nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2021‒07‒26
twenty-one papers chosen by
Joseph Marchand
University of Alberta

  1. Job Search and Hiring with Two-Sided Limited Information about Workseekers' Skills By Carranza, Eliana; Garlick, Robert; Orkin, Kate; Rankin, Neil
  2. Progressive Pensions as an Incentive for Labor Force Participation By Fabian Kindermann; Veronika Püschel
  3. Breaking the Implicit Contract: Using Pension Freezes to Study Lifetime Labor Supply By Dhiren Patki
  4. The Impact of Covid-19 on Economic Activity: Evidence from Administrative Tax Registers By Nikolay Angelov; Daniel Waldenström
  5. Temperature, Workplace Safety, and Labor Market Inequality By Park, R. Jisung; Pankratz, Nora; Behrer, A. Patrick
  6. Non-Base Compensation and the Gender Pay Gap By Hirsch, Boris; Lentge, Philipp
  7. Employers’ willingness to invest in the training of temporary workers: a discrete choice experiment By Poulissen, Davey; de Grip, Andries; Fouarge, Didier; Künn, Annemarie
  8. Workplace training in Myanmar: Determinants and wage returns By Henrik Hansen; S Kanayade; John Rand; Neda Trifkovic
  9. Covid-19 and Income Inequality: Evidence from Monthly Population Registers By Nikolay Angelov; Daniel Waldenström
  10. Are payroll tax cuts absorbed by insiders? Evidence from the Swedish retail industry By Seerar Westerberg, Hans
  11. Wage Effects of Employer-Mediated Transfers By Santiago Garriga; Dario Tortarolo
  12. The Efficacy of Tournaments for Non-Routine Team Tasks By Florian Englmaier; Stefan Grimm; Dominik Grothe; David Schindler; Simeon Andreas Dermot Schudy
  13. Impact of the 2017 Tax Cuts and Jobs Act on Labor Supply and Welfare of Married Households By Julie L. Hotchkiss; Robert E. Moore; Fernando Rios-Avila
  14. More or Less Unmarried. The Impact of Legal Settings of Cohabitation on Labour Market Outcomes By Goussé, Marion; Leturcq, Marion
  15. The role of short-time work and discretionary policy measures in mitigating the effects of the COVID-19 crisis in Germany By Michael Christl; Silvia De Poli; Tine Hufkens; Andreas Peichl; Mattia Ricci
  16. Chutes and Ladders? Job Opportunities for Generation COVID By Barth, Erling; Dale-Olsen, Harald; Schone, Pal; Ostbakken, Kjersti Misje
  17. Making it public: The effect of (private and public) wage proposals on efficiency and income distribution By Lara Ezquerra; Joaquin Gomez-Minambres; Natalia Jiminez; Praveen Kujal
  18. Restructuring the Eligibility Policies of the Child Care and Development Fund to Address Benefit Cliffs and Affordability: Florida as a Case Study By Brittany Birken; Elias Ilin; Alexander Ruder; Ellyn Terry
  19. Using Bank Savings Product Design for Empowering Women and Agricultural Development By Galdo, Jose C.
  20. Taxes, Subsidies, and Gender Gaps in Hours and Wages By Robert Duval-Hernandez; Lei Fang; L. Rachel Ngai
  21. Teacher Licensing, Teacher Supply, and Student Achievement: Nationwide Implementation of edTPA By Bobby Chung; Jian Zou

  1. By: Carranza, Eliana (World Bank); Garlick, Robert (Duke University); Orkin, Kate (CSAE); Rankin, Neil (Stellenbosch University)
    Abstract: We present field experimental evidence that limited information about workseekers' skills distorts both firm and workseeker behavior. Assessing workseekers' skills, giving workseekers their assessment results, and helping them to credibly share the results with firms increases workseekers' employment and earnings. It also aligns their beliefs and search strategies more closely with their skills. Giving assessment results only to workseekers has similar effects on beliefs and search, but smaller effects on employment and earnings. Giving assessment results only to firms increases callbacks. These patterns are consistent with two-sided information frictions, a new finding that can inform the design of information-provision mechanisms.
