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on Labor Markets - Supply, Demand, and Wages |
| By: | Zaresani, Arezou (Melbourne Institute of Applied Economic and Social Research) |
| Abstract: | How important are adjustment costs for individuals when they face a change in work incentives induced by a policy change? I provide the first estimate of heterogeneous adjustment costs by exploiting a policy change that substantially increased work incentives. The policy change increased the exemption threshold in a disability insurance program. I document strong responses to work incentives as I observe excess mass –"bunching"– right below the exemption threshold where the marginal tax on earnings is low. A puzzling observation is that individuals continue bunching at the former threshold after the policy change. This finding suggests that they face adjustment costs when changing their labor supply. I use the amount of bunching at the new and former threshold to estimate adjustment costs that vary by individuals' ability to work. The estimated adjustment costs are higher for individuals with lower ability; varying from zero to twenty percent of their potential earnings, with an average at eight percent. The estimated elasticity of earnings respect to net-of-tax rate – accounting for heterogeneous adjustment costs – is 0.2, which is double the size of the elasticity estimated with no adjustment costs. To investigate the relative size of the adjustment costs to the work incentives induced by the policy change, I evaluate the overall effect of the policy change on the labor supply using a Difference-in-Differences design. I find that individuals who already work, work more, and those who did not work, start working. Policies designed to increase labor supply will work if the induced work incentives are large enough to offset the adjustment costs. Accounting for adjustment costs then might explain disparate findings on the effects of an increase in work incentives on labor supply in disability insurance programs. These findings have important implications for designing policies and targeting heterogeneous groups to increase labor supply in disability insurance programs. |
| Keywords: | adjustment costs, bunching, kink, elasticity, disability insurance |
| JEL: | H53 J21 J18 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp12136&r=all |
| By: | David Autor |
| Abstract: | Labor markets in U.S. cities today are vastly more educated and skill-intensive than they were five decades ago. Yet, urban non-college workers perform substantially less skilled work than decades earlier. This deskilling reflects the joint effects of automation and international trade, which have eliminated the bulk of non-college production, administrative support, and clerical jobs, yielding a disproportionate polarization of urban labor markets. The unwinding of the urban non-college occupational skill gradient has, I argue, abetted a secular fall in real non-college wages by: (1) shunting non-college workers out of specialized middle-skill occupations into low-wage occupations that require only generic skills; (2) diminishing the set of non-college workers that hold middle-skill jobs in high-wage cities; and (3) attenuating, to a startling degree, the steep urban wage premium for non-college workers that prevailed in earlier decades. Changes in the nature of work—many of which are technological in origin—have been more disruptive and less beneficial for non-college than college workers. |
| JEL: | J23 J24 J31 J6 O33 R12 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:25588&r=all |
| By: | Boffy-Ramirez, Ernest (University of Colorado Denver) |
| Abstract: | Neumark, Salas, and Wascher (2014) succinctly summarize the empirical challenges researchers of the minimum wage face: "the identification of minimum wage effects requires both a sufficiently sharp focus on potentially affected workers and the construction of a valid counterfactual control group for what would have happened absent increases in the minimum wage." The difficulty of addressing these two challenges is evident in the variety of empirical approaches seen in the literature. In this paper, I address the latter of the issues in a manner nearly absent in the minimum wage literature by taking advantage of individual-level longitudinal data to observe the impacts of minimum wage changes on unemployment and labor force participation. Using within-individual variation and short 4-month panels, I control for heterogeneity at the individual level that determines unemployment and labor force participation. Specifically, the empirical strategy controls any fixed individual-specific idiosyncrasies and differential exposure to time-invariant economic shocks. This differs significantly from previous literature that exploits within-state variation. The short-run impacts of the minimum wage are assessed using monthly data, instead of yearly or quarterly data, which allows for the analysis of contemporaneous minimum wage effects. There is no evidence of an increase in unemployment immediately following a minimum wage increase. In addition, it does not appear that employers are substituting full-time workers with part-time workers. That said, there is robust evidence that immediately following a minimum wage increase, labor force participation decreases. |
