nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2017‒07‒02
twelve papers chosen by
Joseph Marchand
University of Alberta

  1. The Disappointing Recovery of Output after 2009 By John G. Fernald; Robert E. Hall; James H. Stock; Mark W. Watson
  2. Minimum Wage Increases, Wages, and Low-Wage Employment: Evidence from Seattle By Ekaterina Jardim; Mark C. Long; Robert Plotnick; Emma van Inwegen; Jacob Vigdor; Hilary Wething
  3. Population aging, labor demand, and the structure of wages By Papadopoulos, Michael; Patria, Margarita; Triest, Robert K.
  4. Targeted Debt Relief and the Origins of Financial Distress: Experimental Evidence from Distressed Credit Card Borrowers By Will Dobbie; Jae Song
  5. The Great Divergence(s) By Giuseppe Berlingieri; Patrick Blanchenay; Chiara Criscuolo
  6. Payroll Taxes and Firm Performance By Egebark, Johan; Kaunitz, Niklas
  7. Measuring Rents from Public Employment: Regression discontinuity evidence from Kenya By Barton, Nicholas; Bold, Tessa; Sandefur, Justin
  8. Survey Under-Coverage of Top Incomes and Estimation of Inequality: What Is the Role of the UK’s SPI Adjustment? By Richard V. Burkhauser; Nicolas Hérault; Stephen P. Jenkins; Roger Wilkins
  9. Social Security Contributions and the Business Cycle By Almosova, Anna; Burda, Michael C; Voigts, Simon
  10. Online Exports and the Wage Gap By Cruz, Marcio; Milet, Emmanuel; Olarreaga, Marcelo
  11. Top earners: cross-country facts By Badel, Alejandro; Daly, Moira; Huggett, Mark; Nybom, Martin
  12. A Framework for Sharing Confidential Research Data, Applied to Investigating Differential Pay by Race in the U. S. Government By Andrés F. Barrientos; Alexander Bolton; Tom Balmat; Jerome P. Reiter; John M. de Figueiredo; Ashwin Machanavajjhala; Yan Chen; Charles Kneifel; Mark DeLong

  1. By: John G. Fernald; Robert E. Hall; James H. Stock; Mark W. Watson
    Abstract: U.S. output has expanded only slowly since the recession trough in 2009, even though the unemployment rate has essentially returned to a pre-crisis, normal level. We use a growth-accounting decomposition to explore explanations for the output shortfall, giving full treatment to cyclical effects that, given the depth of the recession, should have implied unusually fast growth. We find that the growth shortfall has almost entirely reflected two factors: the slow growth of total factor productivity, and the decline in labor force participation. Both factors reflect powerful adverse forces that are largely unrelated to the financial crisis and recession—and that were in play before the recession.
    JEL: E22 E24 E32 J21
    Date: 2017–06
  2. By: Ekaterina Jardim; Mark C. Long; Robert Plotnick; Emma van Inwegen; Jacob Vigdor; Hilary Wething
    Abstract: This paper evaluates the wage, employment, and hours effects of the first and second phase-in of the Seattle Minimum Wage Ordinance, which raised the minimum wage from $9.47 to $11 per hour in 2015 and to $13 per hour in 2016. Using a variety of methods to analyze employment in all sectors paying below a specified real hourly rate, we conclude that the second wage increase to $13 reduced hours worked in low-wage jobs by around 9 percent, while hourly wages in such jobs increased by around 3 percent. Consequently, total payroll fell for such jobs, implying that the minimum wage ordinance lowered low-wage employees’ earnings by an average of $125 per month in 2016. Evidence attributes more modest effects to the first wage increase. We estimate an effect of zero when analyzing employment in the restaurant industry at all wage levels, comparable to many prior studies.
    JEL: H7 J2 J3
    Date: 2017–06
  3. By: Papadopoulos, Michael (New School for Social Research); Patria, Margarita (Charles River Associates); Triest, Robert K. (Federal Reserve Bank of Boston)
    Abstract: One consequence of demographic change is substantial shifts in the age distribution of the working-age population. As the baby boom generation ages, the usual historical pattern of a high ratio of younger workers relative to older workers has been replaced by a pattern of roughly equal percentages of workers of different ages. One might expect that the increasing relative supply of older workers would lower the wage premium paid for older, more experienced workers. This paper provides strong empirical support for this hypothesis. Econometric estimates imply that the size of one’s birth cohort affects wages throughout one’s working life, with members of relatively large cohorts (at all stages of their careers) earning a significantly lower wage than members of smaller cohorts. Estimated elasticities of wages with respect to the relative size of one’s own cohort are generally between -0.05 and -0.10, and are of similar magnitude for men and for women. Our results suggest that cohort size effects are quantitatively important and should be incorporated into public policy analyses.