    Keywords: skills, job search, employment, wages, labor markets, active labor market
    JEL: J23 J24 J31 J41 O15 O17
    Date: 2021–07
  2. By: Fabian Kindermann (University of Regensburg); Veronika Püschel (University of Regensburg)
    Abstract: In this paper, we challenge the conventional idea that an increase in the progressivity of old-age pensions unanimously distorts the labor supply decision of households. So far, the literature has argued that higher pension progressivity leads to more redistribution and insurance provision on the one hand, but increases implicit taxes and therefore distorts labor supply choices on the other. In contrast, we show that a well-designed reform of the pension system has the potential to encourage labor force participation. We propose a progressive pension component linked to the employment decision of households, which implicitly subsidizes employment of the productivity poor. A simulation analysis in a quantitative stochastic overlapping generations model with productivity and longevity risk indicates that this positive employment effect can be sizable and welfare enhancing.
    Keywords: progressive pensions, Labor Supply, employment incentives
    JEL: D15 H31 H55 J21 J22
    Date: 2021–07
  3. By: Dhiren Patki
    Abstract: This paper studies the elimination of traditional pensions and subsequent adoption of 401(k) plans by U.S. employers. Using thousands of firm-level natural experiments, it shows that unexpected losses in future compensation engendered by pension plan transitions induce premature retirement for some workers and delayed retirement for others. Observed heterogeneity in retirement behavior is indicative of differences in wealth and in preferences for leisure. Using credibly identified treatment effects as estimation targets, it fits a structural model of retirement and uses the model to evaluate the effect of a counterfactual reform that eliminates Social Security payroll taxes for older workers.
    Keywords: labor supply; pensions; retirement savings; Social Security payroll tax
    JEL: J26 J32 J41 M52 D15 H24
    Date: 2021–06–01
  4. By: Nikolay Angelov; Daniel Waldenström
    Abstract: We use population-wide tax register data to document the impact of the COVID-19 pandemic on firm sales, tax revenues, and sick pay in Sweden. The pandemic impact is identified using within-year, between-year, and geographical variation, and our data allows us to run placebo tests. Our findings confirm the large negative effects of the pandemic, but shed new light on their magnitudes and sensitivity to COVID-19 morbidity rates. Specifically, we find that the impact on VAT and firm sales was larger than on commonly used industrial and service production indexes, larger than the effect on electricity for industrial use, but less than the effect on excise taxes on air travel. The pandemic’s impact on short-term sick pay is large, but unlike tax payments, it does not vary with local infection rates, indicating behavioral responses to more generous rules for sickness insurance during the pandemic.
    Keywords: Covid-19 impact, VAT, excise taxes, sick pay
    JEL: H24 H25 J22 J24
    Date: 2021
  5. By: Park, R. Jisung (University of California, Los Angeles); Pankratz, Nora (UCLA); Behrer, A. Patrick (Stanford University)
    Abstract: Using data covering the universe of injury claims from the nation's largest worker's compensation system (2001-2018), we explore the relationship between temperature and workplace safety and its implications for labor market inequality. Hotter temperature increases workplace injuries significantly, causing approximately 20,000 injuries per year. The effects persist in both outdoor and indoor settings (e.g. manufacturing, warehousing), and for injury types ostensibly unrelated to temperature (e.g. falling from heights), consistent with cognitive or cost-related channels. The risks are substantially larger for men versus women; for younger versus older workers; and for workers at the lower end of the income distribution, suggesting that accounting for workplace heat exposure may exacerbate total compensation inequality. We document a decline in the heat-sensitivity of injuries over the study period, suggesting significant scope for adaptation using existing technologies.
    Keywords: inequality, labor, workplace safety, temperature, climate change, adaptation
    JEL: J20 J32 I18 Q50
    Date: 2021–07
  6. By: Hirsch, Boris (Leuphana University Lüneburg); Lentge, Philipp (Leuphana University Lüneburg)
    Abstract: This paper investigates whether non-base compensation contributes to the gender pay gap. In wage decompositions, we find that lower bonus payments to women explain about 10% of the gap at the mean and at different quantiles of the unconditional wage distribution whereas the lower prevalence of shift premia and overtime pay among women is unimportant. Among managers, the contribution of bonuses to the mean gap more than doubles and is steadily rising as one moves up the wage distribution. Our findings suggest that gender differences in bonuses are an important contributor to the gender pay gap, particularly in top jobs.