| Keywords: | minimum wage, unemployment, labor force participation, individual fixed effects |
| JEL: | J2 J3 J6 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp12137&r=all |
| By: | Ariel J. Binder; John Bound |
| Abstract: | Over the last half century, U.S. wage growth stagnated, wage inequality rose, and the labor-force participation rate of prime-age men steadily declined. In this article, we examine these labor market trends, focusing on outcomes for males without a college education. Though wages and participation have fallen in tandem for this population, we argue that the canonical neo-classical framework, which postulates a labor demand curve shifting inward across a stable labor supply curve, does not reasonably explain the data. Alternatives we discuss include adjustment frictions associated with labor demand shocks and effects of the changing marriage market—that is, the fact that fewer less-educated men are forming their own stable families—on male labor supply incentives. Our observations lead us to be skeptical of attempts to attribute the secular decline in male labor-force participation to a series of separately-acting causal factors. We argue that the correct interpretation probably involves complicated feedback between falling labor demand and other factors which have disproportionately affected men without a college education. |
| JEL: | E24 J12 J21 J22 J23 J31 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:25577&r=all |
| By: | Berson, Clémence (Banque de France); Laouénan, Morgane (CNRS); Valat, Emmanuel (University of Paris 2) |
| Abstract: | Many studies have proven the existence of discriminatory behavior from employers according to the origin of applicants. However, little is known about how these behaviors can be prevented. In this work, we assess how organization of recruitment in large companies affects ethnic discrimination. We consider large multi-establishment companies and distinguish two types of recruitment organization: hiring made through a human resources (HR) service at a centralized level of the company and hiring made at only the level of the establishment concerned by the position, generally by managers in charge of recruitment. To conduct our research, we rely on data from a correspondence study conducted in 2016 by the Dares (French Ministry of Labor) in large companies, which shows the existence of ethnic discrimination in hiring. This experimentation allows us to gather precise and original information on the level at which applications were selected for each of the 1,500 tests carried out. Because access to a centralized HR service is potentially endogenous, we use an instrument to assess the causal effect: whether (or not) the establishment with the job offer belongs to a company that has developed a franchise network. Our results indicate that access to a centralized HR service in the selection of applications has an important effect on the level of discrimination: This type of recruitment organization results in a 0.29-point decrease in the probability that the applicant of presumed "French" origin is selected alone. |
| Keywords: | North African origin, large firms, hiring discrimination, organization of human resources |
| JEL: | A13 C93 J21 J71 J78 O15 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp12132&r=all |
| By: | Robert L. Clark; Steven Nyce; Beth Ritter; John B. Shoven |
| Abstract: | Economist and public policy analysts have devoted considerable research to examining the work and retirement decisions of employees. Much less effort has been spent on understanding the concerns and challenges of employers if their workers delay retirement and remain on the job until older ages. In this study, we report findings from three employer surveys with the objective of learning how organizations are responding to the aging of their workforces. The surveys provide several important observations. First, employer concerns about workforce aging vary considerably across the economy. To some firms, these demographic changes are of immediate concern and are viewed as a significant risk to the organization while other firms remain more concerned about potential productivity and cost effect of an older labor force. Second, most employers expect the importance of workforce aging to increase in the next five years. In response, a significant proportion of organizations are making changes to working conditions and compensation policies. Third, firms remain reluctant to adopt formal phased retirement policies but are more willing to offer part-time employment, return to work, and other policies on a case by case basis. |