    Keywords: labor market demographics; population aging; wage structure; social insurance
    JEL: J11 J21 J26
    Date: 2017–05–31
  4. By: Will Dobbie; Jae Song
    Abstract: We study the drivers of financial distress using a large-scale field experiment that offered randomly selected borrowers a combination of (i) immediate payment reductions to target short-run liquidity constraints and (ii) delayed debt write-downs to target long-run debt constraints. We identify the separate effects of the payment reductions and debt write-downs using variation from both the experiment and cross-sectional differences in treatment intensity. We find that the debt write-downs significantly improved both financial and labor market outcomes despite not taking effect for three to five years. In sharp contrast, there were no positive effects of the more immediate payment reductions. These results run counter to the widespread view that financial distress is largely the result of short-run constraints.
    JEL: D14 J22 J31 K35
    Date: 2017–06
  5. By: Giuseppe Berlingieri; Patrick Blanchenay; Chiara Criscuolo
    Abstract: This report provides new evidence on the increasing dispersion in wages and productivity using novel micro-aggregated firm-level data from 16 countries. First, the report documents an increase in wage and productivity dispersions, for both manufacturing and market services (excluding the financial sector). Second, it shows that these trends are driven by differences within rather than across sectors, and that the increase in dispersion is mainly driven by the bottom of the distribution, while divergence at the top occurs only in the service sector, and only after 2005. Third, it suggests that between-firm wage dispersion is linked to increasing differences between high and low productivity firms. Fourth, it suggests that both globalisation and digitalisation imply higher wage divergence, but strengthen the link between productivity and wage dispersion. Finally, it offers preliminary analysis of the impact of minimum wage, employment protection legislation, trade union density, and coordination in wage setting on wage dispersion and its link to productivity dispersion.
    Keywords: dispersion, productivity, sorting, wages
    JEL: D2 J3
    Date: 2017–06
  6. By: Egebark, Johan (Research Institute of Industrial Economics (IFN)); Kaunitz, Niklas (Department of Economics, Stockholm University)
    Abstract: The Swedish employer paid payroll tax was reduced substantially for young workers in 2007, causing firms’ average social fees to depend on the age structure of their employees. Using pre-reform conditions to define treated and control firms, we show that the lower costs induced by the reduced taxes have no impact on exit rates or profitability. We find negligible effects on gross investments, and negative, but not statistically significant, effects on labor productivity.
    Keywords: Payroll taxes; Labor costs; Profitability; Labor productivity; Investments; Windfall gain; Tax subsidy; Firm survival
    JEL: D22 H22 J38 L25
    Date: 2017–06–20
  7. By: Barton, Nicholas; Bold, Tessa; Sandefur, Justin
    Abstract: Public employees in many developing economies earn much higher wages than similar private-sector workers. These wage premia may reflect an efficient return to effort or unobserved skills, or an inefficient rent causing labor misallocation. To distinguish these explanations, we exploit the Kenyan government's algorithm for hiring eighteen-thousand new teachers in 2010 in a regression discontinuity design. Fuzzy regression discontinuity estimates yield a civil-service wage premium of over 100% (not attributable to observed or unobserved skills), but no effect on motivation, suggesting rent-sharing as the most plausible explanation for the wage premium.
    Keywords: civil servants; motivation; public sector wages; wage gap
    JEL: H1 J3 O1
    Date: 2017–06
  8. By: Richard V. Burkhauser (Lyndon B. Johnson School of Public Affairs, University of Texas-Austin; Department of Policy Analysis and Management, Cornell University; Melbourne Institute of Applied Economic and Social Research, The University of Melbourne); Nicolas Hérault (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne); Stephen P. Jenkins (London School of Economics; Institute for Social and Economic Research, University of Essex; and Institute for the Study of Labor (IZA); Melbourne Institute of Applied Economic and Social Research, The University of Melbourne); Roger Wilkins (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)
    Abstract: Survey under-coverage of top incomes leads to bias in survey-based estimates of overall income inequality. Using income tax record data in combination with survey data is a potential approach to address the problem; we consider here the UK’s pioneering ‘SPI adjustment’ method that implements this idea. Since 1992, the principal income distribution series (reported annually in Households Below Average Income) has been based on household survey data in which the incomes of a small number of ‘very rich’ individuals are adjusted using information from ‘very rich’ individuals in personal income tax return data. We explain what the procedure involves, reveal the extent to which it addresses survey under-coverage of top incomes, and show how it affects estimates of overall income inequality. More generally, we assess whether the SPI adjustment is fit for purpose and consider whether variants of it could be employed by other countries.
