nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2022‒03‒21
fourteen papers chosen by
Joseph Marchand
University of Alberta

  1. Reconciling Trends in U.S. Male Earnings Volatility: Results from Survey and Administrative Data By Robert A. Moffitt; John M. Abowd; Christopher R. Bollinger; Michael D. Carr; Charles M. Hokayem; Kevin L. McKinney; Emily E. Wiemers; Sisi Zhang; James P. Ziliak
  2. Wage dispersion and firm performance: evidence from Kazakhstan By Dinara Alpysbayeva; Jozef Konings; Venkat Subramanian; Aigerim Yergabulova
  3. How Tight are U.S. Labor Markets? By Alex Domash; Lawrence H. Summers
  4. Children and the US Social Safety Net: Balancing Disincentives for Adults and Benefits for Children By Anna Aizer; Hilary W. Hoynes; Adriana Lleras-Muney
  5. Valuing the Time of the Self-Employed By Daniel J. Agness; Travis Baseler; Sylvain Chassang; Pascaline Dupas; Erik Snowberg
  6. Gifted Children Programs’ Short and Long-Term Impact: Higher Education, Earnings, and the Knowledge-Economy By Victor Lavy; Yoav Goldstein
  7. Drivers of skill mismatch among Italian graduates: The role of personality traits By Esposito, Piero; Scicchitano, Sergio
  8. Corporate Flexibility in a Time of Crisis By John W. Barry; Murillo Campello; John Graham; Yueran Ma
  9. The Impact of Working Conditions on Mental Health: Novel Evidence from the UK. By Belloni, Michele; Carrino, Ludovico; Meschi, Elena
  10. Lifecycle Earnings Risk and Insurance: New Evidence from Australia By Darapheak Tin; Chung Tran
  11. US Salary History Bans -- Strategic Disclosure by Job Applicants and the Gender Pay Gap By Sourav Sinha
  12. Air Pollution, Avoidance Behavior and Labor Supply: Evidence from the United States By Djoumessi, Berenger Tiague
  13. Designing Benefits for Platform Workers By Jonathan Gruber
  14. Inferring Occupation Arduousness from Poor Health Beyond the Age of 50 By Arno Baurin; Sandy Tubeuf; Vincent Vandenberghe

  1. By: Robert A. Moffitt; John M. Abowd; Christopher R. Bollinger; Michael D. Carr; Charles M. Hokayem; Kevin L. McKinney; Emily E. Wiemers; Sisi Zhang; James P. Ziliak
    Abstract: One strand of the literature in labor economics, household finance, and macroeconomics has studied whether individual earnings volatility has risen or fallen in the U.S. over the last several decades. There are disagreements in the empirical literature on this question, with some suggestions that the differences are the result of using flawed survey data instead of more accurate administrative data. This paper summarizes the results of a project to reconcile these findings with four different data sets and six different data series--three survey and three administrative data series, including two which match survey respondent data to their administrative data. Four of the six series show no significant trend in male earnings volatility over the last 20-to-30+ years when differences across the data sets are properly accounted for. A fifth shows a positive net trend but small in magnitude. A sixth shows no net trend 1998-2011 and only a small decline thereafter. The remaining differences across data series can be largely explained by differences in the left tail of their cross-sectional earnings distributions. We conclude that the data sets we have analyzed show little evidence of any significant trend in male earnings volatility since the mid-1980s.
    JEL: C23 J31
    Date: 2022–02
  2. By: Dinara Alpysbayeva (Norwegian University of Life Sciences, School of Economics and Business); Jozef Konings (Nazarbayev University, Graduate School of Business); Venkat Subramanian (Nazarbayev University, Graduate School of Business); Aigerim Yergabulova (Nazarbayev University, Graduate School of Business)
    Abstract: This paper studies within-firm pay inequality and its impact on firm performance in Kazakhstan. We measure within-firm pay inequality as the wage differential between the top- and the bottom-level job occupations. First, we report that wage inequality is higher in larger firms. This finding is consistent with the theories of differentiated pay schemes and the scope of control. Further, we explore to what extent a rise in firm inequality affects firm performance. Although a higher wage dispersion may serve as a signal to attract more productive or talented workers, we find no evidence to support the idea that incentive-based pay can boost overall firm performance. The negative impact points to rent extraction by top job occupations.