| JEL: | J1 J2 J23 J26 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:25572&r=all |
| By: | Batistich, Mary Kate (Purdue University); Bond, Timothy N. (Purdue University) |
| Abstract: | Many of the positive economic trends coming out of the Civil Rights Era for black men stagnated or reversed during the late 1970s and early 1980s. These changes were concurrent with a rapid rise in import competition from Japan. We assess the impact of this trade shock on racial disparities using commuting zone level variation in exposure. We find it decreased black manufacturing employment, labor force participation, and median earnings, and increased public assistance recipiency. However these manufacturing losses for blacks were offset by increased white manufacturing employment. This compositional shift appears to have been caused by skill upgrading in the manufacturing sector. Losses were concentrated among black high school dropouts and gains among college educated whites. We also see a shifting of manufacturing employment towards professionals, engineers, and college educated production workers. We find no evidence the heterogeneous effects of import competition can be explained by unionization, prejudice, or changes in spatial mismatch. Our results can explain 66-86% of the relative decrease in black manufacturing employment, 17-23% of the relative rise in black non-labor force participation, and 34-44% of the relative decline in black median male earnings from 1970-1990. |
| Keywords: | race, trade, import competition, black-white wage gap, Japan |
| JEL: | F14 J31 F14 N32 N62 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp12133&r=all |
| By: | Borowiecki, Karol Jan (Department of Business and Economics) |
| Abstract: | This research illuminates the historical development of creative activity in the United States. Census data is used to identify creative occupations (i.e., artists, musicians, authors, actors) and data on prominent creatives, as listed in a comprehensive biographical compendium. The analysis first sheds light on the socio-economic background of creative people and how it has changed since 1850. The results indicate that the proportion of female creatives is relatively high, time constraints can be a hindrance for taking up a creative occupation, racial inequality is present and tends to change only slowly, and education plays a significant role for taking up a creative occupation. Second, the study systematically documents and quantifies the geography of creative clusters in the United States and explains how these have evolved over time and across creative domains. Third, it investigates the importance of outstanding talent in a discipline for the local growth of an artistic cluster. |
| Keywords: | Creativity; artists; geographic clustering; agglomeration economies; urban history |
| JEL: | N33 R10 Z11 |
| Date: | 2019–02–18 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:sdueko:2019_003&r=all |
| By: | Prüfer, Jens (Tilburg University, Center For Economic Research); Prüfer, Patricia (Tilburg University, Center For Economic Research) |
| Abstract: | The recent rise of big data and artificial intelligence (AI) is changing markets, politics, organizations, and societies. It also affects the domain of research. Supported by new statistical methods that rely on computational power and computer science --- data science methods --- we are now able to analyze data sets that can be huge, multidimensional, unstructured, and are diversely sourced. In this paper, we describe the most prominent data science methods suitable for entrepreneurship research and provide links to literature and Internet resources for self-starters. We survey how data science methods have been applied in the entrepreneurship research literature. As a showcase of data science techniques, based on a dataset of 95% of all job vacancies in the Netherlands over a 6-year period with 7.7 million data points, we provide an original analysis of the demand dynamics for entrepreneurial skills in the Netherlands. We show which entrepreneurial skills are particularly important for which type of profession. Moreover, we find that demand for both entrepreneurial and digital skills has increased for managerial positions, but not for others. We also find that entrepreneurial skills were significantly more demanded than digital skills over the entire period 2012-2017 and that the absolute importance of entrepreneurial skills has even increased more than digital skills for managers, despite the impact of datafication on the labor market. We conclude that further studies of entrepreneurial skills in the general population --- outside the domain of entrepreneurs --- is a rewarding subject for future research. |
| Keywords: | data science; machine learning; entrepreneurship; entrepreneurial skills; big data; artificial intelligence |
| JEL: | L26 C50 C87 O32 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:tiu:tiucen:83a4ca9e-c0cd-4786-ac8c-923b9317f0aa&r=all |
| By: | Abbott, Brant; Gallipoli, Giovanni |
