nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2023‒03‒13
seven papers chosen by
Joseph Marchand
University of Alberta

  1. The Value of Early-Career Skills By Christina Langer; Simon Wiederhold
  2. Economics of ChatGPT: A Labor Market View on the Occupational Impact of Artificial Intelligence By Zarifhonarvar, Ali
  3. Wages and Productivity in Argentinian Manufacturing. A Structuralist and Distributional firm-level Analysis By María Celeste Gómez; Maria Enrica Virgillito
  4. The Wage Formation Mechanism in Japan: Summary of the Third Workshop on "Issues Surrounding Price Developments during the COVID-19 Pandemic" By Monetary Affairs Department; Research and Statistics Department
  5. Informality, Education-Occupation Mismatch, and Wages: Evidence from India By Bahl, Shweta; Sharma, Ajay
  6. Did Labour Market Concentration Lower Wages Growth Pre-COVID? By Jonathan Hambur
  7. Inter-industry and Intra-industry Switching as Sources of Productivity Growth: Structural Change of Finland’s ICT Industries By Kuosmanen, Natalia; Kuosmanen, Timo

  1. By: Christina Langer; Simon Wiederhold
    Abstract: We develop novel measures of early-career skills that are more detailed, comprehensive, and labor-market-relevant than existing skill proxies. We exploit that skill requirements of apprenticeships in Germany are codified in state-approved, nationally standardized apprenticeship plans. These plans provide more than 13, 000 different skills and the exact duration of learning each skill. Following workers over their careers in administrative data, we find that cognitive, social, and digital skills acquired during apprenticeship are highly – yet differently – rewarded. We also document rising returns to digital and social skills since the 1990s, with a more moderate increase in returns to cognitive skills.
    Keywords: returns to skills, apprenticeship plans, labor market, earnings, early-career skills
    JEL: I21 I26 J24
    Date: 2023
  2. By: Zarifhonarvar, Ali
    Abstract: This study examines how ChatGPT affects the labor market. I first thoroughly analyzed the prior research that has been done on the subject in order to start understanding how ChatGPT and other AI-related services are influencing the labor market. Using the supply and demand model, I then assess ChatGPT's impact. This paper examines this innovation's short- and long-term effects on the labor market, concentrating on its challenges and opportunities. Furthermore, I employ a text-mining approach to extract various tasks from the International Standard Occupation Classification to present a comprehensive list of occupations most sensitive to ChatGPT.
    Keywords: Large Language Models, Artificial Intelligence, Automation, Labor Saving Technology, ChatGPT, Labor Market, Generative AI, Occupational Classification
    JEL: O33 E24 J21 J24
    Date: 2023
  3. By: María Celeste Gómez (Universidad Nacional de Córdoba/CONICET); Maria Enrica Virgillito (Scuola Universitaria Superiore Sant’Anna)
    Abstract: Wages and productivity represent two of the most relevant variables to consider in economic development. Given the low productivity levels that emerging countries reveal, the accumulation of productive capabilities and a narrower dispersion across sectors would enable emerging countries to overcome the middle-income trap. Y et, this positive trend in productivity should translate into higher wages. Thus, we pose the following questions applied to a middle-income trapped country: is there a link between labour productivity and wages in the Argentine manufacturing sector? Does it differ across techno-productive classes or wage levels? Which factors affect this nexus, considering premature deindustrialisation? Using a firm-level dataset from 2010 to 2016, we perform quantile regression estimates to evaluate the link between productivity and wages across the conditional wage distribution among manufacturing firms. Based on a structural analysis, we identify the differences in these elasticities at 2-ISIC code levels and across Pavitt taxonomies. Our results confirm a positive , but extremely low, pass-through between productivity and wages in the Argentinian manufacturing firms, different across sectors according to their techno-productive capabilities, robust under different empirical strategies
    Keywords: Gains from productivity, Development, Asymmetries
    JEL: J31 D24 L6 O14 C21
    Date: 2023–02
  4. By: Monetary Affairs Department (Bank of Japan); Research and Statistics Department (Bank of Japan)
    Abstract: On November 25, 2022, the third workshop on "Issues Surrounding Price Developments during the COVID-19 Pandemic, " entitled "The Wage Formation Mechanism in Japan, " was held at the Bank of Japan's Head Office. The workshop featured lively discussions on wage developments and the link between wages and prices based on the characteristics of Japan's labor market and recent changes therein, involving experts and scholars in economics and empirical analysis. Session 1 highlighted various factors that made nominal wages in Japan prior to the COVID-19 pandemic more sluggish than those in the United States and Europe and reported recent changes in the factors. Further, issues on the outlook for the pace of wage growth in the future were presented, and problems in looking at average wages as well as the link between wages and prices were discussed. Session 2 focused on the nominal wage growth of full-time workers in Japan taking into account