Human resources
Technological Change and Wage Premiums: Historical Evidence from Linked Employer-Employee Data
Sanna-Mari Hynninen, Jari Ojala & Jaakko Pehkonen
Labour Economics, October 2013, Pages 1–11
Abstract:
This study analyses the impacts of a technological change (the steam engine) on wage premiums. Using historical employer-employee panel data, we found that steam technology had both new skill-demanding and skill-replacing aspects. The former manifested itself as an increase in the demand for high-skilled engineers, the latter in a decline in the demand for intermediate-skilled, able-bodied seamen and an increase in the demand for unskilled engine room operators. Our panel data analysis, which controls for unobserved heterogeneity, implies that high-skilled labourers in abstract tasks and unskilled labourers in manual tasks improved their wage positions relative to intermediate-skilled labourers in routine tasks. These findings are compatible with the hypothesis of technology-based polarisation.
----------------------
Jan Brueckner & David Neumark
American Economic Journal: Economic Policy, forthcoming
Abstract:
The absence of a competitive market may enable public-sector workers to extract rents from taxpayers in the form of high pay, especially when public-sector workers are unionized. On the other hand, this rent extraction may be suppressed by the ability of taxpayers to vote with their feet, leaving jurisdictions where public-sector workers extract high rents. However, although migration of taxpayers may limit rent-seeking, public-sector workers may be able to extract higher rents in regions where high amenities mute the migration response. We develop a theoretical model that predicts such a link between public-sector wage differentials and local amenities, and we test the model’s predictions by analyzing variation in these wage differentials and amenities across states. We find that public-sector wage differentials are, in fact, larger in the presence of high amenities, with the effect stronger for unionized public-sector workers who are likely better able to exercise political power in extracting rents. The implication is that the mobility of taxpayers is insufficient to prevent rent-seeking behavior of public-sector workers from leading to higher public-sector pay.
----------------------
Working parents and total factor productivity growth
Geoffrey Dunbar & Stephen Easton
Journal of Population Economics, October 2013, Pages 1431-1456
Abstract:
Since 1963, changes in the family composition of the US labor force explain more than half of the variability in US total factor productivity growth. Using the Current Population Survey Annual Social and Economic Supplement, we document the rise of two (and single) working-parent families in the USA. We augment a standard growth-accounting equation to differentiate between parental and nonparental labor inputs and find that accounting for the parental composition of the labor force explains roughly 50 % of total factor productivity growth, the productivity slowdown of the 1970s, and the productivity rise of the 1990s. The parental composition of the workforce also helps to explain labor productivity differences across US states while controlling for differences in the age and gender profile of workers across states does not.
----------------------
The bright side of bad times: The affective advantages of entering the workforce in a recession
Emily Bianchi
Emory University Working Paper, April 2013
Abstract:
This paper proposes that graduating in a recession can have long term positive implications for job satisfaction. In Studies 1 and 2, results from two large, nationally representative surveys showed that people who entered the workforce during economic downturns were more satisfied with their jobs even long after economic conditions had changed. A third cross-sectional study found that people who entered the workforce in bad economies were less likely to entertain upward counterfactuals about how they might have done better and more likely to feel grateful for their jobs, both of which mediated the relationship between workforce entry economic conditions and job satisfaction. While past research on job satisfaction has focused on dispositional and situational predictors, this paper suggests that early workforce environmental conditions can also have an enduring effect on job satisfaction.
----------------------
Making Do with Less: Working Harder During Recessions
Edward Lazear, Kathryn Shaw & Christopher Stanton
NBER Working Paper, August 2013
Abstract:
There are two obvious possibilities that can account for the rise in productivity during recent recessions. The first is that the decline in the workforce was not random, and that the average worker was of higher quality during the recession than in the preceding period. The second is that each worker produced more while holding worker quality constant. We call the second effect, “making do with less,” that is, getting more effort from fewer workers. Using data spanning June 2006 to May 2010 on individual worker productivity from a large firm, it is possible to measure the increase in productivity due to effort and sorting. For this firm, the second effect — that workers’ effort increases — dominates the first effect — that the composition of the workforce differs over the business cycle.
