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Minimum Wage Effects on Permanent Versus Temporary Minimum Wage Employment
Michele Campolieti, Morley Gunderson & Byron Lee
Contemporary Economic Policy, forthcoming
Abstract:
We estimate the effect of minimum wages on employment using the Master Files of the Canadian Labour Force Survey over the recent period 1997–2008. Particular attention is paid to the differences between permanent and temporary minimum wage workers — an important distinction not made in the existing literature. Our estimates for permanent and temporary minimum wage workers combined are at the lower end of estimates based on Canadian studies estimated over earlier time periods, suggesting that the adverse employment effects are declining over time for reasons discussed. Importantly, the adverse employment effects are substantially larger for permanent compared to temporary minimum wage workers; in fact they fall almost exclusively on permanent minimum wage workers.
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Viral Acharya, Ramin Baghai & Krishnamurthy Subramanian
Journal of Law and Economics, November 2013, Pages 997-1037
Abstract:
When contracts are incomplete, dismissal laws prevent employers from arbitrarily discharging employees and thereby limit employers’ ability to hold up innovating employees after an innovation is successful. Therefore, dismissal laws can enhance employees’ innovative efforts and encourage firms to invest in risky but potentially groundbreaking projects. Other forms of labor laws that do not affect dismissal of employees do not have this bright side. We find support for these predictions in empirical tests that exploit country-level changes in dismissal laws in the United States, the United Kingdom, France, and Germany: more stringent dismissal laws foster innovation, particularly in innovation-intensive industries, but other labor laws do not.
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Simon Deakin, Jonas Malmberg & Prabirjit Sarkar
University of Cambridge Working Paper, February 2014
Abstract:
Using longitudinal data on labour law in France, Germany, Japan, Sweden, the UK and the USA for the four decades after 1970, we estimate the impact of labour regulation on unemployment and equality, using labour’s share of national income as a proxy for the latter. We employ a dynamic panel data analysis which distinguishes between short-run and long-run effects of legal change. We find that worker-protective labour laws in general have no consistent relationship to unemployment but are positively correlated with equality. Laws relating to working time and employee representation are found to have beneficial impacts on both efficiency and distribution.
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Technology Adoption, Turbulence, and the Dynamics of Unemployment
Georg Duernecker
Journal of the European Economic Association, forthcoming
Abstract:
Starting in the late 1970s, European unemployment began to increase while US unemployment remained constant. At the same time, capital-embodied technical change began to accelerate, and the United States adopted the new capital much faster than Europe. I argue that these two facts are related. The main idea is that if there is capital-embodied technical change, then the unemployment rate depends critically on how obsolete the installed capital stock is compared to the frontier. In particular, European workers initially worked with relatively obsolete capital, and so they lacked the skills required to work with frontier capital. When they lost their jobs they therefore stayed unemployed for longer than their American counterparts. I find that this channel accounts for about 70% of the discrepancy between the behavior of unemployment rates in Europe and the United States.
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International trade, risk taking and welfare
G. Vannoorenberghe
Journal of International Economics, March 2014, Pages 363–374
Abstract:
This paper shows that the gains from opening up to international trade are smaller when firms do not fully internalize downward risk. I develop a general equilibrium model with two key assumptions. First, when faced with adverse productivity shocks, employers can lay off workers without fully paying the social costs of their layoff decisions, a common feature of many institutions. Second, when opening to international trade, the elasticity of demand perceived by an industry increases. In this setup, I show that international trade induces firms to take more risk and (i) raises the equilibrium unemployment rate, (ii) increases the volatility of sectoral sales and (iii) increases welfare proportionately less than in the absence of the externality. Inducing firms to internalize the costs of layoff (Blanchard and Tirole, 2003) therefore appears even more important in a globalized world.
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Ben Baumberg
Journal of Social Policy, April 2014, Pages 289-310
Abstract:
It remains a puzzle as to why incapacity claims rose in many OECD countries when life expectancy was increasing. While potentially due to hidden unemployment and policy failure, this paper tests a further explanation: that work has become more difficult for disabled workers. It focuses on the UK as a ‘most likely’ case, given evidence of intensification and declining control at work. To get a more objective measure of working conditions, the models use average working conditions in particular occupations, and impute this into the British Household Panel Survey. The results show that people in low-control (but not high-demands) jobs are more likely to claim incapacity benefits in the following year, a result that is robust to a number of sensitivity analyses. Deteriorating job control seems to be a part of the explanation for rising incapacity, and strategies to cut the number of incapacity claimants should therefore consider ways to improve job control. Given the challenges in changing job characteristics, however, an equally important implication is that high levels of incapacity should not just be seen as a result of poor policies and a lack of jobs, but also as a result of the changing nature of work.
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Real Options Approach to Inter-Sectoral Migration of U.S. Farm Labor
Gülcan Önel & Barry Goodwin
American Journal of Agricultural Economics, forthcoming
Abstract:
The core of the literature on inter-sectoral labor migration is based on net present value models of investment in which individuals are assumed to migrate to take advantage of positive wage differentials. In this article, we argue that a real options approach, taken together with the adjustment costs associated with sectoral relocation, may provide a basis for explaining the migration of farm labor out of the agricultural sector. Given the irreversibility of migration decisions and uncertainty in the economy, potential migrants might choose to postpone migration, even in the face of positive wage differentials. Using annual U.S. employment data from between 1948 and 2009, our results indicate that large elasticities between economic incentives and out-farm migration are observed after a high threshold of wage differentials between farm and off-farm sectors is surpassed.
