nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2019‒03‒18
twelve papers chosen by
Joseph Marchand
University of Alberta

  1. Aggregate Nominal Wage Adjustments: New Evidence from Administrative Payroll Data By John Grigsby; Erik Hurst; Ahu Yildirmaz
  2. Does Schooling Cause Structural Transformation? By Porzio, T.; Santangelo, G.
  3. Downward Nominal Wage Rigidity in the United States: New Evidence from Worker-Firm Linked Data By André Kurmann; Erika McEntarfer
  4. Firms and Farms: The Local Effects of Farm Income on Firms’ Demand By Santangelo, G.
  5. Assessing the impact of off- and on-the-job training on employment outcomes. A counterfactual evaluation of the PIPOL program By Pastore, Francesco; Pompili, Marco
  6. Occupational Characteristics and the Gender Pay Gap By Aline Zucco
  7. Employee Wellbeing, Productivity and Firm Performance By Jan-Emmanuel De Neve; Christian Krekel; George Ward
  8. Gender Wage Gaps and Worker Mobility: Evidence from the Garment Sector in Bangladesh By Menzel, Andreas; Woodruff, Christopher
  9. The consequences of U.S. technology changes for productivity in advanced economies By Elstner, Steffen; Rujin, Svetlana
  10. The political economy of higher education finance: how information and design affect public preferences for tuition By Philipp Lergetporer; Ludger Wößmann
  11. Responses to Trade Opening: Evidence and Lessons from Asia By Mitra, Devashish
  12. Why was the First Industrial Revolution English? Roman Real Wages and the Little Divergence within Europe Reconsidered By Rota, Mauro; Weisdorf, Jacob

  1. By: John Grigsby; Erik Hurst; Ahu Yildirmaz
    Abstract: Using administrative payroll data from the largest U.S. payroll processing company, we document a series of new facts about nominal wage adjustments in the United States. The data allow us to define a worker's per-period base contract wage separately from other forms of compensation such as bonuses. We provide evidence that the extent to which base wages adjust is likely the appropriate concept of wage stickiness in many macro models. Nominal base wage declines are much rarer than previously thought with only 2% of job-stayers receiving a nominal base wage cut during a given year. However, accounting for shifts in nominal base wages of job-changers implies that aggregate nominal wages are more flexible than the nominal wages of job-stayers. In addition, we provide evidence that the flexibility of new hire base wages is similar to that of existing workers. Finally, nominal base wage adjustments are state-dependent: downward aggregate nominal wage adjustments were much more common during the Great Recession than in the subsequent recovery period. Throughout, we highlight differences in the adjustment patterns of base wages and of broader wage measures that include bonuses. Collectively, our results can be used to discipline models of nominal wage rigidity.
    JEL: E24 J3 J31
    Date: 2019–03
  2. By: Porzio, T.; Santangelo, G.
    Abstract: We study how the global schooling increase during the 20th century affected structural transformation by changing the supply of agricultural labor. We develop an analytical model of frictional labor reallocation out of agriculture to infer changes in birth-cohort characteristics from observed data on agricultural employment. Bringing the model to microdata from 52 countries, we find that the increase in schooling was accompanied by a large shift of the labor force’s comparative advantage away from agriculture. We bring empirical evidence to suggest this relationship was causal. With fixed prices, the resulting decrease in the supply of agricultural workers can account for almost half of the observed reallocation out of agriculture. However, in general equilibrium, the net effect is ambiguous.
    Keywords: Development, Education, Human Capital, Skills, Occupational Choice, Labor Force Demographics, Schooling, Skill Biased, Labor Mobility, Cross Country Development, Structural Transformation, Agriculture
    JEL: E23 E24 I25 J21 J23 J24 J62 O11 O12 O15 Q11
    Date: 2019–02–24
  3. By: André Kurmann; Erika McEntarfer
    Abstract: This paper examines the extent and consequences of Downward Nominal Wage Rigidity (DNWR) using administrative worker-firm linked data from the Longitudinal Employer Household Dynamics (LEHD) program for a large representative U.S. state. Prior to the Great Recession, only 7-8% of job stayers are paid the same nominal hourly wage rate as one year earlier - substantially less than previously found in survey-based data - and about 20% of job stayers experience a wage cut. During the Great Recession, the incidence of wage cuts increases to 30%, followed by a large rise in the proportion of wage freezes to 16% as the economy recovers. Total earnings of job stayers exhibit even fewer zero changes and a larger incidence of reductions than hourly wage rates, due to systematic variations in hours worked. The results are consistent with concurrent findings in the literature that reductions in base pay are exceedingly rare but that firms use different forms of non-base pay and variations in hours worked to flexibilize labor cost. We then exploit the worker-firm link of the LEHD and find that during the Great Recession, firms with indicators of DNWR reduced employment by about 1.2% more per year. This negative effect is driven by significantly lower hiring rates and persists into the recovery. Our results suggest that despite the relatively large incidence of wage cuts in the aggregate, DNWR has sizable allocative consequences.