    Keywords: Inequality, income inequality, survey under-coverage, SPI adjustment, top incomes, tax return data, survey data
    JEL: D31 C81
    Date: 2017–06
  9. By: Almosova, Anna; Burda, Michael C; Voigts, Simon
    Abstract: This paper examines magnitudes and business cycle dynamics of social security contributions (SSC). In most OECD countries studied, we document a negative covariation of payroll tax burdens with GDP and GDP growth at business cycle and lower frequencies. We assess the overall magnitude of the distortion following Barro and Redlick (2011). For most countries, average marginal SSC tax rates exceed average rates, but the latter tracks the former tightly. Changes in average payroll tax burdens are mostly accounted for by changes in tax schedules rather than shifts in the earnings distribution over time. For many countries, SSC rates behave like estimated values of the "labor wedge" (Chari et al. 2007, Brinca et al., 2016).
    Keywords: Business cycle; labor wedge; payroll tax; social security contributions
    JEL: E24 E32 H55 J32
    Date: 2017–06
  10. By: Cruz, Marcio; Milet, Emmanuel; Olarreaga, Marcelo
    Abstract: The development of the internet is often seen as a source of demand for skilled workers and therefore a potential driver of the wage gap between skilled and unskilled workers. In this paper we focus on the impact that international trade in online platforms has on the wage gap. Because online trade allows smaller firms with relatively more unskilled workers to access world markets we can a priori expect that an expansion of online exports reduces the wage gap. After correcting for potential endogeneity bias in a sample of twenty three developing countries for which we can match online trade and wage gap data, we find that a 1 percent increase in the share of online exports over GDP leads to a 0.01 percent decline in the wage gap.
    Keywords: online trade; wage gap
    JEL: F14 J31 L86
    Date: 2017–06
  11. By: Badel, Alejandro (Georgetown University and Bureau of Labor Statistics); Daly, Moira (Copenhagen Business School); Huggett, Mark (Georgetown University); Nybom, Martin (IFAU - Institute for Evaluation of Labour Market and Education Policy)
    Abstract: We provide a common set of life-cycle earnings statistics using administrative data from the United States, Canada, Denmark and Sweden. Three qualitative patterns are common across countries: (1) the earnings distribution above the median fans out with age, (2) the extreme right tail of the earnings distribution becomes thicker with age, and (3) the growth rate of earnings over the working lifetime is larger for groups with higher lifetime earnings. Models of top earners should account for these qualitative patterns and, importantly, for how they quantitatively differ across countries.
    Keywords: earnings; inequality; top earners; top incomes
    JEL: D31 D91 H21 J31
    Date: 2017–06–01
  12. By: Andrés F. Barrientos; Alexander Bolton; Tom Balmat; Jerome P. Reiter; John M. de Figueiredo; Ashwin Machanavajjhala; Yan Chen; Charles Kneifel; Mark DeLong
    Abstract: Data stewards seeking to provide access to large-scale social science data face a difficult challenge. They have to share data in ways that protect privacy and confidentiality, are informative for many analyses and purposes, and are relatively straightforward to use by data analysts. We present a framework for addressing this challenge. The framework uses an integrated system that includes fully synthetic data intended for wide access, coupled with means for approved users to access the confidential data via secure remote access solutions, glued together by verification servers that allow users to assess the quality of their analyses with the synthetic data. We apply this framework to data on the careers of employees of the U. S. federal government, studying differentials in pay by race. The integrated system performs as intended, allowing users to explore the synthetic data for potential pay differentials and learn through verifications which findings in the synthetic data hold up in the confidential data and which do not. We find differentials across races; for example, the gap between black and white female federal employees' pay increased over the time period. We present models for generating synthetic careers and differentially private algorithms for verification of regression results.
    JEL: C51 C53 C55 C81 J15 J45
    Date: 2017–06

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