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on Labor Markets - Supply, Demand, and Wages |
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Issue of 2024‒08‒12
twenty papers chosen by |
| By: | Fongoni, Marco (Aix Marseille University); Schaefer, Daniel (Johannes Kepler University Linz); Singleton, Carl (University of Stirling) |
| Abstract: | We investigate how the incompleteness of an employment contract - discretionary and non-contractible effort - can affect an employer's decision about cutting nominal wages. Using matched employer-employee payroll data from Great Britain, linked to a survey of managers, we find support for the main predictions of a stylised theoretical framework of wage determination: nominal cuts are at most half as likely when managers believe their employees have significant discretion over how they do their work, though the involvement of employees, via information sharing, reduces this correlation. We also describe how contract incompleteness and wage cuts vary across different jobs. These findings provide the first observational quantitative evidence that managerial beliefs about contractual incompleteness can account for their hesitancy over nominal wage cuts. This has long been conjectured by economists based on anecdotes, qualitative surveys, and laboratory and field experiments. |
| Keywords: | wage rigidity, employment contract, workplace relations, employer-employee data |
| JEL: | E24 E70 J31 J41 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17079 |
| By: | Andrea Ramazzotti (Università di Napoli Federico II and CSEF) |
| Abstract: | Do minimum wages influence post-compulsory school enrollment and educational choices? This paper studies the effect of sectorally-bargained minimum wages using a quasi-natural historical experiment from Italy around 1969, when labour unions obtained steep wage raises for manufacturing workers. Italy’s weakly-selective educational system—whereby students choose specialist educational curricula at age fourteen—allows to separately identify the impact on enrollment from that on educational choices. Absent microdata for the period under study, I present original estimates of education and labour-market variables at the province level with annual frequency between 1962 and 1982. Exploiting exogenous spatial variation in the intensity of the minimum wage hike between provinces with an instrumental variable approach and flexible Difference-in-Differences, I find a temporary increase in early school leaving and a permanent substitution away from vocational schools preparing for manufacturing jobs. The length of the adjustment might have caused a significant long-term loss for Italy’s human capital stock. |
| Keywords: | Wage Differentials, Education, Schooling, Economic History: Europe post-1913. |
| JEL: | J24 J31 N34 |
| Date: | 2024–06–12 |
| URL: | https://d.repec.org/n?u=RePEc:sef:csefwp:717 |
| By: | Clemens, Marco (IAAEU, University of Trier); Sauermann, Jan (IFAU) |
| Abstract: | Performance pay has been shown to have important implications for worker and firm productivity. Although workers' skills may directly matter for the cost of effort to reach performance goals, surprisingly little is know about the heterogeneity in the effects of incentive pay across workers. In this study, we apply a dynamic difference-in-differences estimator to the introduction of a generous bonus pay program to study how salient performance thresholds affect incentivized and non-incentivized performance outcomes for low- and high-skilled workers. While we do find that individual incentive pay did not affect workers' performance on average, we show that this result conceals an underlying heterogeneity in the response to individual performance pay: individual performance pay has a significant effect on the performance of high-skilled workers but not for low-skilled workers. The findings can be rationalized with the idea that the costs of effort differ by workers' skill level. We also explore whether agents alter their overtime hours and find a negative effect, possibly avoiding negative consequences of longer working hours. |
| Keywords: | performance pay, incentives, productivity, skills, panel data |
| JEL: | M52 J33 C23 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17119 |
| By: | Azam, Mehtabul (Oklahoma State University); Emran, M. Shahe (Columbia University); Shilpi, Forhad (World Bank) |
| Abstract: | Using a nationally representative large-scale survey of individual ICT skills in India (Multiple Indicators Survey, 2020), we provide evidence on the effects of ICT skills on labor market outcomes and household welfare as measured by per capita expenditure. We study the effects both at the extensive and intensive margins of labor market. To tackle the challenges in identification arising from unobserved individual heterogeneity in the acquisition of ICT skills, we develop an instrumental variables (IV) strategy. The IV approach exploits the dramatic expansion of cell towers in India as a source of supply-side variation, and relies on an institutional feature of the telecom market, the "telecom circles", to construct a leave-own-out instrumental variable. The evidence suggests no significant effects at the extensive margin (null effect on both labor force participation and employment). In contrast, there are important effects at the intensive margin: a 10 percentile higher ICT skills index increases the probability of salaried employment by 6.5 percentage points, and leads to a 