nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2020‒10‒12
twenty papers chosen by
Joseph Marchand
University of Alberta

  1. When the minimum wage really bites hard: Impact on top earners and skill supply By Gregory, Terry; Zierahn, Ulrich
  2. Skill Demand and Posted Wages. Evidence from Online Job Ads in Austria By Lennart Ziegler
  3. Child Skill Production: Accounting for Parental and Market-Based Time and Goods Investments By Elizabeth Caucutt; Lance Lochner; Joseph Mullins; Youngmin Park
  4. Flexible Wages, Bargaining, and the Gender Gap By Biasi, Barbara; Sarsons, Heather
  5. Disentangling Retirement and Savings Responses By Maarten Lindeboom; Raymond Montizaan
  6. Children and the Remaining Gender Gaps in the Labor Market By Cortes, Patricia; Pan, Jessica
  7. The Expected (Signaling) Value of Higher Education By Laura Ehrmantraut; Pia Pinger; Renske Stans
  8. Dispersion estimation; Earnings risk; Censoring; Quantile regression; Occupational choice; Sorting; Risk preferences; SOEP; IABS By Daniel Pollmann; Thomas Dohmen; Franz Palm
  9. The big sell: Privatizing East Germany's economy By Hennicke, Moritz; Lubczyk, Moritz; Mergele, Lukas
  10. Taxing Mobile and Overconfident Top Earners By Andreas Haufler; Yukihiro Nishimura
  11. The Transition to Self-Employment and Perceived Skill-Mismatches: Panel Data Evidence from Eleven EU Countries By Albiol Sanchez, Judit; Diaz-Serrano, Luis; Teruel, Mercedes
  12. When robots do (not) enhance job quality: The role of innovation regimes By Damiani, Mirella; Pompei, Fabrizio; Kleinknecht, Alfred
  13. Financial Distress and the Role of Management in Micro and Small-Sized Firms By Alexandre, Fernando; Cruz, Sara; Portela, Miguel
  14. Ethnic employment gaps of graduates in the Netherlands By Paul Bisschop; Bas ter Weel; Jelle Zwetsloot
  15. Explaining the Decline in the US Labor Share: Taxation and Automation By Burkhard Heer; Andreas Irmen; Bernd Süssmuth
  16. Work, Care and Gender during the COVID-19 Crisis By Hupkau, Claudia; Petrongolo, Barbara
  17. Who’s In and Who’s Out under Workplace COVID Symptom Screening? By Krista Ruffini; Aaron Sojourner; Abigail Wozniak
  18. Do Recruiters Select Workers with Different Personality Traits for Different Tasks? A Discrete Choice Experiment By Wehner, Caroline; de Grip, Andries; Pfeifer, Harald
  19. "Quality of Match for Statistical Matches Used in the Development of the Levy Institute Measure of Time and Consumption Poverty (LIMTCP) for Ethiopia and South Africa" By Fernando Rios-Avila
  20. Are Employment Protection Laws for Disabled People Effective in a Developing Country? By Michael Palmer; Jenny Williams

  1. By: Gregory, Terry; Zierahn, Ulrich
    Abstract: We investigate minimum wage spillovers by exploiting the first-time introduction of a minimum wage within a quasi-experiment in a context with an extraordinary large bite: the German roofing industry. We find positive wage spillovers for medium-skilled workers with wages just above the minimum wage, but negative effects for high-skilled top earners in East Germany, where the bite was particularly pronounced. There, the minimum wage lowered both returns to skills and skill supply. We propose a theoretical model according to which negative spillovers occur whenever a negative scale effect dominates a positive substitution effect and provide empirical support for our theory.