| Abstract: | We characterize the distribution of permanent-income and quantify the value of assets and human capital in lifetime wealth portfolios. We estimate the distribution of human wealth using nonparametric identification results that allow for state-dependent stochastic discounting and unobserved heterogeneity. The approach imposes no restrictions on income processes or utility. Accounting for the value of human capital delivers a different view of inequality: (i) in 2016 the top 10% share of permanent-income was 1/3 lower than the corresponding share of assets; (ii) however, since 1989, the top 10% share of permanent-income has grown much faster than the corresponding share of assets. Human wealth has a mitigating influence on inequality, but this effect has waned over time due to the growing importance of assets in lifetime wealth portfolios. We find that consumption expenditures are tightly linked to permanent-income; however, liquidity constraints can lead to substantial deviations below permanent-income. |
| Keywords: | Consumption; Human Capital; inequality; permanent income; Wealth |
| JEL: | D31 D6 E2 E21 I24 J17 J24 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13540&r=all |
| By: | d'Agostino, Giorgio; Raitano, Michele; Scarlato, Margherita |
| Abstract: | Apprenticeship may provide an important opportunity to improve human capital and future earnings of young people, especially those with low levels of education. Based on new administrative data, we provide the first empirical evidence of the effect on wages and employability of the mobility across firms and economic sectors of apprentices after graduation in Italy. We use an instrumental variable approach to account for endogenous selection that is based on observed and unobserved characteristics when estimating the causal effects of mobility. Our main finding is that job switchers outside the economic sector of the training firm faced a considerable gap in wages and weeks worked in comparison to stayers in the training firm, indicating a loss of firm-specific human capital. In addition, the new apprenticeship introduced by the Biagi reform, which lessened the stringency of the norms on the training content delivered by firms, resulted in further reductions of the transferability of skills for trainees relative to the previous regime. Overall, the apprenticeship contract in Italy generated earning gaps according to the workers’ mobility after graduation, thus increasing inequality among similar employees. |
| Keywords: | Apprenticeship training, Job mobility, Wages. |
| JEL: | J24 J31 J38 J62 |
| Date: | 2019–02–19 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:92261&r=all |
| By: | Bertulfo, Donald Jay (Asian Development Bank); Gentile, Elisabetta (Asian Development Bank); de Vries , Gaaitzen J. (University of Groningen) |
| Abstract: | Global value chains (GVCs) have been a vehicle for job creation in developing Asia, but there is mounting concern that more sophisticated and cost-effective technology could displace workers through automation or reshoring of production. We use the demand-based input–output approach in Reijnders and de Vries (2018) to examine how employment responded to consumption, trade, and technological advances in 12 economies that accounted for 90% of employment in developing Asia during the period 2005–2015. Structural decomposition analysis based on the Asian Development Bank Multiregional Input–Output Tables combined with harmonized cross-country occupation data indicates that, other things being equal, technological change within GVCs was associated with a decrease in labor demand across all sectors, and an increase in the share of nonroutine cognitive occupations. We also find that increased domestic consumption expenditures of goods and services generated an increase in labor demand large enough to offset the negative employment impact of technological change. Finally, we do not find evidence of major shifts in occupational labor demand due to reshoring. |
| Keywords: | developing Asia; employment; global value chains; reshoring; task relocation; technology |
| JEL: | D57 J21 O14 |
| Date: | 2019–02–26 |
| URL: | http://d.repec.org/n?u=RePEc:ris:adbewp:0572&r=all |
| By: | Matthew E. Kahn; Pei Li |
| Abstract: | The quality of governance depends on public sector worker productivity. We use micro data from China to document that judges are less productive on polluted days. Building on the insights of Alchian and Kessel (1962), we discuss the role of organization design and the incentives of public versus for profit organizations in designing a workplace that reduces the productivity costs of local disamenities. We find that the public sector productivity elasticities are larger than published estimates of the private sector productivity elasticities with respect to pollution. |
| JEL: | H11 Q53 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:25594&r=all |
| By: | Turon, Hélène (University of Bristol) |