9.5 percent higher per capita expenditure. Employment transitions happen from daily wage employment and self-employment to salaried employment. The effects vary substantially across gender: women face a penalty in the form of a lower impact on salaried employment, but the impact on per capita expenditure is larger for households with ICT-skilled women. The higher impact on women reflects the fact that the family stock of ICT skills is much larger in households with ICT-skilled women. Contrary to conventional wisdom, the lower caste individuals enjoy a larger positive effect on salaried employment, despite their unfavorable labor market network, possibly due to the employment quotas in public sector employment. The impacts on salaried employment and per capita expenditure for Muslims are comparable to the other social groups. We find no significant rural-urban differences. |
| Keywords: | ICT skills, labor market, employment, salaried employment, daily wage employment, self-employment, per capita expenditure, gender, caste, religion, towercos, telecom circles, India |
| JEL: | J24 J62 I30 O12 O15 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17105 |
| By: | Andrew Leigh |
| Abstract: | What are the economic returns to education in Australia? Using data from the 2018- 2022 waves of the Household, Income and Labour Dynamics in Australia survey, and taking account of existing estimates of ability bias and social returns to schooling, I estimate the economic return to various levels of education. As in Leigh (2008), which used data from the 2001-2005 waves of the same survey, I report large returns. Across high school, vocational education and university qualifications, an additional year of schooling raises hourly wages by 7 percent, boosts annual earnings by 13 percent, and increases the probability of reporting positive earnings by 4 percentage points. In terms of hourly wages, the largest per-year returns are from completing a Bachelor degree. In terms of annual earnings, the largest per-year returns are from completing year 12. Testing for changes in returns to schooling over time provides little evidence of systematic trends over the period 2001-2022. Over the lifecycle, returns to education tend to decline from age 60 for high school and vocational qualifications, and tend to decline from age 55 for university qualifications, suggesting that the value of education diminishes as workers approach retirement age. |
| Keywords: | returns to education, ability bias, high school, vocational training, university |
| JEL: | I28 J31 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11146 |
| By: | Bo Cowgill; Amanda Y. Agan; Laura K. Gee |
| Abstract: | This study investigates whether the success of salary history bans could be limited by job-seekers volunteering their salaries unprompted. We survey American workers in 2019 and 2021 about their recent job searches, distinguishing when candidates were asked about salary history from when they were not. Historically well-paid workers may have an incentive to disclose, and employers who are aware of this could infer that non-disclosing workers are concealing low salaries. Through this mechanism, all workers could face pressure to avoid the stigma of silence. Our data shows a large percentage of workers (28%) volunteer salary history, even when a ban prevents employers from asking. An additional 47% will disclose if enough other job candidates disclose. Men are more likely than women to disclose their salaries unprompted, especially if they believe other candidates are disclosing. Over our 1.5-year sample covering jurisdictions with (and without) bans, unprompted volunteering of salary histories increased by about 6-8 percentage points. |
| Keywords: | voluntary disclosure, information economics, organizations, hiring, compensation, inequality, salary history bans, statistical discrimination |
| JEL: | D80 M51 J71 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11168 |
| By: | Anand Chopra; Ronit Mukherji |
| Abstract: | This paper illustrates the role of low-skilled immigrants' location choice as a channel through which local labour markets adjust to automation. We employ a shift-share instrumental variable approach to demonstrate that low-skilled immigrants are more mobile than low-skilled native born in response to robot exposure. Low-skilled immigrants are less likely to enter and more likely to exit from highly robot-exposed regions. Immigrants' location decisions attenuate wage losses due to robot exposure for low-skilled natives. Low-skilled native workers experience a 0.07 percentage point smaller decline in wages comparing commuting zones at the 50th and 25th percentiles of low-skilled immigrant shares. |
| Keywords: | Automation, Geographic labour mobility, Immigrants, Technology |
| JEL: | J15 J23 J31 J61 O33 R23 |
| Date: | 2024–06–25 |
| URL: | https://d.repec.org/n?u=RePEc:liv:livedp:202409 |
| By: | Parisa Ghasemi (University of Coimbra, Faculty of Economics); Paulino Teixeira (University of Coimbra, Centre for Business and Economics and Faculty of Economics); Carlos Carreira (University of Coimbra, Centre for Business and Economics and Faculty of Economics) |