    Keywords: minimum wages,wage effects,spillover effects,wage restraints,returns to skills,unconditional quantile regression,scale effect,substitution effect,skill supply
    JEL: J31 J38 J24 C21 J23
    Date: 2020
  2. By: Lennart Ziegler
    Abstract: This study provides new evidence on skill requirements in the labor market and shows to what extent these skills are associated with higher wage offers. Using more than 380,000 job postings published on Austria’s major employment website, I identify the most common skill requirements mentioned in job descriptions. Because employers in Austria are legally required to state the minimum remuneration for advertised positions, I can relate the skill content of jobs to offered wages using ad-level variation. Accounting for education, work experience, and firm and occupation fixed-effects, there exists a robust association between the number of skill requirements and wage offers. In particular, job ads with many skill requirements offer substantially higher wages. While I estimate large effects for managerial and analytical skills, associations with most soft skills are small. Overall, the analysis shows that skill requirements listed in online job ads can offer important insights on skill demand and skill wages differentials.
    JEL: J23 J24 J31
    Date: 2020–08
  3. By: Elizabeth Caucutt; Lance Lochner; Joseph Mullins; Youngmin Park
    Abstract: This paper studies the multidimensional nature of investments in children within a dynamic framework. In particular, we examine the roles of parental time investments, purchased home goods/services inputs, and market-based child care services. We first document strong increases in total investment expenditures by maternal education; yet expenditure shares, which skew heavily towards parental time, vary little with parental schooling. Second, we develop an intergenerational lifecycle model with multiple child investment inputs to study these patterns and the impacts of policies that alter the prices of different inputs. We analytically characterize investment behavior, focusing on the substitutability of different investment inputs and the way parental skills affect the productivity of family-based inputs. Third, we develop an estimation strategy that exploits intratemporal optimality conditions based on relative demand to estimate substitutability between inputs, the relative productivity of different inputs, and the role played by parental education. This approach requires no assumptions about the dynamics of skill investment, preferences, or credit markets. We also account for mismeasured inputs and wages, as well as unobserved heterogeneity in parenting skills. We further show how noisy measures of child achievement (measured several years apart) can also be incorporated in a generalized method of moments approach to additionally identify the dynamics of skill accumulation. Fourth, we use data from the Child Development Supplement of the Panel Study of Income Dynamics to estimate the skill production technology for children ages 12 and younger. Our estimates suggest complementarity between parental time and home goods/services inputs as well as between these family-based inputs and market-based child care, with elasticities of substitution ranging from 0.2 to 0.5. We find no systematic effects of parental education on the relative productivity of parental time and other home inputs. Finally, we use counterfactual simulations to explore the extent and sources of variation in investments across families, as well as investment responses to changes in input prices. We find that variation in prices explains 48% of the overall variance in investment expenditures, and differences in wages explain more than half of the investment expenditure gap between college-educated and non-college-educated parents. We further show that accounting for the degree of input complementarity implied by our estimates has important implications for the responses of individual inputs to any price change and for the responses in total investments and skill accumulation to large (but not small) price changes.
    Keywords: Fiscal policy; Labour markets; Potential output; Productivity
    JEL: D1 D13 H3 H31 J2 J22 J24
    Date: 2020–09
  4. By: Biasi, Barbara (Yale School of Management); Sarsons, Heather (University of Chicago Booth School of Business)
    Abstract: Does flexible pay increase the gender wage gap? To answer this question we analyze the wages of public-school teachers in Wisconsin, where a 2011 reform allowed school districts to set teachers' pay more flexibly and engage in individual negotiations. Using quasi-exogenous variation in the timing of the introduction of flexible pay driven by the expiration of preexisting collective-bargaining agreements, we show that flexible pay increased the gender pay gap among teachers with the same credentials. This gap is larger for younger teachers and absent for teachers working under a female principal or superintendent. Survey evidence suggests that the gap is partly driven by women not engaging in negotiations over pay, especially when the counterpart is a man. This gap is not driven by gender differences in job mobility, ability, or a higher demand for male teachers. We conclude that environmental factors are an important determinant of the gender wage gap in contexts where workers are required to negotiate.
