nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2022‒08‒08
nineteen papers chosen by
Joseph Marchand
University of Alberta

  1. Labor Supply and the Pension-Contribution Link By Eric French; Attila S. Lindner; Cormac O'Dea; Tom A. Zawisza
  2. Does the Employment Effect of National Minimum Wage Vary by Non-employment Rate? A Regression Discontinuity Approach By Xu, Lei; Zhu, Yu
  3. Minimum Wages in Developing Countries By Fang, Tony; Ha, Viet Hoang
  4. Corporate Training and Skill Gaps: Did COVID-19 Stem EU Convergence in Training Investments? By Pouliakas, Konstantinos; Wruuck, Patricia
  5. The Quality of Lower-Track Education: Evidence from Britain By Damon Clark
  6. The Impact of ICT and Intangible Capital Accumulation on Labour Demand Growth and Functional Income Shares By Robert Stehrer
  7. Firm responses to a more generous insurance against high sick pay costs By Hall, Caroline; Liljeberg, Linus; Lindahl, Erica
  8. How Does Job Coaching Help Disability Insurance Recipients Work While on Claim? By Fontenay, Sébastien; Tojerow, Ilan
  9. Spillover Effects of Old-Age Pension across Generations: Family Labor Supply and Child Outcomes By Kaufmann, Katja Maria; Özdemir, Yasemin; Ye, Han
  10. New Perspectives on Inequality in Latin America By Manuel Fernández; Gabriela Serrano
  11. Winners take all (the most): The effects of market concentration on labor share and wage inequality By Sossdorf, Fernando
  12. Markups, labor market inequality and the nature of work By Greg Kaplan; Piotr Zoch
  13. The over-education wage penalty among PhD holders: a European perspective By François Rycx; Giulia Santosuosso; Guillaume Vermeylen
  14. The Evolution of Inequality in Education Trajectories and Graduation Outcomes in the US By Christian Belzil; Jörgen Hansen; Xingfei Liu
  15. Long-Haulers and Labor Market Outcomes By Dasom I. Ham
  16. A Shot at Economic Prosperity: Long-term Effects of India’s Childhood Immunization Program on Earnings and Consumption Expenditure By Amit Summan; Arindam Nandi; David E. Bloom
  17. Informal versus Formal: Microfirms' Productivity Gaps By Gutiérrez, L. H.; Rodríguez- Lesmes, P.
  18. Firms' responses to foreign demand shock: The case of Indonesia and the GFC By Sulistiyo K. Ardiyono; Arianto A. Patunru
  19. Revolution in Progress? The Rise of Remote Work in the UK By Draca, Mirko; Duchini, Emma; Rathelot, Roland; Turrell, Arthur; Vattuone, Giulia

  1. By: Eric French; Attila S. Lindner; Cormac O'Dea; Tom A. Zawisza
    Abstract: We estimate the impact of public pension systems on labor supply far from the normal retirement age by exploiting Poland's switch from a Defined Benefit to a Notional Defined Contribution scheme for men born after 1948. Using the universe of taxpayers and this sharp cohort-based discontinuity in the link between current contributions and future benefits, we estimate an employment elasticity with respect to the return to work of 0.44 for ages 51-54. We estimate a lifecycle model that matches these results. The model implies that the change in the contribution-benefit link from the reform increases employment among those in their 30s but decreases it at older ages, reducing overall labor supply across the lifecycle by 2 months.
    JEL: D15 H55 J22 J26
    Date: 2022–06
  2. By: Xu, Lei (Bournemouth University); Zhu, Yu (University of Dundee)
    Abstract: We examine the impact of increasing minimum wage on employment by exploiting variation in the age-dependent National Minimum Wage (NMW) in the UK. We extend the Regression Discontinuity model to evaluate the procyclicality of employment effect and show that previous estimates may be biased due to failure to account for the local non-employment rate. Contrary to the existing literature, we report a positive employment elasticity after accounting for the effect of local labour market conditions. The results suggest that the positive employment effect of increasing minimum wage is strongly procyclical, i.e. is more pronounced in areas with low non-employment rates. Under an assumption that employers have no direct impact around the cut-off point, the results suggest that a higher minimum wage increases labour supply of young workers.
