nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2019‒02‒25
twenty-two papers chosen by
Joseph Marchand
University of Alberta

  1. Income, wealth and earnings inequality in Australia: Evidence from the HILDA survey By Urban Sila; Valéry Dugain
  2. Female Leadership and Gender Gap within Firms: Evidence from an Italian Board Reform By Maida, Agata; Weber, Andrea
  3. Do digital skill certificates help new workers enter the market?: Evidence from an online labour platform By Otto Kässi; Vili Lehdonvirta
  4. Benefitting from globalisation and technological change in Australia By Urban Sila; Philip Hemmings
  5. Local Norms Describing the Role of the State and the Private Provision of Training By Andreas Kuhn; Juerg Schweri; Stefan C. Wolter
  6. Retirement Implications of a Low Wage Growth, Low Real Interest Rate Economy By Jason Scott; John B. Shoven; Sita Slavov; John G. Watson
  7. What Aspects of Formality Do Workers Value? Evidence from a Choice Experiment in Bangladesh By Mahmud, Minhaj; Gutierrez, Italo A.; Kumar, Krishna B.; Nataraj, Shanthi
  8. Artificial intelligence, jobs, inequality and productivity: Does aggregate demand matter? By Gries, Thomas; Naude, Wim
  9. Changing Current Net Nutrition with Weight as a Measure of Net Nutritional Change with the Transition from Bound to Free Labor: A Difference-in-Decompositions Approach By Scott A. Carson
  10. How Prevalent Is Downward Rigidity in Nominal Wages? Evidence from Payroll Records in Washington State By Jardim, Ekaterina; Solon, Gary; Vigdor, Jacob
  11. Automatic Reaction – What Happens to Workers at Firms that Automate? By Wiljan van den Berge
  12. Paying to Program? Engineering Brand and High-Tech Wages By Prasanna Tambe; Xuan Ye; Peter Cappelli
  13. The Part-Time Wage Gap across the Wage Distribution By Patricia Gallego Granados
  14. Monopsony Power and Guest Worker Programs By Gibbons, Eric M.; Greenman, Allie; Norlander, Peter; Sorensen, Todd A.
  15. Labour share developments over the past two decades: The role of public policies By Mathilde Pak; Cyrille Schwellnus
  16. Works Councils and Workplace Health Promotion in Germany By Jirjahn, Uwe; Mohrenweiser, Jens; Smith, Stephen C.
  17. Labor Market Discrimination and the Macroeconomy By Asali, Muhammad; Gurashvili, Rusudan
  18. Optimal Social Insurance and Rising Labor Market Risk By Krebs, Tom; Scheffel, Martin
  19. Long-Term Responses to Large Minimum Wage Shocks: Sub-Minimum and Super-Minimum Workers in Slovenia By Laporsek, Suzana; Orazem, Peter F.; Vodopivec, Matija; Vodopivec, Milan
  20. Improving Estimation of Labor Market Disequilibrium Using Shortage Indicators, with an Application to the Market for Anesthesiologists By Baird, Matthew; Daugherty, Lindsay; Kumar, Krishna B.
  21. Can Capital Deepening Explain the Global Decline in Labor’s Share? By Andrew Glover; Jacob Short
  22. The Long-Term Effect of Age at School Entry on Competencies in Adulthood By Katja Görlitz; Merlin Penny; Marcus Tamm

  1. By: Urban Sila; Valéry Dugain
    Abstract: This paper analyses income, wealth and earnings inequality in Australia, using the Household, Income and Labour Dynamics in Australia (HILDA) Survey as the primary source of data. Income inequality in Australia has risen in the last two decades, but most of the rise occurred prior to the global financial crisis. HILDA data nevertheless show evidence of slower income growth in the middle of the income distribution compared with the top and the bottom. While Australia has experienced a rising inequality in wages – mostly through rapid earnings increases among top earners - this has been offset by increased participation and longer hours worked at the bottom of the distribution. According to HILDA data, relative pay across different levels of education groups has not recorded large shifts over the last 15 years. At the same time, we find evidence for job polarisation; notably, the share of high skilled jobs versus middle skilled jobs has increased. With respect to concerns about the casualisation of the labour force and less stable nature of jobs amid technological change and globalisation, the incidence of casual employment – where workers receive no paid sick leave or holiday leave - in Australia has been reported to have risen since the 1980s, especially for females. According to HILDA data however, the incidence of casual employment has fallen since early 2000s. Furthermore, we find no evidence that contract duration has shortened over time.