    Keywords: gender wage gap, flexible pay, teacher salaries, bargaining
    JEL: J31 J71 J45
    Date: 2020–09
  5. By: Maarten Lindeboom (Vrije Universiteit Amsterdam); Raymond Montizaan (Maastricht University)
    Abstract: In January 2006, the Dutch government implemented a pension reform that substantially reduced the public pension wealth of workers born in 1950 or later. At the same time, a tax-facilitated savings plan was introduced that implied a large savings subsidy for all workers, irrespective of birth year. This paper uses linked administrative and survey data to assess the effect of the reform on the savings and retirement expectations and realizations of two virtually identical male cohorts that differ only in treatment status, the treated having been born in 1950 and the controls having been born in 1949. We show that retirement expectations are in line with realizations and that the reform increased the labor supply for the larger part of the workers, namely, those without sufficient means to substantially increase private savings to counter the effect of the reform. These workers have zero substitution rates between private and public wealth. On the other hand, there is a group of mostly high-wage workers who participate in the tax-facilitated savings plan and increase their private savings to fully counter the impact of the drop in public wealth. An unintended side effect of the introduction of the tax-facilitated savings plan is that high-wage earners who are not affected by the drop in pension wealth retire even sooner than initially planned.
    Keywords: Natural experiment, regression discontinuity, retirement, savings, public pension wealth
    JEL: H55 J26
    Date: 2020–09–29
  6. By: Cortes, Patricia (Boston University); Pan, Jessica (National University of Singapore)
    Abstract: The past five decades have seen a remarkable convergence in the economic roles of men and women in society. Yet, persistently large gender gaps in terms of labor supply, earnings, and representation in top jobs remain. Moreover, in countries like the U.S., convergence in labor market outcomes appears to have slowed in recent decades. In this article, we focus on the role of children and show that many potential explanations for the remaining gender disparities in labor market outcomes are related to the fact that children impose significantly larger penalties on the career trajectories of women relative to men. In the U.S., we document that close to two-thirds of the overall gender earnings gap can be accounted for by the differential impacts of children on women and men. We propose a simple model of household decision-making to motivate the link between children and gender gaps in the labor market, and to help rationalize how various factors potentially interact with parenthood to produce differential outcomes for men and women. We discuss several forces that might make the road to gender equity even more challenging for modern cohorts of parents, and offer a critical discussion of public policies in seeking to address the remaining gaps.
    Keywords: labor market, children, gender gap, gender
    JEL: J16 J24 J31 J13
    Date: 2020–09
  7. By: Laura Ehrmantraut (University of Bonn, Institute for Applied Microeconomics); Pia Pinger (University of Cologne & Behavior and Inequality Research Institute (briq)); Renske Stans (Erasmus University Rotterdam)
    Abstract: This paper explores students' expectations about the returns to completing higher education and provides first evidence on \textit{perceived} signaling and human capital effects. We elicit counterfactual labor market expectations for the hypothetical scenarios of leaving university with or without a degree certificate among a large and diverse sample of students at different stages of higher education. Our findings indicate substantial perceived returns to higher education. Moreover, by exploiting within-individual variation, we document sizeable expected labor market returns from signaling, whereas perceived productivity-enhancing (human capital) returns seem to be less pronounced. Over the expected course of career, we find lasting education premia as well as evidence consistent with employer learning.
    Keywords: higher education, returns to education, signaling, educational attainment, licensing, employer learning
    JEL: I21 I23 I26 J24 J31 J32 J44
    Date: 2020–09
  8. By: Daniel Pollmann (Department of Economics, Harvard University); Thomas Dohmen (University of Bonn, Maastricht University, IZA, DIW and CESifo); Franz Palm (Maastricht University)
    Abstract: We present a semiparametric method to estimate group-level dispersion, which is particularly effective in the presence of censored data. We apply this procedure to obtain measures of occupation-specific wage dispersion using top-coded administrative wage data from the German IAB Employment Sample (IABS). We then relate these robust measures of earnings risk to the risk attitudes of individuals working in these occupations. We find that willingness to take risk is positively correlated with the wage dispersion of an individual's occupation.