    Keywords: minimum wage, macroeconomic fluctuation, regression discontinuity, age dependent, procyclicality
    JEL: J22
    Date: 2022–06
  3. By: Fang, Tony (Memorial University of Newfoundland); Ha, Viet Hoang (Memorial University of Newfoundland)
    Abstract: There is considerable debate on the level and effects of minimum wages for many decades. However, most of the studies are conducted in developed countries. This chapter first reviews the theoretical frameworks of anticipated effects of a minimum wage increase on wages and employment in developing countries. The empirical challenges are then discussed, including potential heterogeneity, simultaneity (or endogeneity) between employment and minimum wages, and possible omitted variable bias, taking into consideration of the different labour market structures and labour market institutions in developing countries, particularly the level of informal sector, extent of binding minimum wages, level of enforcement, and the vulnerability of the workers impacted. Evidence from BRICS members (Brazil, Russia, India, China, and South Africa) are reviewed and discussed. Surprisingly, there is substantial evidence of positive wage effects in both formal and informal sectors, although the adverse effects on employment are generally modest in the formal sector, and almost non-existent in the informal sector. However, when minimum wages are binding and enforced, studies focusing on vulnerable workers do find significant and positive wage effects and strong disemployment effects, implying that the classic trade-off of minimum wages between higher wages and lower employment does occur in developing countries.
    Keywords: minimum wages, labour market outcomes, developing countries
    JEL: J31 J33 J38
    Date: 2022–05
  4. By: Pouliakas, Konstantinos (European Centre for the Development of Vocational Training (Cedefop)); Wruuck, Patricia (European Investment Bank)
    Abstract: European firms have increasingly invested in training of employees but differences across countries and types of firms remain – and the Covid-19 shock may have exacerbated them. This report analyses European firms' investment in training over the last six years examining trends, factors supporting training investment as well as the impact of the Covid-19 shock. We base the empirical analysis on a unique dataset, the European Investment Bank's Investment Survey (EIBIS), which allows tracking corporate training investment on a yearly basis. To understand dynamics underpinning firms' decision to invest in their workforce, we examine transition patterns and employ dynamic panel data estimation. Finally, we analyze the impact of the Covid-19 pandemic on firms' investment in workforce training and transitions in and out of training. We find that despite a slow upward trend in training investment observed in recent years, supported by labour market recovery, differences across firms and countries have persisted. The pandemic risks aggravating these, through its asymmetric impact on labour markets and differences in corporate innovation, firm structure and resilience. While firm training can be an important element for firms and their workforce to adjust to the post-pandemic environment, asymmetries in training investment could make it harder for those already lagging. The paper concludes with a discussion of policy implications.
    Keywords: training, skill gaps, investment, COVID-19, panel data, EIB Investment survey
    JEL: J24 M53 C23 D22 E22
    Date: 2022–06
  5. By: Damon Clark
    Abstract: For much of the 20th century, British students were tracked into higher-track (for the "top" 20%) or lower-track (for the rest) secondary schools. Opponents of tracking contend that the lower-track schools in these systems will inevitably provide low-quality education. In this paper I examine this claim using a 1947 reform that increased the minimum school leaving age from 14 to 15. First, I show that over 95% of the students affected by the reform ("compliers") attended lower-track schools. Second, using new data, I show that for both men and women, the additional schooling induced by the reform had close to zero impact on a range of labor market outcomes including earnings. Third, I show that lower-track schools featured, among other things, large classes and a curriculum that promoted practical education. I conclude that my findings shed new light on the potential consequences of educational tracking.
    JEL: I21 J24 J31
    Date: 2022–06
  6. By: Robert Stehrer (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: This paper investigates whether the diffusion of tangible IT and CT capital and intangible capital asset types has an impact on labour demand growth and the share of labour income in total income at the industry and country level. The econometric analysis is derived from a Cobb-Douglas production function taking empirical stylized facts into account. The effects of technical progress embodied in the various forms of capital impact along inter-industry and intercountry production linkages, which are considered by using global value chain indicators. The analysis is broken down to examine the influence on different types of labour, including the dimensions of gender, age, and educational attainment. Accumulation of ICT assets have generally insignificant and in some cases small positive effects on labour demand and income shares, though patterns differ across types of labour. Intangible assets show a positive relation with respect to labour demand growth.