| Abstract: | This paper proposes a dynamic structural model of labour market and childcare choices for couples within a collective model of decision making. We formalise explicitly the need for childcare as a function of the age structure of the children population in the household then examine the determinants of the decision to supply labour. The fraction of home-produced childcare to household childcare needs is considered to be a public good within the household, for which preferences are heterogeneous across households. An important feature of our framework, which introduces one of the dynamic dimensions of the decision, is that we take into account the implications of today's labour supply decision on future wage growth and future bargaining power. The decision to leave (partially or not) the labour market is often taken within a couple but, in the event of divorce, the impact of this decision may not be borne by both parties equally, which may render the initial decision inefficient. Using data from the BHPS, we then present a structural estimation of our model to quantify these various components of the choice of home childcare vs. labour supply. We are able to quantify each household's sensitivity to potential childcare policies and find that a large part of the dispersion in these responses comes from households' valuation of home-produced childcare. |
| Keywords: | household, labour supply, collective model, childcare, commitment |
| JEL: | J12 J13 J22 J31 J38 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp12148&r=all |
| By: | Lieze Sohiers; Luc Van Ootegem; Elsy Verhofstadt (-) |
| Abstract: | The worker’s perception of a forced decision to work (i.e. involuntary employment) has a negative effect on the overall well-being of the older worker (aged 50 and above). This paper first investigates the job situation, the financial and health situation and the relationship status of the involuntary workers. The micro data of the Survey of Health, Ageing and Retirement in Europe (SHARE) allows for panel estimations. We control for unobserved differences in personality traits between voluntary and involuntary workers. We find that the job situation of the worker and the retirement of the partner are important drivers of involuntary employment. Specifically, involuntary workers are more frequently employed in jobs that are physically demanding or that have more stress related tasks. Involuntary workers also often feel underappreciated for their work by the management or colleagues. Second, we focus on cross-country differences. The fraction of involuntary workers in the labor population aged 50 and more ranges from 29 percent in Switzerland to 62 percent in Spain. We find that in the countries with the lowest rates of involuntary employment, the involuntary workers have better working conditions and are more easily able to make ends meet. Furthermore, the country dummies in our estimations indicate that the probability of being involuntarily employed is partly explained by time-invariant factors that differ across countries, for example public policies, e.g. pension systems. We investigate cross-country differences in four aspects of the pension system. The countries with the lowest rates of involuntary employment are those with the highest rates of partial and joint retirement. |
| Keywords: | older workers; involuntary employment longer working careers; aging |
| JEL: | J26 J28 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:rug:rugwps:19/956&r=all |
| By: | Cai, Zhengyu (Southwestern University of Finance and Economics); Stephens, Heather M. (West Virginia University); Winters, John V. (Iowa State University) |
| Abstract: | Women face unique challenges in starting and running their own businesses and may have differing motives to men for pursuing self-employment. Previous research suggests that married women with families value the flexibility that self-employment can offer, allowing them to balance their family responsibilities with their career aspirations. This may be especially true for college graduates, who tend to have more successful businesses. Access to childcare may also affect their labor force decisions. Using American Community Survey microdata, we examine how birth-place residence, a proxy for access to extended family and child care, relates to self-employment and hours worked for college-graduate married mothers. Our results suggest that flexibility is a major factor pulling out-migrant college-educated mothers into self-employment. Additionally, it appears that, in response to fewer childcare options, self-employed mothers away from their birth-place work fewer hours, while self-employed mothers residing in their birth place are able to work more hours per week. |
| Keywords: | motherhood, migration, self-employment, childcare, hours worked |
| JEL: | J13 J22 L26 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp12147&r=all |
| By: | Button, Patrick (Tulane University); Walker, Brigham (Tulane University) |