    Keywords: Dispersion estimation; Earnings risk; Censoring; Quantile regression; Occupational choice; Sorting; Risk preferences; SOEP; IABS
    JEL: C14 C21 C24 J24 J31 D01 D81
    Date: 2020–09
  9. By: Hennicke, Moritz; Lubczyk, Moritz; Mergele, Lukas
    Abstract: The end of communism in the 1990s probably is the most fundamental restructuring of institutions witnessed in recent history. At its core was the large-scale redistribution of previously state-owned companies. We construct a unique firm-level dataset to study this redistribution in East Germany where the entire state-owned economy was either privatized or liquidated within less than five years. We examine whether the privatization authority followed its mandate to privatize competitive firms using initial labor productivity to indicate firms' competitiveness. Our results highlight that firms with higher baseline productivity are more likely to be privatized, yield higher sales prices, are more often acquired by West German investors, and are more likely to remain in business even 20 years after leaving public ownership. The privatization agency plausibly contributed to these outcomes by rating and prioritizing productive firms.
    Keywords: privatization,labor productivity,German reunification
    JEL: D24 G38 H11 L33 P31
    Date: 2020
  10. By: Andreas Haufler; Yukihiro Nishimura
    Abstract: We set up a simple model of tax competition for mobile, highly-skilled and overconfident managers. Firms endogenously choose the compensation scheme for managers, which consists of a fixed wage and a bonus payment in the high state. Managers are overconfident about the probability of the high state and hence of receiving the bonus, whereas firms and governments are not. In this setting we show that overconfidence (i) unambiguously increases the bonus component in the managers’ compensation package and (ii) it reduces the bonus tax rate that governments set in the non-cooperative tax equilibrium. Hence overconfidence can contribute to explaining both the increasing role of bonus contracts and the fall in marginal tax rates for high-income earners.
    Keywords: overconfidence, bonus taxes, tax competition, migration
    JEL: H20 H87 G28
    Date: 2020
  11. By: Albiol Sanchez, Judit (Universitat Rovira i Virgili); Diaz-Serrano, Luis (Universitat Rovira i Virgili); Teruel, Mercedes (Universitat Rovira i Virgili)
    Abstract: Some studies using either objective or subjective indicators, find that self-employed individuals are less likely to be or to report being skill-mismatched in comparison with salaried employees. The aim of this paper is to analyze the impact of the transition from salaried employment to self-employment on self-reported skill mismatches. To do so, this article uses eight waves of the European Community Household Panel covering the period 1994–2001. The panel data nature of this rich dataset, allows us to track individuals over time and measure self-reported skill-mismatches before and after the transition for the same individuals, using as the comparison group those individu-als who remain in salaried employment during the whole sample period. Our empirical findings indicate that those individuals who transit from salaried employment to self-employment reduce their probability to report being skill-mismatched after the transition. Interestingly, we also observe that this effect vanish if the transition is done from an unemployment status, and that the effect is quite heterogenous across countries.
    Keywords: self-employment, skill mismatches, salaried employment, job transitions
    JEL: L26 J24 B23
    Date: 2020–10
  12. By: Damiani, Mirella; Pompei, Fabrizio; Kleinknecht, Alfred
    Abstract: Whether robots have a positive or negative impact on job quality and wages depends on the dominant innovation regime in an industry. In an innovation regime with a high cumulativeness of knowledge, i.e. if accumulation of (tacit) knowledge from experience (embodied by workers) is important for innovation, robots enhance the probability that workers will get permanent (other than temporary) contracts and they earn higher wages. The opposite holds for industries with a low-cumulativeness regime when innovation depends mainly on general (and generally available) knowledge. Our results emerge from multi-level estimates of two countries (Italy and Germany), combining sectoral data on robot use with person-level data on properties of workers. Our results imply that previous studies tended to find weak effects of robotization as they did not control for innovation regimes. An implication for European industrial policy is that the hiring of more flexible personnel (and shorter job tenures) that has become popular in the period of supply-side economics is likely to have a negative impact on the productive use of robot technology in industries with a high cumulativeness of knowledge, and less so in low-cumulativeness industries. Unqualified pleas for labour market deregulation can have a problematic impact on technology and should be reconsidered.