    Keywords: gender pay gap, bonus payments, shift premia, overtime pay, glass ceilings
    JEL: J31 J71
    Date: 2021–07
  7. By: Poulissen, Davey (RS: GSBE other - not theme-related research, ROA / Health, skills and inequality); de Grip, Andries (ROA / Health, skills and inequality, RS: GSBE Theme Learning and Work, RS: SBE - MACIMIDE); Fouarge, Didier (RS: GSBE Theme Learning and Work, RS: GSBE Theme Data-Driven Decision-Making, ROA / Labour market and training); Künn, Annemarie (RS: GSBE Theme Learning and Work, ROA / Labour market and training)
    Abstract: Various studies have shown that temporary workers participate less in training than those on permanent contracts. Human resources practices are considered to be an important explanation for this difference. We develop a theoretical framework for employers’ provision of training that explicitly incorporates the costs and benefits associated with training investments in employees with different types of employment contracts. Our framework not only predicts employers to be less willing to invest in temporary workers due to the shorter time horizon associated with such an investment, but it also provides insights into how this willingness depends on characteristics of the training that are related to the expected costs and benefits of the training investment. A discrete choice experiment is used to empirically test the predictions from our theoretical framework. In line with our theoretical framework, we find that employers are less likely to invest in the training of temporary workers. This particularly holds when temporary workers do not have the prospect of a permanent contract with their current employer. Furthermore, we show that employers’ likelihood of investing in temporary workers indeed depends on aspects related to the costs and benefits of training, that is, a financial contribution to the training costs made by employees, a repayment agreement that applies when workers leave the organisation prematurely, and the transferability of the skills being trained. Our findings can be used to increase employers’ willingness to invest in temporary workers. However, similar effects are observed when looking at employers’ willingness to invest in permanent workers, suggesting that it will be difficult to decrease the gap in employers’ willingness to invest between temporary and permanent workers.
    JEL: J24 J41 J62
    Date: 2021–05–31
  8. By: Henrik Hansen (Department of Economics, University of Copenhagen, Denmark); S Kanayade (CESD, Myanmar); John Rand (Department of Economics, University of Copenhagen, Denmark); Neda Trifkovic (Department of Economics, University of Copenhagen, Denmark)
    Abstract: Using linked employer-worker panel data from Myanmar, we estimate wage returns to workplace training. First, we document a low prevalence of training in manufacturing enterprises. Second, we find the wage premium associated with training of about 7%, which is in the range found in other South-East Asian countries. Third, we show that workplace training is offered selectively to workers and when this is the case, the wage gap between trained and untrained workers doubles. Fourth, we find that previous training does not contribute to higher present wage, which indicates low transferability of workplace training in Myanmar. While this setup may benefit employers, workers get short-lived benefits from training, which do not carry throughout the working life. Fifth, we find a convex profile of the returns to training with respect to education and that specific industries such as food, apparel and printing lend themselves more to the benefits from training. Considering the wage return as a lower bound of productivity gains from training, our results suggest that government support of workplace training programs could help increase performance of the manufacturing sector in Myanmar.
    Keywords: training, wage, manufacturing, myanmar
    JEL: J31 J16 M53 O53
    Date: 2021–07–14
  9. By: Nikolay Angelov; Daniel Waldenström
    Abstract: We measure the distributional impact of the COVID-19 pandemic using newly released population register data in Sweden. Monthly earnings inequality increased during the pandemic, and the key driver is income losses among low-paid individuals while middle- and high-income earners were almost unaffected. The pandemic had a larger negative impact on private-sector workers and on women. Using data on individual take-up of government COVID-19 support, we show that policy significantly dampened the inequality increase, but did not fully offset it. Annual total market income inequality, which also includes capital income and taxable transfers, shows similar patterns of increasing inequality during the pandemic.