    Keywords: Australia, earnings inequality, HILDA, household panel, income distribution, income mobility, inequality, job polarisation, wealth inequality
    JEL: D31 E24 J2 J3
    Date: 2019–02–21
  2. By: Maida, Agata; Weber, Andrea
    Abstract: Over the last decade, several countries have followed the Norwegian example and introduced laws mandating gender quota for corporate board membership. The main aim of these laws is breaking the "glass ceiling" which prevents women from advancing into top corporate positions. In this paper, we evaluate the Italian law of 2011, which installed a step-wise increase in gender quota that remain effective for three consecutive board renewals of listed limited liability firms. We link firm-level information on board membership and board election dates with detailed employment and earnings records from the Social Security registers. Exploiting the staggered introduction of the gender quota regulation and variation in board renewals across firms, we evaluate the effect of the board gender composition on measures of gender diversity in top positions over a period of 4 years. While the reform substantially raised the female membership on corporate boards, we find no evidence of spillover effects on the representation of women in top executive or top earnings positions. Our results confirm the findings by Bertrand et al. (2018) who study the introduction of a gender quota for board members in Norway. Given that Italy is a much less egalitarian society than Norway, with a larger scope of establishing gender equality, our results confirm that board quota policies alone are ineffective in raising female representation in top corporate positions, at least in the short run.
    Keywords: corporate board reform; female employment; Gender quota; glass ceiling
    JEL: J24 J7 J78
    Date: 2019–01
  3. By: Otto Kässi; Vili Lehdonvirta
    Abstract: This paper studies the effects of a voluntary skill certification scheme in an online freelancing labour market. The paper show that obtaining skill certificates increases a worker’s earnings. This effect is not driven by increased worker productivity but by decreased employer uncertainty. The increase in worker earnings is mostly realised through an increase in the value of the projects obtained (up to 10%) rather than an increase in the number of projects obtained (up to 0.03 projects). In addition, the paper finds evidence for negative selection to completing skill certificates, which suggests that the workers who complete more skill certificates are, on average, in a more disadvantaged position in the labour market. Finally, skill certificates are found to be an imperfect substitute to other types of standardised information. On the whole, the results suggest that certificates play a role in helping new workers break into the labour market, but are more valuable to workers with at least some work experience. More stringent skill certification tests could improve the benefits to new workers.
    Keywords: gig economy, human capital, online freelancing, platforms, signalling, skill certificates
    JEL: J21 J23 J24 J31 I2
    Date: 2019–02–18
  4. By: Urban Sila; Philip Hemmings
    Abstract: Australia has seen large rises in living standards over the last decades across the whole of the income distribution. Technological change and international trade have contributed to this success, but have also brought structural change. Some industries have declined, while others flourished. Furthermore, new technologies and structural change create new skills and new tasks, boosting demand for some jobs, while making others disappear.Although technology and globalisation have not decreased overall employment, certain people, groups, and communities have undergone disruptive change and experienced falling living standards. Some groups face a higher risk of poverty and laid-off workers can have difficulty finding a new job. Well-informed and well-targeted policy is therefore needed to ensure that the benefits of technology and globalisation are widely shared.This paper focuses on policies to ensure that everyone in Australia has the opportunity to benefit from technological change and globalisation. The paper assesses policies relating to three issues: i) labour markets and active labour market policies; ii) education and skills; to ensure adequate skills for accessing good quality jobs; and iii) urban environments, ensuring that Australia's highly urbanised population can adapt to change.