    Date: 2019–02
  4. By: Santangelo, G.
    Abstract: How do changes in agricultural productivity affect firms? Using the predictions of a simple multi-sector general equilibrium model of the local economy and exploiting weather-induced agricultural volatility across India, I estimate the response of manufacturing firms to changes in agricultural productivity. I show that negative agricultural productivity shocks lower the cost of labor but that this does not cause firms to hire more. Firms’ production and employment in fact decrease because the shocks also reduce local income and hence the demand that firms face. My estimates provide evidence for a significant local demand effect. I then use my framework to show that this has key policy implications. I examine the introduction of a rural workfare program and assess how it affects firms. I show that the program attenuates the impact of negative agricultural shocks on firms because of its counter-cyclical effects on local wage and demand for manufacturing goods. The results highlight how policies that target households and increase their income can affect local market size and therefore the industrial sector through their general equilibrium effects.
    Keywords: Labor Demand, Agricultural Labor Market, Farms, Economic Development, Firms, Agriculture, Manufacturing, Rural, Agricultural Productivity, Regional Economic Activity, Regional General Equilibrium, Regional Labor Markets, NREGA, India, Workfare Programs
    JEL: J23 J43 O12 O13 O14 O18 Q11 Q12 R11 R13 R23
    Date: 2019–01–14
  5. By: Pastore, Francesco; Pompili, Marco
    Abstract: This evaluation study aims to assess the impact of PIPOL, an integrated program of active labor policies, on the employment integration of benefit recipients. To address the issue, we have resorted to a counterfactual approach with data from two main sources: the program administration and compulsory communications on employment and unemployment spells. We found a net impact of 5% on average for on-the-job training, but no impact for off-the-job training. On-the-job training also affects the probability to find permanent work (+3%). This is consistent with the view that young people have excellent theoretical, but very little work-related competences. Off-the-job training does affect the probability to experience at least one labor contract after 2016. These results are partly due to a lock-in effect, namely the tendency of those who attend training programs to delay their job search. Interestingly, we found that the program has a different impact for different typologies of recipients and different types of intervention. In a nutshell, active labor policy works when it generates work-related competences.
    Keywords: youth unemployment,school-to-work transition,professional training,on-the-job training,matching,evaluation
    JEL: D04 J48
    Date: 2019
  6. By: Aline Zucco
    Abstract: Germany has a large persistent Gender Pay Gap of 21 %; although this gap is not constant across occupations. The question arises why some occupations have large Gender Pay Gaps while others have only small gaps. Using data from the Structural Earnings Study merged with occupational task information provided by the Federal Labor Office, this paper aims to uncover the relationship between occupational characteristics and the Gender Pay Gap. To do so, I apply a two-step approach, where the first step uses individual characteristics to estimate the adjusted occupation-specific Gender Pay Gaps. In the second step, these gaps are regressed on occupational characteristics. I find that wage differences between men and women are lower in occupations with linear earnings and in occupations with a large share of public firms. Moreover, we observe that an increasing share of persons with supervisory power is linked to larger wage differences between men and women, which indicates the presence of a glass ceiling. Finally, the Gender Pay Gap is higher in occupations with routine tasks. Moreover, the findings suggest that the more that employees can be substituted with other employees, the lower is the Gender Pay Gap. Hence, this study extends previous findings on occupation-specific Gender Pay Gaps by linking them to occupational characteristics on a more general level.
    Keywords: Gender pay gap, segregation, discrimination, wage differentials, occupations
    JEL: J3 J31 J24 J16
    Date: 2019
  7. By: Jan-Emmanuel De Neve; Christian Krekel; George Ward
    Abstract: Does higher employee wellbeing lead to higher productivity, and, ultimately, to tangible benefits to the bottom line of businesses? We survey the evidence and study this question in a meta-analysis of 339 independent research studies, including the wellbeing of 1,882,131 employees and the performance of 82,248 business units, originating from 230 independent organisations across 49 industries in the Gallup client database. We find a significant, strong positive correlation between employees' satisfaction with their company and employee productivity and customer loyalty, and a strong negative correlation with staff turnover. Ultimately, higher wellbeing at work is positively correlated with more business-unit level profitability.