    Keywords: pandemic, income inequality, earnings, government policy
    JEL: D31 H12 H24 J22
    Date: 2021
  10. By: Seerar Westerberg, Hans (Institute of Retail Economics (Handelns Forskningsinstitut))
    Abstract: It is commonly argued that payroll tax cuts are inefficient for increasing employment among outsiders because insiders will use their power to bargain for higher wages at the expense of outsiders’ possibility of becoming employed. The extent to which insiders or outsiders reap the rewards of payroll tax cuts is a longstanding issue, and previous literature has largely focused on the employment effects of outsiders. Using wage statistics of employees in the Swedish retail sector, we investigate the effects of a youth payroll tax cut in 2007 on insiders’ wage earnings and the number of hours worked. In accordance with earlier studies, the results show that the payroll tax cut increased insiders’ total wage earnings. However, only 21 percent of the increase in wage earnings was a result of higher bargained wages, 57 percent of the wage increase corresponds to a higher intensive margin of employment, and the rest was attributed to the number of hours worked by insiders with a higher hourly wage rate. There is, thus, little to suggest that insiders can absorb large amounts of payroll tax cuts in the form of higher bargained wages, even in the case of a small number of workers with the most bargaining power.
    Keywords: Retail; labor market; wage; payroll tax; DiD; employment; inconvenience allowance
    JEL: D24 L25 L26
    Date: 2021–07–17
  11. By: Santiago Garriga; Dario Tortarolo
    Abstract: We explore whether the way in which tax credits are disbursed affects the gross wage of workers. We exploit an unusual reform in Argentina that shifted the disbursement responsibility of child benefits from employers to a government agency in a staggered fashion, from 2003 to 2010. Using population-wide administrative data and an event-study approach based on firms’ switching dates set by the government, we show that the way tax credits are disbursed matters for the final economic incidence. Our evidence suggests that employers capture about 6-14 percent of the transfers through lower wages when they mediate the payments. We argue that in the firm-based system, transfers were likely understood as part of the starting compensation package and employers exploited this confusion to extract rents. Our findings therefore accord with the hypothesis that transfers are not entirely captured dollar for dollar by workers. More generally, this paper suggests that relying on firms as mediators in the tax-benefit system could have unintended consequences; as less salient schemes may lead to rent capture.
    Keywords: tax credits, family allowances, means-tested transfers, incidence, wage effects, event study
    JEL: H23 H31 H71 I38 J31 J32 J33
    Date: 2021
  12. By: Florian Englmaier; Stefan Grimm; Dominik Grothe; David Schindler; Simeon Andreas Dermot Schudy
    Abstract: Tournaments are often used to improve performance in innovation contexts. Tournaments provide monetary incentives but also render teams’ identity and social-image concerns salient. We study the effects of tournaments on team performance in a non-routine task and identify the importance of these behavioral aspects. In a natural field experiment (n>1,700 participants), we vary the salience of team identity, social-image concerns, and whether teams face monetary incentives. Increased salience of team identity does not improve performance. Social-image motivates mainly the top-performing teams. Additional monetary incentives improve all teams’ outcomes without crowding out teams’ willingness to explore or perform similar tasks again.
    Keywords: team-work, tournaments, rankings, incentives, identity, image concerns, innovation, exploration, natural field experiment
    JEL: C93 D90 J24 J33 M52
    Date: 2021
  13. By: Julie L. Hotchkiss; Robert E. Moore; Fernando Rios-Avila
    Abstract: This paper calculates the change in optimal labor supply and total family welfare resulting from the Tax Cuts and Jobs Act of 2017 (TCJA). We estimate labor supply elasticities for married families in the Current Population Survey from 2015 to 2017, using a joint family utility model. These elasticities are then used to simulate changes in optimal labor supply and resulting change in welfare among families with different characteristics under the new TCJA tax code. We find that optimal hours are lower post-TCJA, relative to before. However, there are differences across family members and family types. Both men’s and women’s optimal hours decline with income starting in the second quintile, but the decline is more dramatic for men. Overall, all families’ welfare increased post-TCJA, with the gains in welfare disproportionately benefiting the wealthy; families with any self-employment income; families with children; and families renting, versus owning, their home.