| Abstract: | We conducted a resume correspondence experiment to measure discrimination in hiring faced by Indigenous Peoples in the United States (Native Americans, Alaska Natives, and Native Hawaiians). We sent employers realistic resumes for common jobs (retail sales, kitchen staff, server, janitor, and security) in 11 cities and compared interview offer rates. We signaled Indigenous status in one of four different ways. Based on 13,516 applications, we do not find hiring discrimination in any context. These findings hold after numerous robustness checks, although our checks and discussions raise multiple concerns that are relevant to audit studies generally. |
| Keywords: | indigenous peoples, employment discrimination, Native American, Alaska Native, Native Hawaiian, Indian reservations, correspondence experiment, resume study, Oaxaca-Blinder Decomposition |
| JEL: | J15 J7 C93 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp12131&r=all |
| By: | Itzik Fadlon; Shanthi P. Ramnath; Patricia K. Tong |
| Abstract: | We use administrative tax data that cover the U.S. population to identify the causal effects of Social Security’s survivors benefit receipt on American families’ behavior and financial well-being. We analyze over a quarter of a million widowed households in which the husband died between 2002-2007, and we exploit a sharp age discontinuity in benefit eligibility to study the responses of financially vulnerable households to government transfers. We first study how households respond to unanticipated benefit receipt in the immediate periods following a large financial shock to investigate the protective role of transfers. We find significant impacts of the program on newly-widowed families’ net income and labor supply behavior, which points to considerable allocative inefficiencies in the life insurance market and to a high valuation of survivors benefits in protecting Americans against mortality shocks. Second, to investigate the particular role of liquidity and benefit timing, we then study how already-widowed women’s labor supply responds to anticipated survivors benefit receipt. We find considerable responses to cash-on-hand via benefit availability that underscore allocative inefficiencies in the credit market and the value of liquidity itself provided by government transfers. These responses and their heterogeneity highlight mechanisms that underlie the labor supply behavior of older vulnerable households, and they point to liquidity constraints, rather than myopia or benefit-schedule misperceptions, as the likely operative channel. Our results have implications for survivors benefits in the U.S., and, more generally, for retirement behavior and response mechanisms to transfers among older vulnerable populations. |
| JEL: | D1 D61 G22 H0 H55 I1 I38 J2 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:25586&r=all |
| By: | Ekaterina Jardim (Amazon.com); Emma van Inwegen (New York University) |
| Abstract: | We study the impact of the minimum wage hike in Seattle from $9.47 to $13 on wagebill, labor demand, and firm revenue using administrative data from the state of Washington. We show that the minimum wage affected businesses both at the intensive and extensive margins. At the intensive margin, businesses increased their labor costs and adjusted to the minimum wage by mildly reducing demand for low-wage jobs, but they largely did not pass the increase in labor costs to prices. At the extensive margin, the minimum wage led to higher rates of business exit and shifted the composition of entering businesses towards less labor-intensive businesses. Finally, we find that the extensive margin and the intensive margin effects were of the same order of magnitude, and were equally important for understanding the impacts of the minimum wage. |
| Keywords: | minimum wage, extensive and intensive margin, channels of adjustment |
| JEL: | J38 J23 J63 |
| URL: | http://d.repec.org/n?u=RePEc:upj:weupjo:19-298&r=all |
| By: | McKinnish, Terra (University of Colorado, Boulder) |
| Abstract: | This paper estimates the effect of overwork and underwork in husband's undergraduate degree field on the labor market outcomes of skilled married women using 2009-2015 ACS data. Overwork and underwork by degree field, respectively, are measured as the fraction of prime-aged men reporting 50 or more and 34 or fewer usual hours of work per week. Analysis is conducted using the sample of college-educated men and women ages 25-44 married to college-educated spouses. Results indicate that for married women with children, overwork in spouse's degree field negatively affects total earnings, hourly wages, employment and hours of work relative to married men with children or married women without children. There is little evidence that underwork in spouse's degree field differentially affects married women with children. |
| Keywords: | marriage, labor market, spouse hours of work, degree field |
| JEL: | J16 J22 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp12149&r=all |