    Keywords: capital accumulation, ICT capital, intangibles, labour demand, income distribution
    JEL: J23 J31 O33 O52
    Date: 2022–07
  7. By: Hall, Caroline (IFAU - Institute for Evaluation of Labour Market and Education Policy); Liljeberg, Linus (IFAU - Institute for Evaluation of Labour Market and Education Policy); Lindahl, Erica (IFAU - Institute for Evaluation of Labour Market and Education Policy)
    Abstract: This paper presents evidence on how firms react to a more generous insurance against high sick pay costs. We exploit a reform launched in Sweden in 2015, which introduced different thresholds for insurance reimbursement depending on firm size. By comparing workers in smaller firms with workers in large firms over time, we evaluate the effects of the reform. We find no indication of changed behaviour among employees in the smallest firms (on average 15 employees), but an increase in sickness absence among those employed in middle-sized firms (on average 38 employees). The increased absence in middle-sized firms is entirely driven by new hires, but the newly hired employees do not seem to be differently selected. We find no evidence indicating that the more generous insurance made firms more inclined to employ more sick-prone individuals. Further analysis suggests that the absence of behavioural responses among employees in the smallest firms might be related to a large production loss from an absent worker, which the insurance cannot fully compensate for. Taken together, we find no support for any societal benefits of a more generous insurance against high sick pay costs in terms of an increased employment-probability among more sick-prone individuals.
    Keywords: sickness absence; sick pay; firm size; insurance; recruitment
    JEL: J22 J23 L23 M51
    Date: 2022–07–04
  8. By: Fontenay, Sébastien (Free University of Brussels); Tojerow, Ilan (Free University of Brussels)
    Abstract: We evaluate the effects of a Supported Employment (SE) program aimed at Disability Insurance (DI) recipients with mental conditions. The program is characterized by a "work-first" approach, which includes intensive job coaching and follow-along support. Using a Randomized Control Trial with more than 660 participants over a follow-up period of 18 months, we compare the benefits of this newly introduced program to regular vocational rehabilitation services traditionally used in Belgium. We find that SE increases the probability that DI recipients with mental conditions work while on claim and reduces their reliance on DI benefits. Specifically, we estimate that 18 months after the start of their return-to-work program, participants in the SE group are 9.5 percentage points more likely to be working, and receive 6% less in DI benefits than those in the control group.
    Keywords: employment support, disability insurance, mental health, randomized experiment
    JEL: H55 I38 J24
    Date: 2022–06
  9. By: Kaufmann, Katja Maria (University of Mainz); Özdemir, Yasemin (University of Mainz); Ye, Han (University of Mannheim)
    Abstract: We study the impact of grandparental retirement decisions on family members' labor supply and child outcomes by exploiting a Dutch pension reform in a fuzzy Regression Discontinuity design. A one-hour increase in grandmothers' hours worked causes adult daughters with young children to work half an hour less. Daughters without children, with older children and sons/daughters-in-law are not affected. We show important long-run impacts on maternal labor supply and on the child penalty. Test score effects are positive for children aged 4-7 (substitution from grandparental to maternal care), and negative for children aged 11-12 (substitution from grandparental to formal childcare).