    Keywords: activation policies, Australia, education, globalisation, income distribution, inequality, job polarisation, labour market, metropolitan areas, skills, technological change, urbanisation, welfare policies
    JEL: D31 E24 H5 H7 I2 I3 J2 J3 O18 O3
    Date: 2019–02–21
  5. By: Andreas Kuhn; Juerg Schweri; Stefan C. Wolter
    Abstract: Apprenticeship systems are essentially based on the voluntary participation of firms that provide (and usually also finance) training positions, often incurring considerable net training costs. One potential, yet under-researched explanation for this behavior is that firms act in accordance with the norms and expectations they face with in the local labor market in which they operate. In this paper, we focus on the Swiss apprenticeship system and ask whether local norms towards the private, rather than the public, provision of training influence firms’ decisions to offer apprenticeship positions. In line with this hypothesis, we find that the training incidence is higher in communities characterized by a stronger norm towards the private provision of training, which we measure using local results from two national-level plebiscites that explicitly dealt with the role of the state in the context of the apprenticeship system. This finding turns out to be robust to a series of alternative specifications and robustness checks, as well as to an instrumental-variable strategy that tackles the issue of potential endogeneity of normative attitudes.
    Keywords: public goods, private provision of training, social norms, normative attitudes towards the role of the state, vocational education and training, apprenticeship training
    JEL: D22 D63 H41 I22 J24
    Date: 2019
  6. By: Jason Scott; John B. Shoven; Sita Slavov; John G. Watson
    Abstract: We examine the implications of persistent low real interest rates and wage growth rates on individuals nearing retirement. We begin by reviewing the concept of r star – the long-term real, safe interest rate that is neither expansionary nor contractionary – and presenting recent estimates suggesting that this value has declined. We then examine the implications of low returns and low wage growth for individuals currently aged 45 and 55. We find that low returns and low wage growth have substantial welfare effects, with compensating variations that are often in the hundreds of thousands of dollars. Low returns increase optimal Social Security claiming ages and the marginal benefit of working longer, while low wage growth decreases the marginal benefit of working longer. Low economy-wide wage growth has a much larger welfare effect than low individual wage growth due to wage indexation of the initial benefit and the progressivity of the Social Security benefit formula. When individual wage growth alone is low, wage indexation is unchanged, and the progressivity of the benefit formula provides insurance. When economy-wide wage growth is low, wage indexation is less generous and there is no insurance benefit from progressivity as average wages fall along with individual wages.
    JEL: D14 H55 J26
    Date: 2019–02
  7. By: Mahmud, Minhaj (Bangladesh Institute of Development Studies (BIDS)); Gutierrez, Italo A. (RAND); Kumar, Krishna B. (RAND); Nataraj, Shanthi (RAND)
    Abstract: Using a choice experiment among 2,000 workers in Bangladesh, we to elicit willingness to pay (WTP) for specific job benefits typically associated with formal employment. We find that workers value job stability the most; the average worker would be willing to forego a 27 percent increase in monthly income in order to obtain a 1-year written contract (relative to no contract), or to forego a 12 percent increase to obtain thirty days of termination notice. On average, government workers place a higher value on contracts than do private sector employees, while casual workers particularly value higher pay. Our use of choice experiments to overcome the challenges associated with estimating WTP for specific job benefits from hedonic wage regressions or from observed job transitions is of interest in its own right, especially in a developing country context where data on worker transitions are unavailable and many workers are informally employed.
    Keywords: informality, worker benefits, discrete choice experiments
    JEL: J32 J81
    Date: 2019–01
  8. By: Gries, Thomas (Universitat Paderborn); Naude, Wim (UNU-MERIT, and Maastricht University, RWTH Aachen University, IZA Institute of Labor Economics, Bonn.)
    Abstract: Rapid technological progress in artificial intelligence (AI) has been predicted to lead to mass unemployment, rising inequality, and higher productivity growth through automation. In this paper we critically re-assess these predictions by (i) surveying the recent literature and (ii) incorporating AI-facilitated automation into a product variety-model, frequently used in endogenous growth theory, but modified to allow for demand-side constraints. This is a novel approach, given that endogenous growth models, and including most recent work on AI in economic growth, are largely supply-driven. Our contribution is motivated by two reasons. One is that there are still only very few theoretical models of economic growth that incorporate AI, and moreover an absence of growth models with AI that takes into consideration growth constraints due to insuficient aggregate demand. A second is that the predictions of AI causing massive job losses and faster growth in productivity and GDP are at odds with reality so far: if anything, unemployment in many advanced economies is historically low. However, wage growth and productivity is stagnating and inequality is rising. Our paper provides a theoretical explanation of this in the context of rapid progress in AI.