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Who Works for Startups? The Relation between Firm Age, Employee Age, and Growth
Paige Ouimet & Rebecca Zarutskie
Journal of Financial Economics, forthcoming
Abstract:
Young firms disproportionately employ and hire young workers. On average, young employees in young firms earn higher wages than young employees in older firms. Young employees disproportionately join young firms with greater innovation potential and that exhibit higher growth, conditional on survival. We argue that the skills, risk tolerance, and joint dynamics of young workers contribute to their disproportionate share of employment in young firms. Moreover, an increase in the supply of young workers is positively related to new firm creation in high-tech industries, supporting a causal link between the supply of young workers and new firm creation.
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The Role of Health in Retirement
Alan Gustman & Thomas Steinmeier
NBER Working Paper, February 2014
Abstract:
This paper constructs and estimates a dynamic model of the evolution of health for those over the age of 50 and then embeds that model of health dynamics in a structural, econometric model of retirement and saving. The health model traces the effects of smoking, obesity, alcohol consumption, depression and other proclivities on medical conditions, including hypertension, diabetes, cancer, lung disease, heart problems, stroke, psychiatric problems and arthritis. These in turn influence an overall index of health status based on self-reported health, work limitations and ADLs, which is used to classify the population into good, fair, poor or terrible health. Compared to a situation where the entire population is in good health, the current health status of the population reduces the retirement age of the entire population by an average of about one year. While poor health or terrible health have a great impact on the disutility of work and thus on retirement, fair health as opposed to good health has a relatively minor effect. Smoking depresses full-time work effort by up to 3.5 percentage points by those in the early sixties, reducing the average retirement age by four to five months. Effects of trends in health care and health policies on retirement are also analyzed. Including detailed measurement of health dynamics in a retirement model improves understanding of the effects of health on retirement. It does not, however, influence estimates of the marginal effects of economic incentives on retirement.
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The Effect of 21st Century Military Service on Civilian Labor and Educational Outcomes
Wesley Routon
Journal of Labor Research, March 2014, Pages 15-38
Abstract:
I estimate the effect of military service during the Afghanistan and Iraq wars on civilian labor and educational outcomes using several empirical methodologies including sibling fixed effects and propensity score matching. Since military occupations and training have changed significantly in the past few decades, these effects may be different than those found in previous studies on veterans of earlier theaters. I find that veteran status increases civilian wages by approximately ten percent for minorities but has little or no effect on whites in this regard. Veterans of all demographic groups are found to be equally employable and equally as satisfied with their civilian occupation as non-veterans. For females and minorities, veteran status substantially increases the likelihood one attempts college. These veterans are found to be more apt to pursue and obtain a two year (associate’s) degree instead of a four year (bachelor’s) degree. Lastly, I find mixed evidence that veteran status increases the likelihood of public sector employment.
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A search for evidence of skill mismatch in the aftermath of the great recession
J. Hotchkiss, M. Pitts & F. Rios-Avila
Applied Economics Letters, Spring 2014, Pages 587-592
Abstract:
Using matched individual-level data from the Current Population Survey, this article identifies a significant trend shift upwards in schooling among prime-age labour force leavers following the 2008–2009 recession. However, further evidence discredits skill mismatch as an explanation for that trend shift.
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Paul Byrne
Public Finance Review, March 2014, Pages 199-221
Abstract:
Previous studies on the impact of nonprofit status on employee compensation view nonprofit status as yielding a fixed benefit attributable to the legal prohibition against distributing profits. However, nonprofit status also exempts firms from many federal, state, and local taxes resulting in the size of economic rents varying by the jurisdiction. This study examines how differences in the implied subsidy of state and local tax exemption impact the nonprofit wage differential in the hospital industry. The study also takes advantage of the fact that a significant proportion of nonprofit hospitals are religiously affiliated to control for worker self-selection into the nonprofit sector. Results indicate that nonprofit hospital workers receive a wage premium; however, the wage premium decreases as state tax burden increases. This finding suggests that the nonprofit wage differential is not accentuated by a hospital’s tax-exempt status but is instead a byproduct of the nondistribution constraint.
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College Graduates, Local Retailers, and Community Belonging in the United States
Samuel Stroope et al.
Sociological Spectrum, March/April 2014, Pages 143-162
Abstract:
How do communities retain their highly educated residents? Do local retailers play a role? This study addresses these questions using confidential U.S. census data on locally-oriented retail employment and county-level public-use files. Hierarchical linear modeling is employed to test hypotheses derived from prior research on civic community and migration. The results confirm that state-level local retail employment buffers the extent to which county-level college graduation is associated with county nonmigration. This finding is consistent with civic community theory, suggesting that locally-oriented retailers are a valuable resource for promoting residential stability.