| Abstract: | In this study, we investigate the impact of the share of the foreign labor force on the wage of native workers in Portugal between 2010 and 2019 using linked employer-employee data from Quadros de Pessoal. By leveraging job characteristics from the O*NET skill taxonomy, we create more homogeneous skill groups, enabling a precise analysis of immigration's impact on specific skill sets. The empirical analysis, focusing on occupation-experience groups, reveals a positive association between native wages and immigrant shares. In contrast, when groups are based on education-experience, the relationship appears negative. These contradictory findings suggest that the impact of immigration on native wages varies significantly depending on how labor markets are segmented. Furthermore, our analysis demonstrates a positive and statistically significant effect on native wages in high-skilled occupations, while native wages in low-skilled occupations are negatively affected due to increased competition. Our findings highlight the importance of considering occupation classification over simple education levels and suggest that diverse results in existing literature may be due to sample averaging. |
| Keywords: | Immigration, native wages, native-immigrants’ complementarities |
| JEL: | J24 J31 J61 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:gmf:papers:2024-02 |
| By: | Alvin Christian; Matthew Ronfeldt; Basit Zafar |
| Abstract: | We survey undergraduate students at a large public university to understand the pecuniary and non-pecuniary factors driving their college major and career decisions with a focus on K-12 teaching. While the average student reports there is a 6% chance they will pursue teaching, almost 27% report a nonzero chance of working as a teacher in the future. Students, relative to existing statistics, generally believe they would earn substantially more in a non-teaching job (relative to a teaching job). We run a randomized information experiment where we provide students with information on the pecuniary and non-pecuniary job characteristics of teachers and non-teachers. This low-cost informational intervention impacts students' beliefs about their job characteristics if they were to work as a teacher or non-teacher, and increases the reported likelihood they will major or minor in education by 35% and pursue a job as a teacher or in education by 14%. Linking the survey data with administrative transcript records, we find that the intervention had small (and weak) impacts on the decision to minor in education in the subsequent year. Overall, our results indicate that students hold biased beliefs about their career prospects, they update these beliefs when provided with information, and that this information has limited impacts on their choices regarding studying and having a career in teaching. |
| JEL: | D80 J24 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32641 |
| By: | Datta, Nikhil (University of Warwick); Machin, Stephen (London School of Economics) |
| Abstract: | Government procurement accounts for a significant share of GDP, and environmental, social and corporate governance (ESG) clauses in government contracts have become common across developed economies. This paper studies one of these clauses: living wages that are set considerably higher than mandated minimum wages. When a local government in the UK signs up to become a living wage employer, as a significant number did in the time period we study, firms that have procurement contracts with them have to pay workers the living wage. This variation is studied with rich matched data on workers in establishments for a service sector company with many establishments located across the country. Just under half of the firm's establishments were made to comply with the living wage as a consequence of the local government becoming a living wage employer in the period between 2011 and 2019. In a staggered difference-in-differences research design, low wage workers are shown to receive a significant wage boost from the living wage introduction. Consistent with a model of monopsony power and where bottom-of-the-rung workers and supervisors are gross complements, the living wage induced labour-labour substitution in favour of the former. Further adjustment to the wage bill increase from the introduction of the living wage took place through within-establishment internal changes to the establishment pay policy structures. The overall result was that the Company was able to absorb the wage cost shock embodied in living wage adoption in a way that significantly narrowed establishment wage inequality. |
| Keywords: | government contracting, living wages |
| JEL: | J31 J38 J42 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17117 |
| By: | Tanguy Le Fur (Lille Economie Management); Alain Trannoy (Aix Marseille Univ, CNRS, AMSE, Marseille, France) |
| Abstract: | This paper provides a macroeconomic explanation for the United States suffering from a health disadvantage relative to other rich European countries despite spending much more on health care. We introduce health capital à la Grossman in the neoclassical growth model and assume that its rate of depreciation increases with labor supply. The steady-state share of GDP devoted to health expenditure increases with labor supply, but the relationship between the health capital stock and the number of hours worked is hump-shaped, meaning that there is a country-specific health-maximizing level. We calibrate the model to the United States and assess how much of this ‘American Health Puzzle’ can be explained by the greater number of hours American workers work. Higher labor supply in the US accounts for 2 to 3 percentage points in extra health expenditure as a share of GDP and between 10% and one-third of the American health disadvantage. |