    Keywords: Technology, artificial intelligence, productivity, labour demand, innovation, growth theory
    JEL: O47 O33 J24 E21 E25
    Date: 2018–12–12
  9. By: Scott A. Carson
    Abstract: A population’s weight conditioned on height reflects its current net nutrition and demonstrates health variation during economic development. This study builds on the use of weight as a measure for current net nutrition and uses a difference-in-decompositions technique to illustrate how black and white current net nutrition varied with the transition to free-labor. Adult black age-related weight gain was greater with the transition to free-labor yet was not as large as the adult white age related weight gain. Agricultural worker’s current net nutrition was better than workers in other occupations, and agricultural workers’ net nutrition was better than workers in other occupations but was worse-off with the transition to free labor. Nativity had the greatest effect with weight changes and the transition to free-labor. Within-group weight variation was greater than across-group variation.
    Keywords: weight variation, current net nutrition, Oaxaca decomposition
    JEL: C10 C40 D10 I10 N30
    Date: 2019
  10. By: Jardim, Ekaterina (Amazon); Solon, Gary (University of Michigan); Vigdor, Jacob (University of Washington)
    Abstract: For more than 80 years, many macroeconomic analyses have been premised on the assumption that workers' nominal wage rates cannot be cut. The U.S. evidence on this assumption has been inconclusive because of distortions from reporting error in household surveys. Following a British literature, we reconsider the issue with more accurate wage data from the payroll records of most employers in the State of Washington over the period 2005-2015. For every one of the 40 four-quarters-apart periods for which we observe year-to-year wage changes, we find that at least 20 percent of job stayers experience nominal wage reductions.
    Keywords: nominal wage rigidity, payroll records
    JEL: J3 E24
    Date: 2019–01
  11. By: Wiljan van den Berge (CPB Netherlands Bureau for Economic Policy Analysis)
    Abstract: We provide the first estimate of the impacts of automation on individual workers by combining Dutch micro-data with a direct measure of automation expenditures covering firms in all private non-financial industries over 2000-2016. Using an event study differences-indifferences design, we find that automation at the firm increases the probability of workers separating from their employers and decreases days worked, leading to a 5-year cumulative wage income loss of about 8% of one year’s earnings for incumbent workers.
    JEL: J23 J31 J62 J63 O33
    Date: 2019–02
  12. By: Prasanna Tambe; Xuan Ye; Peter Cappelli
    Abstract: We test the hypothesis that IT workers accept a compensating differential to work with emerging IT systems, and that employers that invest in these systems can, in turn, capture greater value from the wages they pay. We show that much of the utility IT workers derive from these systems is from skills acquired on the job. This is principally true for younger workers at employers where skill development is encouraged, and the effects are stronger in thicker markets where workers with newer skills have more outside options. An analysis of the text in online employer reviews supports the notion that IT workers value access to interesting IT systems above most other employer attributes. These findings are important because first, they provide evidence of how worker preferences can influence corporate IT investment decisions; second, because they shed light on factors influencing IT skill development; and third, because they point to a potentially important explanation for returns from IT investments.
    JEL: J24 J33 J41 L86
    Date: 2019–02
  13. By: Patricia Gallego Granados
    Abstract: Part-time work has vastly expanded in most OECD labor markets during the last decades. At the same time, full- and part-time wages have grown increasingly apart, leading to a substantial raw part-time wage penalty. Using quantile regression methods, this paper analyses the female part-time wage gap across the wage distribution and over time (1990-2009), while controlling for sample selection into full- and part-time employment. The estimated part-time gap is much lower than the raw gap. Nonetheless, a persistent part-time penalty is found for the lowest wage quartile. The wide divide between the observed and estimated part-time gap is due to strong positive selection into full-time work, which increases over time. On the contrary, sample selection into part-time employment goes from being positive at the beginning of the 1990s to disappearing by the end of the 2000s, even turning negative at the lower end of the distribution. An exploration of potential mechanisms reveals a large prevalence of job mismatch at the lower end of the part-time wage distribution as well as rising differences in the distribution of job tasks between full- and part-time employment.