    Keywords: robots, quality of work, innovation regimes, knowledge cumulativeness
    JEL: J3 J5 M5 O3
    Date: 2020–09–21
  13. By: Alexandre, Fernando (University of Minho); Cruz, Sara (University of Minho); Portela, Miguel (University of Minho)
    Abstract: In this paper, we focus on managerial characteristics of micro and small-sized firms. Using linked employer-employee data on the Portuguese economy for the 2010-2018 period, we estimate the impact of management teams' human capital on the probability of firms becoming financially distressed and on their subsequent recovery. Our estimates show that the relevance of management teams' formal education on the probability of firms becoming financially distressed depends on firms' size and the type of education. We show that management teams' formal education and tenure reduces the probability of micro and small-sized firms becoming financially distressed and increases the probability of their subsequent recovery. The estimates also suggest that those impacts are stronger for micro and small-sized firms. Additionally, our results show that functional experience previously acquired in other firms, namely in foreign-owned and in exporting firms and in the area of finance, may reduce the probability of micro firms becoming financially distressed. On the other hand, previous functional experience in other firms seems to have a strong and highly significant impact on increasing the odds of recovery of financially distressed firms. We conclude that policies that induce an improvement in the managerial human capital of micro and small-sized firms have significant scope to improve their financial condition, reducing the likelihood of firms entering a state of financial distress.
    Keywords: financial distress, human capital, firm performance
    JEL: G32 J24 L25
    Date: 2020–09
  14. By: Paul Bisschop (SEO Amsterdam Economics); Bas ter Weel (University of Amsterdam); Jelle Zwetsloot (SEO Amsterdam Economics)
    Abstract: This research documents ethnic employment gaps for labour-market entrants in the Netherlands in the period 2006-2016. We compare short-term and long-term differences in employment of Dutch graduates with graduates from Moroccan, Turkish, Antillean and Surinamese origin and other (non-)western countries. The analyses focus on graduates from secondary vocational education, which is a group of graduates with many people from ethnic minorities. We document ethnic employment gaps by using an Oaxaca-Blinder decomposition. Our findings suggest that there exist persistent ethnic employment gaps. The gaps are largest for female workers. Part of the ethnic employment gaps are explained by observed characteristics, such as the level of secondary vocational education and the field of study or socioeconomic background and household and neighbourhood characteristics. The substantial unexplained part is present among all ethnic groups and does not disappear over time.
    Keywords: Employment, labour-market entry, ethnic minorities
    JEL: J15 J2 J70
    Date: 2020–09–29
  15. By: Burkhard Heer (University of Augsburg, D); Andreas Irmen (Department of Economics and Management, Université du Luxembourg); Bernd Süssmuth (University of Leipzig, D)
    Abstract: This study provides evidence for the US that the secular decline in the labor share is not only explained by technical change or globalization, but also by the dynamics of factor taxation, automation capital, and population growth. First, we empirically find indications of co-integration for the 1974-2008 period. Permanent effects on factor shares emanate from relative factor taxation. The latter also have a lasting effect on the use of robots. Variance decompositions reveal that taxing contributes to changes in the two income shares and in automation capital. Second, we analyse and calibrate a neoclassical growth model extended to include factor taxation, automation capital, and capital adjustment costs. The model is able to replicate the dynamics of the observed functional income distribution in the US during the 1965-2015 period. Counterfactual experiments suggest that the fall in the labor share would have been significantly smaller if labor and capital income tax rates had remained at their respective level of the 1960s.
    Keywords: Functional income distribution, labor income share, income taxes, automation capital, demography, growth
    JEL: D33 E62 O41 J11 J20
    Date: 2020
  16. By: Hupkau, Claudia (CUNEF, Madrid); Petrongolo, Barbara (University of Oxford)
    Abstract: We explore impacts of the pandemic crisis and associated restrictions to economic activity on paid and unpaid work for men and women in the UK. Using data from the Covid-19 supplement of Understanding Society, we find evidence that labour market outcomes of men and women were roughly equally affected at the extensive margin, as measured by the incidence of job loss or furloughing, but if anything women suffered smaller losses at the intensive margin, experiencing slightly smaller changes in hours and earnings. Within the household, women provided on average a larger share of increased childcare needs, but in an important share of households fathers became the primary childcare providers. These distributional consequences of the pandemic may be important to understand its inequality legacy over the longer term.