    Keywords: Pay inequality, Job occupations, Performance, Firm size
    JEL: J31 L25 M52
    Date: 2022–03
  3. By: Alex Domash; Lawrence H. Summers
    Abstract: Since the outset of the Covid-19 pandemic, labor market indicators that traditionally move together have been sending different signals about the degree of slack in the U.S. labor market. While some indicators on the supply-side, such as the prime-age employment-to-population ratio, suggest that there is still some slack in the labor market, other indicators on the demand-side, such as the job vacancy rate and the quits rate, imply that the labor market is already very tight. In light of these divergent signals, this paper compares alternative labor market indicators as predictors of wage inflation. Using national time series and state cross-section data, we find (i) unemployment is a better predictor of wage inflation than non-employment and (ii) vacancy rates and quit rates have substantial predictive power for wage inflation. We highlight the fact that vacancy and quit rates currently experienced in the United States correspond to a degree of labor market tightness previously associated with sub-2 percent unemployment rates. Finally, we show that predicted firm-side unemployment has dominant explanatory power with respect to subsequent inflation. Our results, along with a cursory analysis of labor force participation information, suggest that labor market tightness is likely to contribute significantly to inflationary pressure in the United States for some time to come.
    JEL: E24 J2 J23 J3
    Date: 2022–02
  4. By: Anna Aizer; Hilary W. Hoynes; Adriana Lleras-Muney
    Abstract: Economic research on the safety net has evolved significantly over time, moving away from a near exclusive focus on the negative incentive effects of means-tested assistance on employment, earnings, marriage and fertility to include examination of the potential positive benefits of such programs to children. Initially, this research on benefits to children focused on short run impacts, but as we accumulated knowledge about skill production and better data became available, the research evolved further to include important long run economic outcomes such as employment, earnings and mortality. Once the positive long-run benefits to children are considered, many safety net programs are cost-effective. However, the current government practice of limiting the time horizon for cost-benefit calculations of major policy initiatives reduces the influence of the most current economic research on the long run benefits. We conclude with a discussion of why the rate of child poverty in the US is still higher than most OECD countries and how research on children and the safety net can better inform policy-making going forward.
    JEL: I3 I32 I38 J12 J13 J24
    Date: 2022–02
  5. By: Daniel J. Agness; Travis Baseler; Sylvain Chassang; Pascaline Dupas; Erik Snowberg
    Abstract: People’s value for their own time is a key input in evaluating public policies: evaluations should account for time taken away from work or leisure as a result of policy. Using rich choice data collected from farming households in western Kenya, we show that households exhibit non-transitive preferences consistent with behavioral features such as loss aversion and self-serving bias. As a result, neither market wages nor standard valuation techniques (such as the Becker-DeGroot-Marschak—BDM—mechanism of Becker et al., 1964) correctly measure participants’ value of time. Using a structural model, we identify the mix of behavioral features driving our choice data. We find that these features distort choices when exchanging cash either for time or for goods. Our model estimates suggest that valuing the time of the self-employed at 60% of the market wage is a reasonable rule of thumb.
    JEL: C93 D03 D61 D91 J22 O12 Q12
    Date: 2022–02
  6. By: Victor Lavy; Yoav Goldstein
    Abstract: We estimate the effects of gifted children programs (GCP) in high schools in Israel. We selected a comparison group of equally gifted students from other cities where GCP was not offered at the time. Based on administrative data, we follow 22 cohorts and measure treatment effects on outcomes, ranging from high school to the labor market in their 30s and 40s. We find tiny impact on academic achievements in high school, in contrast to the abundance of educational resources enjoyed by GCP participants. In the longer run, we find meaningful effects of GCP on higher education attainment. GCP participants study more math, computer, and physical sciences but engage less in engineering programs. The net effect on STEM degrees is, therefore, zero. However, a much higher share of GCP participants graduated with two STEM majors. This evidence suggests that GCP enhances the impact of “multipotentiality,” which characterizes many gifted adolescents. The effect on getting a Ph.D. is positive, too. Lastly, we find no effect of GCP on employment and earnings. Nor do we find that GCP participants work more than other equally talented children in the knowledge economy. These results are very similar for females and males gifted children.