    Keywords: spillover effects, retirement, grandparental childcare, maternal labor supply, child development
    JEL: J22 J26 I38 D64
    Date: 2022–06
  10. By: Manuel Fernández; Gabriela Serrano
    Abstract: Latin American countries have some of the highest levels of income inequality in the world. However, earnings inequality significantly changed over the last three decades, increasing during the 1980s and 1990s, declining sharply in the 2000s, and stagnating or even increasing in some countries during the last decade. Macroeconomic instability in the region in the 1980s and early 1990s, and the introduction of structural reforms like trade, capital, and financial liberalization, affected the patterns of relative demand and relative earnings across skill-demographic groups in the 1990s, increasing inequality. Significant gains in educational attainment, the demographic transition, and rising female labor force participation changed the skill-demographic composition of labor supply, pushing education and experience premium downward, but this was not enough to counteract demand-side trends. At the turn of the century, improved external conditions, driven by China's massive increase in demand for commodities boosted economies across Latin America, which began to grow rapidly. Growth was accompanied by a positive shift in the relative demand for less-educated workers, stronger labor institutions, rising minimum wages, and declining labor informality, a confluence of factors that reduced earnings inequality. In the aftermath of the global financial crisis, particularly after the end of the commodities price boom in 2014, economic growth decelerated, and the pace of inequality decline stagnated. There is extensive literature trying to explain the causes of earnings inequality dynamics during the last three decades in Latin America. We discuss this literature regarding themes, methodological approaches, and key findings, emphasizing the latest perspectives. The focus is on earnings inequality and how developments in labor markets have shaped it.
    Keywords: inequality, Latin America, education premium, experience premium, trade reforms, minimum wage, informality
    JEL: D31 D33 F16 J21 J23 J31 O54
    Date: 2022–07–14
  11. By: Sossdorf, Fernando
    Abstract: The increase in market concentration in the major advanced economies in recent decades has led to an exhaustive analysis of its implications. One of them is that it may explain the fall in labor share. This is explained, according to one theoretical strand, by the emergence of highly efficient superstars firms with low levels of labor share that, due to reallocation effects as they gain very large market share, depress aggregate labor share. In turn, wage inequality between workers with different skills may also increase because superstars firm may demand highly skilled workers. Thus, this paper investigate the effects of market concentration on the labor share and on the highly skilled worker share in the wage bill in the Chilean manufacturing. The results indicate that an increase in concentration is associated with a fall in labor share and a increase in the share of the wage bill that is paid to highly skilled workers. Moreover, those industries with the largest increase in concentration are those with the largest drop in labor share and the largest increase in the highly skilled worker share in the wage bill. However, the small group of large companies that dominate the industries are far from being superstars: they have not become more productive and more innovative and their contribution to aggregate productivity and employment has not increased over time. On the contrary, they charge a higher markup than the rest of firms. The findings shows that increases in market concentration may be detrimental to the economy as dominant firms polarize the labor market, do not contribute to increases in productivity and innovation and exert market power.
    Keywords: Market Concentration, labor share, highly skilled worker, superstar firms.
    JEL: D22 D33 J24 L13 L40
    Date: 2022–07–01
  12. By: Greg Kaplan (University of Chicaco); Piotr Zoch (University of Warsaw; Group for Research in Applied Economics (GRAPE))
    Abstract: We develop a framework for understanding the effects of a change in markups on the income distribution. We demonstrate the importance of distinguishing between production and expansionary uses of labor for this question. An increase in markups redistributes earnings away from production labor and toward expansionary labor, and has an ambiguous effect on the overall labor share that depends on the relative importance of production and expansionary activities in the aggregate economy. We measure the production and expansionary content of different occupations from the co-movement of occupational income shares with markup-induced changes in the labor share. We find that around one-fifth of US labor income compensates expansionary activities, and that occupations with larger expansionary content have experienced the fastest wage and employment growth since 1980. Our framework can be applied more generally to study the distributional implications of shocks, policies and secular forces that affect the economy by changing markups.
    Keywords: Walrasian auction, anonymous thin markets, price impacts
    JEL: D43 D52 L13 L14
    Date: 2022
  13. By: François Rycx; Giulia Santosuosso; Guillaume Vermeylen
    Abstract: While the literature on the incidence and wage effects of over-education is substantial, specific results for doctoral graduates are surprisingly scarce. This article aims to fill this gap, not only by measuring the prevalence of over-educated PhD holders in Europe (i.e. in EU Member States and the UK), but also by estimating their wage penalty relative to what they could have earned in a job corresponding to their level of education. Using a unique pan-European dataset, we rely on two alternative measures of over-education and control stepwise for four groups of covariates (i.e. socio-demographic characteristics, skills needed for the job, other job-specific characteristics and motivations for employment) in order to interpret the over-education wage penalty in light of theoretical models. Depending on the specification adopted, we find that over-educated PhD holders face a wage penalty ranging from 25 to 13.5% with respect to their well-matched counterparts. Our results also show that the over-education wage penalty is significantly higher for PhD holders who are both over-educated and over-skilled and especially for those who are both over-educated and dissatisfied with their jobs. Finally, unconditional quantile regressions highlight that the over-education wage penalty among PhD holders increases greatly along the wage distribution.