| Keywords: | Working Time, Health Capital, Health Expenditure, Health-Maximizing Level of Labor Supply, American Health Puzzle |
| JEL: | I1 J22 O41 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:aim:wpaimx:2419 |
| By: | Zhiyang Jia; Thor O. Thoresen; Trine E. Vattø; Thor Olav Thoresen |
| Abstract: | While the consensus in the literature is that the labor supply of married women is more responsive than that of married men, there are indications that this gap is narrowing. Our estimations of a structural discrete choice labor supply model using repeated cross-sectional data confirms this trend for Norway – the gross wage elasticity for married women decreased from approximately 0.7 in 1997 to under 0.3 in 2019. We further demonstrate how a simulation procedure based on the labor supply model offers insights into the factors driving this decline. We identify four categories of explanations: changes in the sociodemographic composition of the population, changes in preferences and labor market options, wage changes, and tax scheme changes. Our analysis suggests that general wage growth over the period is the primary reason for the decline in responsiveness among married women. |
| Keywords: | female labor supply responsiveness, discrete choice labor supply model, microsimulation |
| JEL: | C35 C51 H24 H31 J22 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11176 |
| By: | Miklós Koren; Álmos Telegdy |
| Abstract: | Using a novel Hungarian dataset on firms and their Chief Executive Officers (CEOs), we estimate the impact of hiring expatriate CEOs. By examining foreign acquisitions where the new owner replaces the incumbent CEO with an expatriate or a local CEO, we address the selection into both acquisition and CEO hiring. Firms led by expatriate CEOs show 13 percent total factor productivity growth, 95 percent sales growth, and increase both exports and domestic sales. Hiring expatriate CEOs enhances firm performance in both international and domestic markets. Our findings suggest that expatriates have superior general management skills. |
| Keywords: | expatriate CEO, foreign acquisition, firm performance, Hungary |
| JEL: | F23 F61 L25 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11164 |
| By: | Ribas, Rafael Perez (Boise State University); Sampaio, Breno (Universidade Federal de Pernambuco); Trevisan, Giuseppe (Universidade Federal de Pernambuco) |
| Abstract: | The ranking system within academic environments may impact future professional trajectories. Examining the influence of class rank on college students' managerial attainment is crucial for understanding some determinants of career advancement. This paper estimates the effect of a low rank in a highperforming class on the probability of college students attaining a managerial position in the future. Our data combine administrative records from a highly selective university in Brazil and employment registries. For most programs, this university divides first-year students into two classes based on their preferences and admission scores. In a regression discontinuity design, we control for students' preferences and inherent skills by comparing the last student admitted to the high-score class (the 'first class') with the first student excluded from this class, who joins the 'second class.' Results show that the last student in the first class is 10 percentage points less likely to attain a managerial position soon after graduating than a similar student in the second class. Although this effect is initially similar between genders, it diminishes for men over time while persisting for women. Overall, our study indicates that better-performing peers can hinder a student's managerial career by lowering their relative rank in the classroom. |
| Keywords: | leadership, relative performance, learning environment, peer effect, ranking effect |
| JEL: | D91 I23 J16 J24 M51 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17082 |
| By: | Eric A. Hanushek; Andrew J. Morgan; Steven G. Rivkin; Jeffrey C. Schiman; Ayman Shakeel; Lauren Sartain |
| Abstract: | Using rich Texas administrative data, we estimate the impact of middle school principals on post-secondary schooling, employment, and criminal justice outcomes. The results highlight the importance of school leadership, though striking differences emerge in the relative importance of different skill dimensions to different outcomes. The estimates reveal large and highly significant effects of principal value-added to cognitive skills on the productive activities of schooling and work but much weaker effects of value-added to noncognitive skills on these outcomes. In contrast, there is little or no evidence that middle school principals affect the probability a male is arrested and has a guilty disposition by raising cognitive skills but strong evidence that they affect these outcomes through their impacts on noncognitive skills, especially those related to the probability of an out-of-school suspension. In addition, the principal effects on the probability of engagement in the criminal justice system are much larger for Black than for nonBlack males, corresponding to race differences in engagement with the criminal justice system. |
| JEL: | I20 J45 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32642 |
| By: | John H.Y. Edwards (Tulane University) |