    Keywords: family welfare; joint labor supply; microsimulation; TCJA
    JEL: D19 I30 J22
    Date: 2021–06–24
  14. By: Goussé, Marion (Université Laval); Leturcq, Marion (INED, France)
    Abstract: We study how different levels of protection upon separation affect the labour market behaviour of unmarried cohabiting partners. In Canada, unmarried cohabitation becomes a legal status after one year of relationship. Most provinces automatically expand couples' rights and responsibilities after several years of cohabitation: some provinces allow cohabiting partners to claim for alimony upon separation, while others consider cohabiting couples to be equal to married couples. Using cross-province variations in legal settings and minimum eligibility duration, we show that eligibility for a more protective regime increases men's labour supply and earnings and decreases those of women's. The impact of the marriage-like regime is stronger, especially for women. We find that the effect is significantly stronger for couples directly eligible at the time of the reform than for couples who are eligible after the reform and may have anticipated changes in the legal settings. Our results show that eligibility affects within-household allocation of earnings and hours of work, and reinforces existing inequality. We present some evidence that enhancing protection upon separation has an effect on the selection of couples into cohabitation. Our results contribute to the ongoing public debate regarding the legal recognition and level of protection that should be given to unmarried cohabiting partners. Our results show that behavioural response may offset additional protection upon separation by increasing women's dependence on their partner.
    Keywords: alimony rights, unmarried cohabitation, labour supply, common law marriage
    JEL: J12 J22 J18 K36
    Date: 2021–06
  15. By: Michael Christl (European Commission - JRC); Silvia De Poli (European Commission - JRC); Tine Hufkens; Andreas Peichl (Ifo Institute); Mattia Ricci (European Commission - JRC)
    Abstract: In this paper, we investigate the impact of the COVID-19 pandemic on German household income using a micro-level approach. We combine a microsimulation model with labour market transition techniques to simulate the COVID-19 shock on the German labour market. We find the consequences of the labour market shock to be highly regressive with a strong impact on the poorest households. However, this effect is nearly entirely offset by automatic stabilisers and discretionary policy measures. We explore the cushioning effect of these policies in detail, showing that short-time working schemes and especially the one-off payments for children are effective in cushioning the income loss of the poor.
    Keywords: COVID-19, EUROMOD, microsimulation, short-time work, automatic stabilisers
    JEL: D31 E24 H24
    Date: 2021–07
  16. By: Barth, Erling (Institute for Social Research, Oslo); Dale-Olsen, Harald (Institute for Social Research, Oslo); Schone, Pal (Institute for Social Research, Oslo); Ostbakken, Kjersti Misje (Institute for Social Research, Oslo)
    Abstract: With a focus on jobs for youth, this paper analyses the development of job postings in Norway during the first and second wave of the COVID-19 pandemic in 2020. Jobs for youth are defined by the top 20 3-digit occupations for young workers. Job postings in these occupations took a larger hit than other jobs. We also identify the top 20 occupations for entrants right after completed highest education. Separate analyses by education reveal that entry jobs for young people with lower education declined the most during the pandemic. Using a difference in difference framework with 2018 and 2019 as reference years, we show that the decline started before "lock-down" policies were in place, but that the decline was even larger during the lock-down. Concurrent with re-opening phases in the economy, job posting rates improved, but did not reach the levels comparable to those in 2018 and 2019.
    Keywords: coronavirus, labor demand shock, job postings, young workers, COVID-19
    JEL: J23 J6 J63
    Date: 2021–07
  17. By: Lara Ezquerra (Universidad de las Islas Baleares, Spain); Joaquin Gomez-Minambres (Lafayette College, Department of Economics and Chapman University, Economic Science Institute.); Natalia Jiminez (Universidad Pablo Olavide, Spain); Praveen Kujal (Middlesex University)
    Abstract: The implications of (public or private) pre-play communication and information revelation in a labour relationship is not well understood. We address these implications theoretically and experimentally. In our baseline experiments, the employer offers a wage to the worker who may then accept or reject it. In the public and private treatment, workers, moving first, make a non-binding private or public wage proposal. Our theoretical model assumes that wage proposals convey information about a worker's minimum acceptable wage and are misreported with a certain probability. It predicts that, on average, wage proposals lead to higher wage offers and acceptance rates, with the highest wages under private proposals. While both, public and private, proposals increase efficiency over the baseline, private proposals generate higher worker incomes. Broad support for the theoretical predictions is found in the laboratory experiments. Our work has important implications for recent policies promoting public information on wage negotiations. We find that while wage proposals promote higher wages, efficiency, and income equality, public information on wage negotiations is likely to benefit firms more than workers.