    JEL: J01 J24
    Date: 2022–02
  7. By: Esposito, Piero; Scicchitano, Sergio
    Abstract: It is now well accepted that human capital is a heterogeneous aggregate and that non-cognitive skills are at least as relevant as cognitive abilities. In spite of this growing interest in the labour market consequences of personality traits, the relationship between these and educational and skill mismatch is scant. In this paper, we investigate the impact of the five main personality traits (Big 5) on educational and skill mismatch in Italian graduates. To this aim, we use the 2018 wave of the INAPP-PLUS survey, which contains information on skill mismatch, on the Big 5 personality traits, and on a large number of other individual and job-specific characteristics. The empirical analysis takes into account both demand and supply variables mediating the effect of personality on skill mismatch and controls for non-random selection into employment and tertiary education. We find that some personality traits reduce the probability of overeducation, suggesting complementarity between cognitive and non-cognitive skills. In addition, we find a positive effect of conscientiousness on both overeducation and overqualification. The evidence regarding job satisfaction suggests that individuals with high scores for conscientiousness voluntarily decide to be mismatched when this entails higher satisfaction in other dimensions of the job.
    JEL: C25 J24 J31 J82
    Date: 2022
  8. By: John W. Barry; Murillo Campello; John Graham; Yueran Ma
    Abstract: We use the COVID shock to study the direct and interactive effects of several forms of corporate flexibility on short- and long-term real business plans. We find that i) workplace flexibility, namely the ability for employees to work remotely, plays a central role in determining firms’ employment plans during the health crisis; ii) investment flexibility allows firms to increase or decrease capital spending based on their business prospects in the crisis, with effects shaped by workplace flexibility; and iii) financial flexibility contributes to stronger employment and investment, in particular when fixed costs are high. While the role of workplace flexibility is new to the COVID crisis, CFOs expect lasting effects for years to come: high workplace flexibility firms foresee continuation of remote work, stronger employment recovery, and shifting away from traditional capital investment, whereas low workplace flexibility firms rely more on automation to replace labor.
    JEL: G01 G17 G31
    Date: 2022–02
  9. By: Belloni, Michele; Carrino, Ludovico; Meschi, Elena (University of Turin)
    Abstract: This paper investigates the causal impact of working conditions on mental health in the UK, combining new comprehensive longitudinal data on working conditions from the European Working Condition Survey with microdata from the UK Household Longitudinal Survey (Understanding Society). Our empirical strategy accounts for the endogenous sorting of individuals into occupations by including individual fixed effects. It addresses the potential endogeneity of occupational change over time by focusing only on individuals who remain in the same occupation (same ISCO), exploiting the variation in working conditions within each occupation over time. This variation, determined primarily by general macroeconomic conditions, is likely to be exogenous from the individual point of view. Our results indicate that improvements in working conditions have a beneficial, statistically significant, and clinically meaningful impact on depressive symptoms for women. A one standard deviation increase in the skills and discretion index reduces depression score by 2.84 points, which corresponds to approximately 20% of the GHQ score standard deviation, while a one standard deviation increase in working time quality reduces depression score by 0.97 points. The results differ by age: improvements in skills and discretion benefit younger workers (through increases in decision latitude and training) and older workers (through higher cognitive roles), as do improvements in working time quality; changes in work intensity and physical environment affect only younger and older workers, respectively. Each aspect of job quality impacts different dimensions of mental health. Specifically, skills and discretion primarily affect the loss of confidence and anxiety; working time quality impacts anxiety and social dysfunction; work intensity affects the feeling of social dysfunction among young female workers. Finally, we show that improvements in levels of job control (higher skills and discretion) and job demand (lower intensity) lead to greater health benefits, especially for occupations that are inherently characterised by higher job strain.
    Date: 2022–01
  10. By: Darapheak Tin; Chung Tran
    Abstract: We study the nature of lifecycle earnings dynamics by documenting higher-order moments of earnings shocks over the lifecycle, using the Household, Income and Labour Dynamics in Australia (HILDA) Survey 2001-2020. Similar to other countries (e.g. see Guvenen et al. (2021) and De Nardi et al. (2021)), the distribution of earnings shocks in Australia displays negative skewness and excess kurtosis, deviating from the conventional linearity and normality assumptions. However, the sources of fluctuations and the role of family and government insurance are quite different. Wages account more for the dispersion of earnings shocks (second-order risk), while hours drive the negative skewness and excess kurtosis (third- and fourth-order risks, respectively). Wage changes are strongly associated with earnings changes, whereas hour changes are largely absent in upward movement and relatively small in downward movement of earnings changes. Family insurance via pooling income of family members and adjusting labor market activities of secondary earners, and government insurance embedded in the progressive tax and transfer system play distinct roles in reducing risks over age and by income group. Government insurance is more important in mitigating the dispersion of earnings shocks; meanwhile, family insurance is more dominant in mitigating the magnitude and likelihood of extreme and rare shocks. Family insurance interacts with government insurance; however, their joint forces fail to eliminate the non-Gaussian and non-linear features. Furthermore, comparison between groups reveals: (i) the risk equalizing effect of government insurance, and (ii) the persistent nature of risks for certain demographics such as female heads of household and non-parents. Hence, our findings shed new insights into the complexity of earnings dynamics and the importance of family and government insurance.