    Keywords: part-time employment, female wages, selection into employment, quantile regression
    JEL: J31 J21
    Date: 2019
  14. By: Gibbons, Eric M. (Ohio State University); Greenman, Allie (University of Nevada, Reno); Norlander, Peter (Loyola University); Sorensen, Todd A. (University of Nevada, Reno)
    Abstract: Guest workers on visas in the United States may be unable to quit bad employers due to barriers to mobility and a lack of labor market competition. Using H-1B, H-2A, and H-2B program data, we calculate the concentration of employers in geographically defined labor markets within occupations. We find that many guest workers face moderately or highly concentrated labor markets, based on federal merger scrutiny guidelines, and that concentration generally decreases wages. For example, moving from a market with an HHI of zero to a market comprised of two employers lowers H-1B worker wages approximately 10 percent, and a pure monopsony (one employer) reduces wages by 13 percent. A simulation shows that wages under pure monopsony could be 47 percent lower, suggesting that employers do not use the extent of their monopsony power. Enforcing wage regulations and decreasing barriers to mobility may better address issues of exploitation than antitrust scrutiny.
    Keywords: guest workers, migration, monopsony, market concentration
    JEL: J42 F22
    Date: 2019–01
  15. By: Mathilde Pak; Cyrille Schwellnus
    Abstract: Labour share developments over the past two decades have differed widely across OECD countries, with about half of them experiencing significant declines. This paper analyses the role of public policies in shaping labour share developments across countries. The results suggest that pro-competition product market reforms raise the labour share by reducing producer rents. Labour market reforms that strengthen the bargaining position of workers, such as tightening employment protection or raising minimum wages, may raise wages in the short term but risk triggering the substitution of capital for labour in the medium term. On average, across countries, such reforms are estimated to reduce the labour share. By contrast, promoting the re-employment of workers who lose their jobs through active labour market policies unambiguously raises the labour share.
    Keywords: difference-in-differences estimation, labour share, public policies
    JEL: D33 J38 J58
    Date: 2019–02–21
  16. By: Jirjahn, Uwe (University of Trier); Mohrenweiser, Jens (Bournemouth University); Smith, Stephen C. (George Washington University)
    Abstract: From a theoretical viewpoint, there can be market failures resulting in an underprovision of occupational health and safety. Works councils may help mitigate these failures. Using establishment data from Germany, our empirical analysis confirms that the incidence of a works council is significantly associated with an increased likelihood that the establishment provides more workplace health promotion than required by law. This result also holds in a recursive bivariate probit regression accounting for the possible endogeneity of works council incidence. Furthermore, analyzing potentially moderating factors such as collective bargaining coverage, industry, type of ownership, multi-establishment status and product market competition, we find a positive association between works councils and workplace health promotion for the various types of establishments examined. Finally, we go beyond the mere incidence of workplace health promotion and show that works councils are positively associated with a series of different measures of workplace health promotion.
    Keywords: non-union employee representation, works council, occupational health and safety, workplace health promotion
    JEL: I18 J28 J50 J81
    Date: 2019–01
  17. By: Asali, Muhammad (ISET, Tbilisi State University); Gurashvili, Rusudan (National Bank of Georgia)
    Abstract: Using Integrated Household Survey data from Georgia, we measure the observable and discriminatory ethnic wage gap, among male and female workers, and the gender wage gap, among Georgians and non-Georgians. The gender wage discrimination is larger than the ethnic wage discrimination. In the second estimation stage, these wage discrimination estimates are used in a general-to-specific vector autoregression framework to test for the Granger causality between discrimination and growth. A general, negative, bidirectional Granger causality is found between these two variables: in the long-run, discrimination reduces economic growth, and economic growth lowers discrimination. Also, we find that higher unemployment rates are associated with increased ethnic wage discrimination–in line with the predictions of Becker's theory of discrimination.