    Keywords: PhD Graduates; Over-Education; Over-Skilling; Job Satisfaction; Wages; Europe
    JEL: J21 J24
    Date: 2022–07–13
  14. By: Christian Belzil (CREST, Paris Polytechnic Institute and IZA and CIRANO); Jörgen Hansen (Concordia University, CIREQ and IZA); Xingfei Liu (University of Alberta)
    Abstract: We model the joint distribution of (i) individual education trajectories, defined by the allocation of time (semesters) between various combinations of school enrollment with different labor supply modalities and periods of school interruption devoted either to employment or home production and (ii) actual graduation outcomes using two cohorts of the National Longitudinal Survey of Youths which we follow from 16 to 28. We discuss the evolution of family income and ability effects where the latter are decomposed into an academic (cognitive) and a practical (technical-mechanical) latent ability factor component correlated with family income and background variables. We find that the individual cognitive-technical ability differential prevailing at 16 was increasing with income in the early 80's but much less so in the early 2000's. We find no evidence of any income-based "trajectory inequality" in either cohort, after conditioning on abilities. Among all graduation and enrollment outcomes, college graduation is the only for which the effect of income has increased between the 1980's and the early 2000's but it reached a level no more important than the high school graduation income effect. In both cohorts, cognitive and technical abilities were the dominant factors but they affect most dimensions of individual trajectories and all graduation outcomes in opposite directions. However, the cognitive ability factor lost half of its effect on college graduation while the impact of the technical-mechanical factor has been more stable across cohorts.
    Keywords: Education, Inequality, Family Income, Multi-dimensional Abilities, Labor Supply.
    JEL: I2 J1 J3
    Date: 2022–05–29
  15. By: Dasom I. Ham
    Abstract: There have been growing concerns about long-haulers or individuals with long-term COVID-19 health complications (long-haul COVID). While the medical field has been investigating the health complications, there has been limited research on the relationship between long-haul COVID and labor market outcomes. To investigate this relationship, I used the University of Southern California Understanding America Study COVID-19 longitudinal survey to provide a snapshot of mid-2021. I first find about 24.1% of individuals who have had COVID are long-haulers and 25.9% of long-haulers reported that their long-haul COVID affected employment or work hours. I then find that a majority of these affected long-haulers remained employed and in same employment type. But I find that their mean change in work hours and paycheck declined. Afterwards, I tested whether long-haul COVID is associated with negative changes in labor market outcomes. When I combined long-haulers who reported that their health complications did or did not affect work, I failed to find that long-haulers are less likely to be employed relative to individuals without prior COVID infection. But, when I discern long-haulers by whether long-haul COVID affected work, I find that long-haulers who reported long-haul COVID affected work are 10 percentage points less likely to be employed and, on average, work 50% fewer hours than individuals without prior COVID infection. In contrast, I failed to find evidence that affected long-haulers receive a lower paycheck earning relative to individuals without prior COVID infection. Lastly, when comparing these affected long-haulers against similar individuals, I find evidence that they are more impacted in their employed status and work hours. Due to limitations, future data collection and research would provide a more robust picture.
