J31
    Date: 2017–03
  14. By: Gobillon, Laurent; Meurs, Dominique; Roux, Sébastien
    Abstract: We propose an assignment model in which positions along a hierarchy are attributed to individuals depending on their characteristics. Our theoretical framework can be used to study differences in assignment and outcomes across groups and we show how it can motivate decomposition and counterfactual exercises. It constitutes an alternative to more descriptive methods such as Oaxaca decompositions and quantile counterfactual approaches. In an application, we study gender disparities in the public and private sectors with a French exhaustive administrative dataset. Whereas females are believed to be treated more fairly in the public sector, we find that the gender gap in propensity to get job positions along the wage distribution is rather similar in the two sectors. The gender wage gap in the public sector is 13.3% and it increases by only 0.7 percentage points when workers are assigned to job positions according to the rules of the private sector. Nevertheless, the gender gap at the last decile in the public sector increases by as much as 3.6 percentage points when using the assignment rules of the private sector.
    Keywords: Assignment; Counterfactuals; Distributions; Gender; Public sector; wages
    JEL: C51 J31 J45
    Date: 2017–04
  15. By: Deguilhem, Thibaud; Berrou, Jean-Philippe; Combarnous, François
    Abstract: This article examines the effect of social networks through the use of family, friends or relatives ties on quality of employment (QoE). Drawing from the socioeconomic literature on social networks and labor market, we propose an original and multidimensional measure of QoE, and a fruitful estimation approach of the effect of social networks on QoE that allows to deal with complex inter-groups heterogeneity. Using the Great Integrated Houshold Survey (GIHS) and a sample on Bogota's workers in 2013, we find evidence proving that the use of ties has high negative effects on QoE index for those who are in the lower quality of employment range. Likewise, the use of social networks has very low negative effects on QoE index for individuals who are in the better quality of employment range. Complemented by focus groups interviews, these empirical results raise questions about the difference prevailing in relational practices between necessity networks for precarious workers and opportunity networks for protected workers.
    Keywords: Social networks, Quality of employment, Finite Mixture Regression Model, Colombia
    JEL: J42 L14 O54 Z13
    Date: 2017–04
  16. By: Lass, Inga (Melbourne Institute of Applied Economic and Social Research); Wooden, Mark (Melbourne Institute of Applied Economic and Social Research)
    Abstract: This study uses panel data for Australia from the HILDA Survey to estimate the wage differential between workers in temporary jobs and workers in permanent jobs. Specifically, unconditional quantile regression methods with fixed effects are used to examine how this gap varies over the entire wages distribution. While fixed-term contract workers are on rates of pay that are similar to permanent workers, low-paid casual workers experience a wage penalty and high-paid casual workers a wage premium compared to their permanent counterparts. Finally, temporary agency workers usually receive a wage premium, which is particularly large for the most well paid.
    Keywords: temporary employment wages, HILDA Survey, quantile regression, longitudinal data
    JEL: J31 J41 C21 C23
    Date: 2017–03
  17. By: Meara, Katie (Bournemouth University); Pastore, Francesco (University of Naples II); Webster, Allan (Bournemouth University)
    Abstract: This study examines the gender wage gap between male and female workers in the US using a cross-section from the Current Population Survey (CPS) It shows that the extent of gender segregation by both industry and occupation is significantly greater than previously supposed. For the wage gap this creates problems of sample selection bias, of non-comparability between male and female employment. To address these problems the study uses a matching approach, which we also extend to a more recent methodological version with a yet stronger statistical foundation – Inverse Probability Weighted Regression Adjustment (IPWRA) – not previously used in related studies. Despite this, doubts remain about even these well founded and appropriate techniques in the presence of such strong gender segregation. To secure even greater precision we repeat the matching analysis for a small number of industries and occupations, each carefully selected for employing similar numbers of men and women. This is an approach that has not previously been explored in the relevant literature. The findings for the full sample are replicated at the level of industry and occupation, where comparability is more reliable. The study supports the view of the existing literature that the gender wage gap varies by factors such as age and parenthood. But it also finds that, even when these and other important "control" variables such as part-time working, industry and occupation are taken into account, a statistically significant gender wage gap remains.
    Keywords: gender pay gap, segregation, sample selection bias, propensity score matching IPWRA, USA
    JEL: C31 J16 J31
    Date: 2017–03
  18. By: Kübler, Dorothea; Schmid, Julia; Stüber, Robert
    Abstract: We investigate gender discrimination and its variation between firms, occupations, and industries with a factorial survey design (vignette study) for a large sample of German firms. Short CVs of fictitious applicants are presented to human resource managers who indicate the likelihood of the applicants being invited to the next step of the hiring process. We observe that women are evaluated worse than men on average, controlling for all other attributes of the CV, i.e., school grades, age, information about activities since leaving school, parents' occupations etc. Discrimination against women varies across industries and occupations, and is strongest for occupations with lower educational requirements and of lower occupational status. Women receive worse evaluations when applying for male-dominated occupations. Overall, the share of women in an occupation explains more of the difference in evaluations than any other occupation- or firm-related variable.
    Keywords: gender discrimination,hiring decisions,vignette study
    JEL: C99 J71
    Date: 2017

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