Japan's "dual labor market, " consisting of an "internal labor market, " where labor reallocation takes place within firms and wages follow the seniority-based system, and an "external labor market, " where employment adjustment occurs across firms and wages are mainly determined by supply and demand in the market. It was shown that the sensitivity of nominal wage growth to labor market conditions differed between the internal and external labor markets. The panel discussion in Session 3 mainly covered two issues: (i) what were the key factors in considering nominal wage developments, and (ii) whether inflation caused by cost-push factors would lead to higher wages and in turn make stable 2 percent inflation achievable. With regard to issue (i), the view was expressed that while it was necessary to assess the link between wages and labor market conditions and between wages and productivity for each type of employment, factors arising from changes in the composition of workers mainly due to demographic changes were also important. Regarding issue (ii), it was pointed out that future developments in aggregate demand and the outcomes of efforts to reflect the previous fiscal year's inflation in the annual spring labor-management wage negotiations would be important. Moreover, the view was expressed that in terms of the outlook for whether the price stability target of 2 percent could be achieved in a sustainable and stable manner, it was important whether 2 percent inflation would become the new social norm in Japan.
    Date: 2023–01–31
  5. By: Bahl, Shweta; Sharma, Ajay
    Abstract: This article examines the intertwining relationship between informality and education-occupation mismatch (EOM) and the consequent impact on the workers' wages. In particular, we discuss two issues - first, the relative importance of informality and education-occupation mismatch in determining the wages; and second, the relevance of EOM for formal and informal workers. The analysis reveals that although both informality and EOM are significant determinants of wages, the former is more crucial for a developing country like India. Further, we find that EOM is one of the crucial determinants of wages for formal workers, but it is not critical for informal workers. The study highlights the need for considering the bifurcation of formal-informal workers to understand the complete dynamics of EOM especially for developing countries where informality is predominant.
    Keywords: Informality, Education-Occupation Mismatch, India
    JEL: I25 I31 O17
    Date: 2023
  6. By: Jonathan Hambur (Reserve Bank of Australia)
    Abstract: Wages growth in Australia was lower than expected prior to COVID-19 based on historical determinants. One possible explanation for this is that employment had become more concentrated among a small number of large employers. This reduced outside options for workers and lowered their bargaining power and wages. This paper examines concentration in Australian labour markets and its impacts on wages using a large and representative database derived from administrative tax data. Labour markets have not, on average, become more concentrated over time. However, the impact of any given level of concentration has increased since the 2010s. This may help explain surprisingly low wages growth pre-COVID, despite labour market concentration having remained constant. Simple back-of-the-envelope estimates suggest that the greater impact of concentration may have lowered wages by a little under 1 per cent on average between 2011 and 2015. Declining firm entry and dynamism appear to have contributed to the increased impact of concentration, and lower wages growth, by lowering competition for labour among incumbent firms. Declining union coverage and occupational mobility may also have played a role, but declining firm entry appears to have been the main driver.
    Keywords: wages; market power; labour markets; concentration
    JEL: C23 C55 D22 D43 E24 J30
    Date: 2023–03
  7. By: Kuosmanen, Natalia; Kuosmanen, Timo
    Abstract: Abstract Structural change is an important driver of productivity growth at the aggregate level. While previous productivity decompositions account for the contributions of market entry and exit, they overlook continuing firms that switch from one industry to another. We develop an improved productivity decomposition that accounts for both intra-industry and inter-industry switching, is applicable to both static and inter-temporal settings, and ensures consistent aggregation of firm level productivity to the industry level. The proposed decomposition is applied to Finland’s information and communication technology (ICT) industry in the first two decades of the 21st century. This industry experienced major structural changes due to the rapid downfall of Nokia, the world’s largest mobile phone manufacturer at the beginning of our study period. Our results reveal that the sharp decline of labor productivity was associated with the structural changes, whereas the surviving firms that continued in the same industry managed to improve their productivity. Our results indicate that industry switching can dampen or enhance the productivity impacts of structural change, especially during the times of crisis and recession.
    Keywords: Entry and exit, Labor productivity, Product switching, Reallocation of resources
    JEL: D24 L16 O47
    Date: 2023–02–27

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