nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2024‒01‒22
twelve papers chosen by
Joseph Marchand, University of Alberta

  1. Artificial Intelligence, Tasks, Skills and Wages: Worker-Level Evidence from Germany By Engberg, Erik; Koch, Michael; Lodefalk, Magnus; Schroeder, Sarah
  2. Labor Market Competition and Inequality By Jose Garcia-Louzao; Alessandro Ruggieri
  3. AI Unboxed and Jobs: A Novel Measure and Firm-Level Evidence from Three Countries By Engberg, Erik; Görg, Holger; Lodefalk, Magnus; Javed, Farrukh; Längkvist, Martin; Monteiro, Natália; Kyvik Nordås, Hildegunn; Pulito, Giuseppe; Schroeder, Sarah; Tang, Aili
  4. High Achieving First-Generation University Students By Nikki Shure; Larissa Zierow
  5. Skills or Degree? The Rise of Skill-Based Hiring for AI and Green Jobs By Eugenia Gonzalez Ehlinger; Fabian Stephany
  6. The subsidy trap: Explaining the unsatisfactory effectiveness of hiring subsidies for the senior unemployed By Axana Dalle; Elsy Verhofstadt; Stijn Baert
  7. Firms and Worker Health By Alexander Ahammer; Analisa Packham; Jonathan Smith
  8. Minimum Wage and Macroeconomic Adjustment: Insights from a Small Open, Emerging, Economy with Formal and Informal Labor By Oscar Iván Ávila-Montealegre; Anderson Grajales-Olarte; Juan J. Ospina-Tejeiro; Mario A. Ramos-Veloza
  9. Professional Motivations in the Public Sector: Evidence from Police Officers By Aaron Chalfin; Felipe M. Gonçalves
  10. Gender Differences in Wage Expectations and Negotiation By Lukas Kiessling; Pia Pinger; Philipp Seegers; Jan Bergerhoff
  11. When Protection Becomes Exploitation: The Impact of Firing Costs on Present-Biased Employees By Florian Englmaier; Matthias Fahn; Ulrich Glogowski; Marco A. Schwarz
  12. Effects of remote work on population distribution across cities: US evidence from a QSE model By Ghinami, Francesca

  1. By: Engberg, Erik (Örebro University School of Business); Koch, Michael (Aarhus University); Lodefalk, Magnus (Örebro University School of Business); Schroeder, Sarah (Aarhus University)
    Abstract: This paper documents novel facts on within-occupation task and skill changes over the past two decades in Germany. In a second step, it reveals a distinct relationship between occupational work content and exposure to artificial intelligence (AI) and automation (robots). Workers in occupations with high AI exposure, perform different activities and face different skill requirements, compared to workers in occupations exposed to robots. In a third step, the study uses individual labour market biographies to investigate the impact on wages between 2010 and 2017. Results indicate a wage growth premium in occupations more exposed to AI, contrasting with a wage growth discount in occupations exposed to robots. Finally, the study further explores the dynamic influence of AI exposure on individual wages over time, uncovering positive associations with wages, with nuanced variations across occupational groups.
    Keywords: Artificial intelligence technologies; Task content; Skills; Wages
    JEL: J23 J24 J44 N34 O33
    Date: 2023–12–27
  2. By: Jose Garcia-Louzao; Alessandro Ruggieri
    Abstract: Does competition in the labor market affect wage inequality? Standard textbook monopsony models predict that lower employer labor market power reduces wage dispersion. We test this hypothesis using Social Security data from Lithuania. We first fit a two-way fixed effects model to quantify the contribution of worker and firm heterogeneity to wage dispersion and document that the compression of dispersion in firm fixed effects has been the main source of the decline in inequality over the past 20 years. Using a theory-based relationship, we then leverage variation across sectors and over time to show that a 10 percentage point increase in labor market competition leads to a 0.7 percentage point reduction in the variance of firm-specific wage components. A counterfactual exercise using our preferred estimates suggests that the increase in labor market competition can explain at least 15 percent of the observed decline in overall wage inequality.