    Keywords: wage negotiations, cheap talk, laboratory experiments, ultimatum game, wage proposals
    JEL: C90 C72 J31 M52
    Date: 2021
  18. By: Brittany Birken; Elias Ilin; Alexander Ruder; Ellyn Terry
    Abstract: This paper explores how the current eligibility policies of the federal Child Care and Development Fund (CCDF) create benefits cliffs that act as barriers to economic self-sufficiency. By examining Florida data and policies, the authors demonstrate how the program’s existing co-payment schedule affects the same hypothetical family living in two contrasting Florida counties: one with state median living costs and one with high living costs. The authors find that the CCDF income eligibility exit threshold is too low, particularly in high-cost counties. That occurs because the exit threshold is based on the state median income, as opposed to more local measures that better approximate and reflect local cost of living. The authors propose and calculate the additional family and government costs of two alternative CCDF phase-out designs, which would remove the CCDF benefits cliffs. Both proposed alternatives feature smooth phase-out schedules that align the subsidies with the local cost of childcare, thereby reducing barriers to economic mobility unintentionally created by government policies.
    Keywords: childcare; benefits cliffs; human capital; skills; provision and effects of welfare programs; effective marginal tax rates
    JEL: I38 J08 J13 J24
    Date: 2021–06–08
  19. By: Galdo, Jose C. (Carleton University)
    Abstract: This study examines whether the random allocation of single and joint saving accounts to cash crop farmers in rural Ethiopia is associated with changes in decision-making authority and control over resources that ultimately lead to changes in labor effort, schooling allocations, income, consumption, agricultural investments, and crop output. Women and children work more when joint deposit accounts are available. Likewise, meaningful effects on school participation are reported for girls. Consistent with posited channels of intrahousehold bargaining models, women from households assigned to the joint saving treatment group show significant gains in autonomy and control of savings resources, and financial empowerment. While we find substantial gains in subjective wellbeing for single and joint account experimental groups, no meaningful impacts on agricultural crop output, income, and consumption are found. However, a systematic decumulation of livestock assets is observed across households assigned to the joint account treatment group.
    Keywords: bank savings, agriculture markets, labor, schooling, women empowerment, RCT
    JEL: C93 D14 G21 J43 I21 O12 R20
    Date: 2021–06
  20. By: Robert Duval-Hernandez; Lei Fang; L. Rachel Ngai
    Abstract: Using micro data from 17 countries in the Organisation for Economic Co-operation and Development, this paper documents a negative cross-country correlation between gender ratios in market hours and wages. We find that market hours by women and the size of the service sector that produces close substitutes to home production are important for the gender differences in market hours across countries. We quantify the role played by taxes and subsidies to family care on the two gender ratios in a multisector model with home production. Higher taxes and lower subsidies reduce the marketization of home production and therefore reduce market hours. The effect is larger for women because of their comparative advantage in producing home services and the corresponding market substitutes. The larger fall in female market hours drives up the female wage relative to the male wage, resulting in higher gender wage ratios.
    Keywords: marketization; gender hour ratios; gender wage ratios; subsidies on family care; taxes; home production
    JEL: E24 E62 J22
    Date: 2021–06–24
  21. By: Bobby Chung (University of Illinois at Urbana-Champaign); Jian Zou (University of Illinois at Urbana-Champaign)
    Abstract: The educative Teacher Performance Assessment (edTPA) - a performance-based examination for prospective PreK-12 teachers to guarantee teaching readiness - has gained popularity in recent years. This research offers the first causal evidence about the effects of this nationwide initiative on teacher supply and student outcomes of new teachers. We leverage the quasi-experimental setting of different adoption timing by states and analyze multiple data sources containing a national sample of prospective teachers and students of new teachers in the US. We find that the new license requirement reduced the number of graduates from teacher preparation programs by 14%. The negative effect is stronger for non-white prospective teachers at less-selective universities. Contrary to the policy intention, we find evidence that edTPA has adverse effects on student learning.
    Keywords: occupational licensing, education policy
    JEL: I28 J20 J44 K31 L51
    Date: 2021–07

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