    Keywords: Labor market outcomes; Long-COVID
    JEL: I12 J20
    Date: 2022–07–07
  16. By: Amit Summan; Arindam Nandi; David E. Bloom
    Abstract: Routine childhood vaccinations are among the most cost-effective interventions. In recent years, the broader benefits of vaccines, which include improved cognitive and schooling outcomes, have also been established. This paper evaluates the long-term economic benefits of India’s national program of childhood vaccinations, known as the Universal Immunization Programme (UIP). We combine individual-level data from the 68th round of the National Sample Survey of India (2011–2012) with district-wise data on the rollout of UIP in 1985–1990. We employ age-district fixed effects regression models to compare the earnings and per capita household consumer spending of 21- to 26-year-old adults who were born in UIP-covered districts vis-à-vis non-UIP districts in 1985–1990. We find that exposure to UIP in infancy increases weekly wages by 13.8% (95% CI: 7.6% to 20.3%, p
    JEL: I15 I18 J31 J38
    Date: 2022–06
  17. By: Gutiérrez, L. H.; Rodríguez- Lesmes, P.
    Abstract: Although evidence of a productivity gap between formal and informal firms is observed, this 'formality premium' is less explored for microfirms. The informality of microfirms is a central concern in low- and middle-income countries, and a crucial demand is noted for designing policies addressing this issue because they are the bulk of the economic tissue. We fill this void by estimating a productivity premium for the case of Colombia, considering two margins of informality: extensive, referring to business registration, and the intensive, which includes as well labor regulations. We use a unique longitudinal dataset from the Microenterprise Survey by the Colombian Statistics Department, which follows approximately 39,000 micro-establishments with up to 9 employees during 2012–2016. We utilize the transition into and out of formality to estimate the productivity premium (yearly sales per worker) between informal and formal firms, thereby exploring differences concerning initial productivity. We use a fixed-effects quantile regression to explore differential effects along the productivity distribution. We find evidence of a premium for both the extensive (20%) and intensive margins (6%), a gap that is decreasing along with the firm's productivity. The evidence of these premiums is related to two growth strategies of firms: an increase in capital investments for the extensive margin and an increase in human capital quality for the intensive margin. Further, we find the premium is notoriously wider for young firms (less than three years in the business) with a steeper gradient. We do not find systematic differences across sectors, gender of the owners, and motivation. These results are new evidence that supports the existence of a premium and the transition into and out of formality of microfirms in middleincome countries. Moreover, they suggest that microfirms' formalization and growth policies should be oriented toward promoting and enhancing formality's benefits.
    Keywords: Microfirms, firm informality, productivity premium, Colombia
    Date: 2022–07–05
  18. By: Sulistiyo K. Ardiyono; Arianto A. Patunru
    Abstract: Export-oriented manufacturing generally create jobs. But a few recent studies on Indonesian manufacturing based on input-output tables reported a declining power of this sector in creating jobs. Using firm-level data to examine manufacturing employment during the global financial crisis (GFC), we find that a 10% increase in the degree of export orientation rises the manufacturing employment by about 1% on average, depending on the firm’s capital intensity. The low sensitivity to foreign demand shock and the economy’s low exposure to the global market explain the mild effect of the Global Financial Crises (GFC) on the Indonesian economy. An examination of the inter-related adjustments of labour, capital, and intermediate input confirms that the changes in employment are not independent of the adjustments of other factor inputs such as capital and material inputs. The results are robust when external and internal instruments are used in instrumental variable (IV) and GMM estimations, respectively.
    Keywords: GFC, manufacturing sector, employment, foreign demand shock
    JEL: F16 J23 D22 L60
    Date: 2022
  19. By: Draca, Mirko (University of Warwick, Department of Economics); Duchini, Emma (University of Essex, Department of Economics); Rathelot, Roland (Institut Polytechnique de Paris); Turrell, Arthur (Office for National Statistics); Vattuone, Giulia (University of Warwick)
    Abstract: The pandemic was accompanied by a wave of adoption of remote work practices. This paper uses online job vacancy data to study how UK firms have adopted remote work. Overall, remote work increased by 300%. Our analysis finds little evidence that occupations have fundamentally changed to better accommodate remote work tasks, nor evidence of changes in the occupational composition of jobs. We find that the overall increase in remote working is driven by the increasing use of remote work at the firm level, especially among firms that were less likely to use remote work before the pandemic. This is consistent with changes in organisational practices or updated information about the viability of large-scale remote working. JEL codes: J23 ; J32.
    Keywords: vacancies ; remote working ; pandemic
    Date: 2022

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