    Keywords: wage inequality, firm heterogeneity, monopsony, labor supply elasticity
    JEL: J31 J42 O15
    Date: 2023
  3. By: Engberg, Erik (The Ratio Institute); Görg, Holger (Kiel Institute); Lodefalk, Magnus (The Ratio Institute); Javed, Farrukh (Lund University); Längkvist, Martin (Örebro University); Monteiro, Natália (The Ratio Institute); Kyvik Nordås, Hildegunn; Pulito, Giuseppe (Berlin School of Economics); Schroeder, Sarah (Aarhus University); Tang, Aili (None)
    Abstract: We unbox developments in artificial intelligence (AI) to estimate how exposure to these developments affect firm-level labour demand, using detailed register data from Denmark, Portugal and Sweden over two decades. Based on data on AI capabilities and occupational work content, We develop and validate a time-variant measure for occupational exposure to AI across subdomains of AI, including language modelling. According to our model, white collar occupations are most exposed to AI, and espe- cially white collar work that entails relatively little social interaction. We illustrate its usefulness by applying it to near-universal data on firms and individuals from Swe- den, Denmark, and Portugal, and estimating firm labour demand regressions. We find a positive (negative) association between AI exposure and labour demand for high- skilled white (blue) collar work. Overall, there is an up-skilling effect, with the share of white-collar to blue collar workers increasing with AI exposure. Exposure to AI within the subdomains of image and language are positively (negatively) linked to demand for high-skilled white collar (blue collar) work, whereas other AI-areas are heterogeneously linked to groups of workers.
    Keywords: Artificial intelligence; Labour demand; Multi-country firm-level evidence
    JEL: E24 J23 J24 N34 O33
    Date: 2023–12–27
  4. By: Nikki Shure; Larissa Zierow
    Abstract: First-generation university graduates have been found to face a series of disadvantages on their pathway to higher education and the labor market. We use unique, national level data on high achieving university graduates to attempt to disentangle the importance of lower prior attainment from parental educational background on a series of higher education and labor market outcomes. We compare first-generation and non-first-generation graduates who are recipients of a prestigious national scholarship program targeted at the top percentile of the student distribution in Germany. We find the first-generation high achievers are more likely to study at less prestigious institutions and at institutions that are closer to home even though they have the prior attainment to go further afield. They are also less likely to study subjects with high labor market returns and are more likely to work in jobs with high job security. We furthermore find evidence that especially female first-generation high achievers are less likely to see the value of the networking opportunities the scholarship provides.
    Keywords: socio-economic gaps, first-generation, higher education
    JEL: I24 J24
    Date: 2023
  5. By: Eugenia Gonzalez Ehlinger; Fabian Stephany
    Abstract: For emerging professions, such as jobs in the field of Artificial Intelligence (AI) or sustainability (green), labour supply does not meet industry demand. In this scenario of labour shortages, our work aims to understand whether employers have started focusing on individual skills rather than on formal qualifications in their recruiting. By analysing a large time series dataset of around one million online job vacancies between 2019 and 2022 from the UK and drawing on diverse literature on technological change and labour market signalling, we provide evidence that employers have started so-called "skill-based hiring" for AI and green roles, as more flexible hiring practices allow them to increase the available talent pool. In our observation period the demand for AI roles grew twice as much as average labour demand. At the same time, the mention of university education for AI roles declined by 23%, while AI roles advertise five times as many skills as job postings on average. Our regression analysis also shows that university degrees no longer show an educational premium for AI roles, while for green positions the educational premium persists. In contrast, AI skills have a wage premium of 16%, similar to having a PhD (17%). Our work recommends making use of alternative skill building formats such as apprenticeships, on-the-job training, MOOCs, vocational education and training, micro-certificates, and online bootcamps to use human capital to its full potential and to tackle talent shortages.