    Keywords: Income dynamics; Earnings risk; Higher-order moments; Non-Gaussian shocks; Family insurance; Government insurance; Inequality
    JEL: E24 H24 H31 J31
    Date: 2022–03
  11. By: Sourav Sinha
    Abstract: I study the effects of US salary history bans which restrict employers from inquiring about job applicants' pay history during the hiring process, but allow candidates to voluntarily share information. Using a difference-in-differences design, I show that these policies narrowed the gender pay gap significantly by 2 p.p., driven almost entirely by an increase in female earnings. The bans were also successful in weakening the auto-correlation between current and future earnings, especially among job-changers. I provide novel evidence showing that when employers could no longer nudge candidates for information, the likelihood of voluntarily disclosing salary history decreased among job applicants and by 2 p.p. more among women. I then develop a salary negotiation model with asymmetric information, where I allow job applicants to choose whether to reveal pay history, and use this framework to explain my empirical findings on disclosure behavior and gender pay gap.
    Date: 2022–02
  12. By: Djoumessi, Berenger Tiague
    Abstract: I estimate the effects of exposure to ambient air pollution on daily health-related behaviors, weekly labor supply, and productivity at the workplace among US individuals. Using an individual fixed-effects regression approach, I examine how increases in daily outdoor air quality influence the time spent on daily health-related activities. I find that only when the air quality index becomes very unhealthy or hazardous, there is a 21% decrease in the minutes spent on outdoor sport and exercise activities, and a 263% increase in minutes spent watching TV. I also implement an instrumental variable (IV) strategy using wind direction as an exogenous shock to satellite-based aerosol optical depth to understand how changes in air pollution affect labor supply. I find that increase in the total aerosol optical depth (AOD) leads to no overall change in labor supply decisions, both on the decision to go to work and the weekly worked hours, but it does so on the likelihood of going to work for women. The effects across subgroups also suggest differential effects in avoidance behaviors across the income distribution, age groups, occupations, race, and ethnicity, especially when the air quality is very unhealthy or hazardous.
    Date: 2022–02–15
  13. By: Jonathan Gruber
    Abstract: Designing benefits for the growing platform workforce in the U.S. poses significant challenges. While platform workers need protection against unforeseen shocks, work that is often part time and spread across multiple platforms makes the traditional benefits model untenable. This paper reports the results from a survey of drivers and couriers working with Uber to help understand their benefits preferences. We find that there is a wide diversity across these workers in platform earnings, the share of platform earnings from Uber, the share of family earnings from platform work and the availability of benefits from other jobs. We use willingness-to-pay questions to show that workers are willing to trade off additional income for benefits; after accounting for the tax advantage of benefits, workers are roughly indifferent on average between the two. While there are some trends in valuation, such as higher valuation for pension than for health contributions, the most notable feature of the data is the wide variation across workers in their preferences across benefits types and relative to income. Workers also show a preference for benefits that can help them commit to increase savings in the future.
    JEL: I13 J32 J41
    Date: 2022–02
  14. By: Arno Baurin (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)); Sandy Tubeuf (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES), Institute of Health and Society (IRSS, UCLouvain)); Vincent Vandenberghe (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))
    Abstract: This paper shows that the analyst with no information on occupation arduousness could reasonably infer it from poor health beyond 50. Using retrospective lifetime data from the Survey of Health, Ageing and Retirement in Europe (SHARE), including the respondents' professional career described with ISCO 2-digit, this paper finds a statistically significant link between many occupations and the risk of poor health beyond the age of 50. Next, we quantify the relative contribution of professional occupation to poor health compared to other factors decomposing the variance of health disparities between sources. We find that occupation's arduousness - although a significant predictor of poor health - is less consequential than initial health endowment, demographics or country fixed effects in explaining differences in health at an older age.
    Keywords: Health, Work, Occupation Arduousness, Variance Decomposition
    JEL: I10 J26 J28
    Date: 2022–03–02

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