    Keywords: employee satisfaction, engagement, employee productivity, firm performance, wellbeing, meta-analysis
    JEL: I31 J24
    Date: 2019–03
  8. By: Menzel, Andreas; Woodruff, Christopher
    Abstract: We examine gender wage gaps in the Bangladeshi garment sector using data from administrative records and surveys from 70 large export-oriented manufacturers. Among production workers, we find that men are paid about 8 percent more than women. Detailed skills assessments available in a subset of the factories suggest that differences in skills differences and sector tenure combined account for just over half of the gap. The other half owes to differences in promotion rates conditional on skills. We show that by adding some structure we can combine the factory-level HR records and the survey data to estimate rates of promotions occurring as workers move across factories and sector exit rates. Differences in promotion rates are largely explained by lower rates of mobility of women across sectors, but these appear to arise mainly from career concerns rather than frictions coming from household responsibilities associated with marriage and children.
    Keywords: Export-oriented manufacturing; Gender wage gaps; monopsony in motion
    JEL: J16 J31 O14
    Date: 2019–03
  9. By: Elstner, Steffen; Rujin, Svetlana
    Abstract: Since at least the mid-2000's, many advanced economies have experienced low productivity growth. This development is often related to the declining productivity gains at the technology frontier, which is commonly assumed to be determined by the U.S. We challenge this explanation by studying the effects of changes in U.S. technology on the productivity level in other advanced economies. Overall, we find positive but small spillover effects of U.S. technology shocks. The elasticity of foreign labor productivity with respect to a one percent increase in the U.S. technology level is significantly lower than one for many countries. The recent U.S. productivity slowdown, therefore, had a limited effect on productivity developments in advanced economies. Furthermore, our results suggest that institutional factors are not able to explain cross-country differences in the size of the spillover effects. If any, regulation of the service sector seems to play a role.
    Keywords: labor productivity,international spillover effects,technology shocks,structural VARs
    JEL: O40 E24 C32 F00
    Date: 2019
  10. By: Philipp Lergetporer; Ludger Wößmann
    Abstract: Public preferences for charging tuition are important for determining higher education finance. To test whether public support for tuition depends on information and design, we devise several survey experiments in representative samples of the German electorate (N>19,500). The electorate is divided, with a slight plurality opposing tuition. Providing information on the university earnings premium raises support for tuition by 7 percentage points, turning the plurality in favor. The opposition-reducing effect persists two weeks after treatment. Information on fiscal costs and unequal access does not affect public preferences. Designing tuition as deferred income-contingent payments raises support by 16 percentage points, creating a strong majority favoring tuition. The same effect emerges when framed as loan payments. Support decreases with higher tuition levels and increases when targeted at non-EU students.
    Keywords: tuition, higher education, political economy, survey experiments, information, earnings premium, income-contingent loans, voting
    JEL: I22 H52 D72 D83
    Date: 2019
  11. By: Mitra, Devashish (Asian Development Bank Institute)
    Abstract: In various Asian countries, international trade has raised productivity, lowered markups through import competition (while increasing them through cheaper inputs that can be imported), raised wages, expanded employment, and, above all, reduced poverty. This is in sharp contrast to the impact of trade in some of the Latin American countries, which suggests exercising caution in extrapolating results to Asian countries that have not yet been studied. There are also a few adverse consequences of trade that have already been found for Asia. Apart from raising inequality, trade can increase informality, especially in the presence of labor-market rigidities. Additionally, there are the adverse effects stemming from trade adjustment as a result of worker mobility costs. In this context, this study discusses various policies that researchers have recommended.
    Keywords: trade opening; worker mobility; trade adjustment; import competition
    JEL: F10 F13
    Date: 2019–01–11
  12. By: Rota, Mauro (University of Rome); Weisdorf, Jacob (University of Southern Denmark, CAGE, CEPR)
    Abstract: We compare early-modern Roman construction wages to Judy Stephenson’s downward-adjusted construction wages for London. We find that Roman workers earned at least as much as their London counterparts in the run-up to the Industrial Revolution, challenging the high-wage-economy explanation for why the Industrial Revolution was English and not Italian. We argue, however, that daily construction wages present a poor testing ground for the high-wage hypothesis, proposing instead that wages are compared among permanent employees in sectors less prone to seasonality and economic fluctuations than construction work.
    Keywords: Construction Work, Convergence, Divergence, Industrial Revolution; Living Standards; Prices, Wages. JEL Classification: J3, J4, J8, I3, N33
    Date: 2019

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