    Date: 2023–12
  6. By: Axana Dalle; Elsy Verhofstadt; Stijn Baert (-)
    Abstract: To extend the labour market participation of seniors, numerouscountries provide subsidies to incentivise their recruitment or employment. Prior research demonstrates that the effectiveness of such subsidies is rather unsatisfactory, although the reasons for this inadequacy remain unclear. Therefore, we examined negative employer perceptions triggered by eligibility for such subsidies that might explain this disappointing effectiveness. To this end, we set up a vignette experiment in which 292 genuine recruiters assessed fictitious candidates on their hireability and underlying productivity estimations. These candidates differed experimentally in their eligibility for a hiring subsidy targeted at the unemployed aged 58 or over. Our results indicate that the subsidy has a negative effect on their hiring outcomes. This adverse effect is explained by negative perceptions that counteract the financial incentive.Specifically, the subsidised candidates signal lower physical and technological skills along with an augmented difficulty in hiring and labour inspection.
    Keywords: Hiring discrimination, Senior workers, Labour market programmes, Hiring subsidy, Signalling effect, Vignettes
    JEL: J14 J38 J71
    Date: 2024–01
  7. By: Alexander Ahammer; Analisa Packham; Jonathan Smith
    Abstract: We estimate the role of firms in worker health care utilization. Using linked administrative data on Austrian workers from 1998-2018, we exploit mobility between firms to estimate how much a firm contributes to worker-level differences in utilization in a setting with non-employer provided universal health care. We find that firms are responsible for nearly 30 percent of the variation in across-worker health care expenditures. Effects are not driven by changes in geography or industry. We then estimate a measure of relative firm-specific utilization and explore existing correlates to help explain these effects.
    JEL: H51 I1
    Date: 2023–12
  8. By: Oscar Iván Ávila-Montealegre; Anderson Grajales-Olarte; Juan J. Ospina-Tejeiro; Mario A. Ramos-Veloza
    Abstract: We examine the adjustment of a small, open, emerging market economy (SOEME) to an unexpected increase in the minimum wage using an extended New-Keynesian SOE model that incorporates heterogeneous households, a flexible production structure, and a minimum wage rule. We calibrate the model for Colombia and find that an unexpected increase in the minimum wage has significant effects on the low-skilled labor market, and weaker impacts on inflation and the policy interest rate. The rise in the minimum wage increases production costs and prompts the substitution of formal low-skilled labor with informal workers and machinery, resulting in reduced output, increased inflation, and higher policy interest rates. We also observe that the minimum wage influences the transmission of productivity, demand, and monetary shocks, leading to a more persistent impact on macroeconomic variables, and a less efficient monetary policy to control inflation. Our findings suggest that the minimum wage has important macroeconomic implications, and affects emerging market economies through different channels than in developed economies. **** RESUMEN: En este artículo estudiamos el ajuste macroeconómico de una economía emergente pequeña y abierta ante un cambio inesperado en el salario mínimo. Para ello, construimos un modelo neo-keynesiano de economía pequeña y abierta con hogares heterogéneos, una estructura de producción con distintos tipos de trabajo y de capital, y una regla de ajuste del salario mínimo que responde a la inflación y productividad laboral pasadas, así como a choques inesperados. Tras calibrar el modelo para Colombia encontramos que un aumento inesperado del salario mínimo tiene efectos significativos sobre la producción y el empleo, y efectos moderados sobre la inflación y la tasa de política monetaria. En particular, observamos que el choque incrementa los costos de contratar mano de obra formal no calificada, la cual es sustituida por trabajadores informales y maquinaria. A pesar de esta sustitución, los mayores costos generan una contracción de la actividad económica, acompañada por un incremento en la inflación y en la tasa de política monetaria. Por otra parte, encontramos que la existencia de una regla de ajuste del salario mínimo afecta la transmisión de choques convencionales (productividad, demanda y política monetaria), aumentando su persistencia y reduciendo la efectividad de la política monetaria. Estos resultados son relevantes para economías emergentes en las que la política de salario mínimo tiene una mayor incidencia en el mercado laboral.