    Keywords: COVID-19, gender gaps, home production
    JEL: J13 J16 J22 J31
    Date: 2020–10
  17. By: Krista Ruffini; Aaron Sojourner; Abigail Wozniak
    Abstract: COVID symptom screening, a new workplace practice, is likely to affect many millions of American workers in the coming months. Eleven states already require and federal guidance recommends frequent screening of employees for infection symptoms. This paper provides some of the first empirical work exploring the tradeoffs employers face in using daily symptom screening. First, we find that common symptom checkers will likely screen out up to 7 percent of workers each day, depending on the measure used. Second, we find that the measures used will matter for three reasons: many respondents report any given symptom, survey design affects responses, and demographic groups report symptoms at different rates, even absent fluctuations in likely COVID exposure. This last pattern can potentially lead to disparate impacts, and is important from an equity standpoint.
    JEL: I1 J50 J70 K30 M50
    Date: 2020–09–01
  18. By: Wehner, Caroline (BIBB); de Grip, Andries (ROA, Maastricht University); Pfeifer, Harald (BIBB)
    Abstract: This paper explores whether firms recruit workers with different personality traits for different tasks. For our analysis, we used data from a discrete choice experiment conducted among recruiters of 634 firms in Germany. Recruiters were asked to choose between job applicants who differed in seven aspects: professional competence, the 'big five' personality traits and the prospective wage level. We found that all personality traits affect the hiring probability of the job applicant; among them, conscientiousness and agreeableness have the strongest effects. However, recruiters' preferences differed for different job tasks. For analytical tasks, recruiters prefer more open and conscientious applicants, whereas they favour more open, extraverted, and agreeable workers for interactive tasks.
    Keywords: recruitment, personality traits, tasks, discrete choice experiment
    JEL: J23 D91 M51
    Date: 2020–09
  19. By: Fernando Rios-Avila
    Abstract: This paper presents a description of the quality of match of the statistical matches used in the LIMTCP estimates prepared for Ethiopia and South Africa. For Ethiopia, the statistical match combines the Ethiopian Socio-economic Survey--Wave 3--2015/2016 (ESS) with the Ethiopian Time Use Survey (ETUS) 2013. For South Africa it combines the October Household Survey (OHS) 1998 with the time use data obtained from the SA-Time Use Survey (SATUS) 2000, and the South African Living Conditions Survey (SALCS) 2014/2015 with the SATUS 2010. In all cases, the alignment of the two datasets is examined, after which various aspects of the match quality are described. Despite the differences in the survey years, the quality of match for South Africa is high and the synthetic dataset appropriate for the time poverty analysis. For Ethiopia, due to data quality differences, we restrict the analysis to married couple households with an employed spouse and young children. Conditioning on the restriction and sample reweighting, the Ethiopian synthetic dataset seems appropriate for the time poverty analysis.
    Keywords: Statistical Matching; Time Use; Household Production; Poverty; LIMTCP; Ethiopia; South Africa
    JEL: C14 C40 D31 J22
    Date: 2020–09
  20. By: Michael Palmer (Economics Discipline, Business School, University of Western Australia); Jenny Williams (Department of Economics, University of Melbourne)
    Abstract: This paper investigates the impact of a law protecting the employment rights of disabled people in Cambodia. Similar to studies in high income countries, we find that Cambodia's national disability law did not improve the employment situation of persons with disabilities, and may have worsened it, four years after implementation. The reduction in employment of disabled persons following the laws introduction is larger among employees, females, and in the industrial sector. The most plausible mechanism through which employment is reduced is via lower demand for disabled workers by employers seeking to avoid the cost of workplace accommodations in an environment of monitoring by a non-government organization and where employment quotas for disabled workers are set at non-binding levels.
    JEL: I18 J21 K31 C21
    Date: 2020

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