    Keywords: labor market discrimination, transition economies, growth, granger causality
    JEL: J71 O43 J15 J16
    Date: 2019–01
  18. By: Krebs, Tom (University of Mannheim); Scheffel, Martin (University of Cologne)
    Abstract: This paper analyzes the optimal response of the social insurance system to a rise in labor market risk. To this end, we develop a tractable macroeconomic model with risk-free physical capital, risky human capital (labor market risk) and unobservable effort choice affecting the distribution of human capital shocks (moral hazard). We show that constrained optimal allocations are simple in the sense that they can be found by solving a static social planner problem. We further show that constrained optimal allocations are the equilibrium allocations of a market economy in which the government uses taxes and transfers that are linear in household wealth/income. We use the tractability result to show that an increase in labor market (human capital) risk increases social welfare if the government adjusts the tax-and-transfer system optimally. Finally, we provide a quantitative analysis of the secular rise in job displacement risk in the US and find that the welfare cost of not adjusting the social insurance system optimally can be substantial.
    Keywords: labor market risk, social insurance, moral hazard
    JEL: E21 H21 J24
    Date: 2019–01
  19. By: Laporsek, Suzana (University of Primorska); Orazem, Peter F. (Iowa State University); Vodopivec, Matija (University of Primorska); Vodopivec, Milan (University of Primorska)
    Abstract: This study examines long-term effects of a minimum wage increase using an innovative identification strategy based on categorising workers according to their predicted marginal revenue products. It finds that the increase had a large and persistent disemployment effects on low-paid workers and that it triggered substitution toward more productive workers. As a consequence, the sub-minimum workers as a group lost average earnings, hours and employment compared to other workers. The adverse employment effect occurred both through a higher probability of transition from employment to non-employment and through a decreased probability of transition from non-employment to employment.
    Keywords: minimum wage, employment, unemployment, hours, earnings, Slovenia
    JEL: J38 J31
    Date: 2019–01
  20. By: Baird, Matthew (RAND); Daugherty, Lindsay (RAND); Kumar, Krishna B. (RAND)
    Abstract: While economic studies often assume that labor markets are in equilibrium, there may be specialized labor markets that are likely in disequilibrium. We develop a new methodology to improve the estimation of a reduced form disequilibrium model from the existing models by incorporating survey-based shortage indicators into the model and estimation. Our shortage-indicator informed disequilibrium model includes as a special case the foundational model of Maddala and Nelson (1974). We demonstrate the gains in information provided by our methodology. We show how the model can be implemented by applying it to the market for anesthesiologists, a profession susceptible to disequilibrium. In this application, we find that our new disequilibrium model informed by a shortage indicator fits the data better than the Maddala-Nelson model, and has better out-of-sample predictive power.
    Keywords: disequilibrium, labor demand, labor supply, shortage, maximum likelihood, health providers
    JEL: J20 J44 I11 C18
    Date: 2019–01
  21. By: Andrew Glover; Jacob Short
    Abstract: We estimate an aggregate elasticity of substitution between capital and labor near or below one, which implies that capital deepening cannot explain the global decline in labor's share. Our methodology derives from transition paths in the neo-classical growth model. The elasticity of substitution is identified from the cross-country correlation between trends in the labor share and (a proxy for) the rental rate of capital. Trends in labor's share and the rental rate are weakly correlated across countries, and inversely related in most samples. Previous cross-country estimates of this elasticity were substantially greater than one, which we show was partly due to omitted variable bias: earlier studies used investment prices alone to proxy for the rental rate, whereas the growth model relates rental rates to investment prices and consumption growth.
    Keywords: Firm dynamics; International topics; Labour markets
    JEL: E25 E22 J3 E13
    Date: 2019
  22. By: Katja Görlitz; Merlin Penny; Marcus Tamm
    Abstract: The previous literature has shown that children who enter school at a more advanced age outperform their younger classmates on competency tests taken between kindergarten and Grade 10. This study analyzes whether these effects of school starting age continue into adulthood. Based on data on math and language test scores for adults in Germany, the identification of the long-term causal effects exploits state and year variation in school entry regulations. The results show that there are no effects of school starting age (SSA) on competencies in math and text comprehension. However, the long-term SSA effect is sizable on receptive vocabulary.
    Keywords: School starting age, education, cognitive competencies, instrumental variable estimates
    JEL: I21 J21 J31
    Date: 2019

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