    Keywords: modelo de equilibrio general dinamico y estocástico, salario mínimo, mercado laboral informal, política monetaria, agentes heterogeneos, DSGE model, minimum wage, informal labor markets, monetary policy, heterogeneous agents
    JEL: E13 E50 J31 J46
    Date: 2023–12
  9. By: Aaron Chalfin; Felipe M. Gonçalves
    Abstract: We study how public sector workers balance their professional motivations with private economic concerns, focusing on police arrests. Arrests made near the end of an officer's shift typically require overtime work, and officers respond by reducing arrest frequency but increasing arrest quality. Days in which an officer works a second job after their police shift have higher opportunity cost, also reducing late-shift arrests. Combining our estimates in a dynamic model identifies officer preferences over workplace activity and overtime work. Our results indicate that officers' private costs of arrests have a first-order impact on the quantity and quality of enforcement.
    JEL: J33 J45 K42
    Date: 2023–12
  10. By: Lukas Kiessling; Pia Pinger; Philipp Seegers; Jan Bergerhoff
    Abstract: This paper presents evidence from a large-scale study on gender differences in expected wages before labor market entry. Based on data for over 15, 000 students, we document a significant and large gender gap in wage expectations that resembles actual wage differences, prevails across subgroups, and along the entire distribution. Over the life-cycle this gap amounts to roughly half a million Euros. Our findings further suggest that expected wages relate to expected asking and reservation wages and that a difference in plans about “boldness” during prospective wage negotiations pertains to gender difference in expected and actual wages. Given the importance of wage expectations for labor market decisions, household bargaining, and wage setting, our results provide an explanation for persistent gender inequalities.
    Keywords: wage expectations, gender gap, negotiations
    JEL: D81 D84 I21 I23 J13 J30
    Date: 2023
  11. By: Florian Englmaier (LMU Munich); Matthias Fahn (JKU Linz); Ulrich Glogowski (JKU Linz); Marco A. Schwarz (DICE)
    Abstract: Employment protection harms early-career employees without benefitting them in later career stages (Leonardi and Pica, 2013). We demonstrate that this pattern can result from employers exploiting na¨ıve present-biased employees. Employers offer a dynamic contract with low early-career wages, an unattractive intermediate qualification stage, and high end-of-career wages. Upon reaching the qualification stage, present-biased employees exchange future wages for immediate rewards on an alternative career path – a choice unanticipated by their previous, na¨ıve, self. Thus, employers never pay high future wages. Firing costs help employers indicate that they will not oust employees instead of making promised payments, enabling early-career wage cuts.
    Keywords: employment protection laws; present bias; dynamic contracting;
    JEL: D21 D90 J33 K31 M52
    Date: 2023–12–14
  12. By: Ghinami, Francesca
    Abstract: This study investigates the impact of remote work adoption on the size and competitiveness of cities in the United States. As a contribution to the ongoing debate sparked by the Covid-19 pandemic, the research initially establishes city-specific upper-bound measures of potential remote work adoption, utilizing the share of employment in remotely-performable occupations for each city. Subsequently, it employs a Quantitative Spatial Economic model, incorporating shipping and commuting costs, to assess the counterfactual effects that these potential levels of remote work adoption would have on population distribution across US cities. Model predictions indicate that upon full remote-work adoption, only select highly productive cities would grow in size and productivity, tothe detriment of the majority of locations. Nevertheless, the emerging spatial equilibrium yields generalized welfare gains characterized by reduced markups in larger cities, extending even to shrinking cities through the pro-competitive effect of trade. The findings suggest a policy-relevant dual role of remote work, concurrently enhancing welfare while reinforcing agglomeration and inequality across cities.
    Date: 2023–12–08

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