| Abstract: | This paper examines the impact of education quality on income inequality among men and on female labor force participation. I introduce a new dataset on local education expenditures for a 64-year period. By matching education spending to the time and place where each person went to school, the data allow for a much more granular measurement of human capital differences than measures like level of schooling or years of school attainment. They also permit measurement of human capital differences and evolution over a much longer time period than the data that are typically available. I show that differences in the quality of education received during childhood become significant determinants of income differences among fully employed adult men. In a finding that is new to the literature, I report that school quality differentials are significant determinants of how adult women allocate their time between domestic labor and formal wage work. |
| Keywords: | Female Labor Force Participation, Women and Economic Development, Brazil, Education Quality, Income Distribution, Education |
| JEL: | I24 I25 O15 J24 J16 D31 D63 H75 N16 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:tul:wpaper:2409 |
| By: | Cahuc, Pierre (Sciences Po, Paris) |
| Abstract: | This article provides an overview of the economic literature on short-time work. It presents the main characteristics of short-time work since its emergence in Germany in the 1930s. It analyzes its effectiveness as a job preservation mechanism, drawing on theoretical models and empirical studies. It concludes by highlighting the areas that future research could explore to address the most significant gaps in our understanding of short-time work. |
| Keywords: | short-time work, furlough, employment, working hours |
| JEL: | J23 J41 J63 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17111 |
| By: | Martin Guzi; Maciej Duszczyk; Peter Huber; Ulrike Huemer; Marcela Veselková |
| Abstract: | The paper provides an overview of the situation of Ukrainian refugees in the labour markets of Austria, Czechia, Poland, and Slovakia, emphasizing the initiatives aimed at facilitating their integration. Refugees face challenges in securing employment adequate to their skills due to language barriers, limited capacity in childcare services, strict entry conditions for skilled occupations, and uncertainty surrounding their refugee status. The chapter concludes with recommendations for enhancing the labour market integration of refugees. |
| JEL: | E24 F22 J41 |
| Date: | 2024–07–15 |
| URL: | https://d.repec.org/n?u=RePEc:cel:dpaper:68 |
| By: | Jonathan Reuter |
| Abstract: | I review the academic literature on defined contribution retirement plan design and participant behavior. While adoption of automatic enrollment has significantly increased participation rates, recent studies find the long-run effects on savings are smaller than the short-run effects, with some savings financed via debt. I also review efforts to expand access to employer-based retirement savings and liquid savings, the pros and cons of target date funds as default investment options, potential conflicts of interest in plan design, and potential benefits of customized defaults. I conclude by discussing how SECURE 2.0 may impact US workers and highlighting topics for future research. |
| JEL: | D14 D91 G11 J26 J32 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32653 |
| By: | Sefa Awaworyi Churchill (School of Economics, Finance and Marketing, RMIT University.); Simon Chang (University of Western Australia Business School, University of Western Australia.); Russell Smyth (Department of Economics, Monash University.); Trong-Anh Trinh (Centre for Health Economics, Monash University.) |
| Abstract: | This paper extends prior theory linking present-day sex ratios to present-day propensity for entrepreneurship among men backward in time to explore the long-run gender origins of entrepreneurship. We argue that present-day propensity for entrepreneurship among men will be higher in neighbourhoods which had historically high sex ratios. We propose that high sex ratios generate attitudes and behaviours that imprint into cultural norms about gender roles and that vertical transmission within families create hysteresis in the evolution of these gender norms. To empirically test the theory, we employ the transport of convicts to the British colonies of New South Wales and Van Diemen’s Land in the eighteenth and nineteenth centuries as a natural experiment to examine the long-run effect of gender norms on entrepreneurship in present-day Australia. We use a representative longitudinal dataset for the Australian population that provides information on the neighbourhood in which the participant lives, which we merge with data on the sex ratio in historical counties from the mid-nineteenth century. We find that men who live in neighbourhoods which had high historical sex ratios have a higher propensity for entrepreneurship. We present evidence consistent with the vertical transmission of gender norms within families being the likely mechanism. Arguments for policies to promote female entrepreneurship are typically couched in terms of gender norms representing a barrier to more women starting their own business. We present evidence consistent with gender norms contributing to gender differences in rates of entrepreneurship by being a spur for higher male entrepreneurship rather than a barrier to female entrepreneurship. |
| Keywords: | gender norms, sex ratios, entrepreneurship, Australia. |
| JEL: | I31 J21 J22 N37 O10 Z13 Z18 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:mos:moswps:2024-11 |