----------------------
The Return of Business Creation
Ian Hathaway, Jordan Bell-Masterson & Daniel Stangler Ewing Marion
Kauffman Foundation Working Paper, July 2013
Abstract:
Freshly released government data show that new business formation rebounded in 2011, after four years of decline, from the depths of the Great Recession. This is a welcome development — new businesses are the engine of job creation in the United States economy and an important source of innovation and productivity. Perhaps most importantly, the rise in new business formation between 2010 and 2011 was geographically dispersed throughout the United States. While the rise of new business creation in 2011 is a significant development — it is the first annual gain in five years and the largest percentage annual increase in nearly a decade — the bulk of this paper examines two classes of new businesses that most closely resemble entrepreneurship: companies less than one year old with one to four employees and those with five to nine. This analysis finds that the smallest of these new firms represent most of the increase in firm formation in 2011: * New companies with one to four employees comprise the vast majority of new businesses formed each year, accounting for, on average, 86 percent of new firms since the late 1970s in the BDS data. * Job creation at new businesses of all sizes increased by 4.3 percent, and rose by 5.4 percent in new companies with one to four employees, reversing four consecutive years of decline for those smallest companies. * Companies less than one year old with one to four employees have created, on average, more than 1 million jobs per year over the past three decades; those with five to nine employees have added, on average, half a million jobs per year. * With a promise of more detailed analysis in future reports, this paper presents maps that illustrate the increased share of new business formation in most states and metro areas across the nation.
----------------------
A Prescription for Unemployment? Recessions and the Demand for Mental Health Drugs
David Bradford & William Lastrapes
Health Economics, forthcoming
Abstract:
We estimate the relationship between mental health drug prescriptions and the level of labor market activity in the USA. Based on monthly data from the National Ambulatory Medical Care Survey of physicians and aggregated by US census regions, we find that the number of mental health drug prescriptions (those aimed at alleviating depression and anxiety) rises by about 10% when employment falls by 1% and when unemployment rises by 100 basis points, but only for patients in the Northeast region. This paper is one of the first to look at compensatory health behavior in response to the business cycle.
----------------------
The Natural Rate Hypothesis: An idea past its sell-by date
Roger Farmer
NBER Working Paper, August 2013
Abstract:
Central banks throughout the world predict inflation with new-Keynesian models where, after a shock, the unemployment rate returns to its so called “natural rate’. That assumption is called the Natural Rate Hypothesis (NRH). This paper reviews a body of work, published over the last decade, which is critical of the NRH. I argue that the NRH does not hold in the data and I provide an alternative paradigm that explains why it does not hold. I replace the NRH with the assumption that the animal spirits of investors are a fundamental of the economy and I show how to operationalize that idea by constructing an empirical model that outperforms the new-Keynesian Phillips curve. I model animal spirits with a new fundamental that I call the belief function.
----------------------
A re-examination of the social returns to education: Evidence from U.S. cities
Benjamin Sand
Labour Economics, October 2013, Pages 97–106
Abstract:
This paper re-examines the impact of city educational composition on wages, often interpreted as human capital externalities. Using U.S. Census data, I find large, positive spill-overs from college education in the 1980s. In contrast, in the 1990s, the supply of skilled workers has no impact on average wages and may even negatively impact the wages of low-skill workers. These findings invite reinterpretation of previous studies on social returns to education, as shifts in the impact of city education composition on wages is not consistent with standard models of technological human capital externalities.
----------------------
Work values and beliefs of ‘Generation X’ and ‘Generation Y’
Harvey Krahn & Nancy Galambos
Journal of Youth Studies, forthcoming
Abstract:
This study examined cohort differences and intraindividual change in the intrinsic and extrinsic work values and job entitlement beliefs of Canadian high school seniors (classes of 1985 and 1996, representing ‘Generation X’ and ‘Generation Y’, respectively) surveyed at age 18 and again at age 25. The 1996 cohort placed more value on extrinsic work rewards (at age 25) and reported stronger job entitlement beliefs. Intrinsic work values increased in both cohorts during early adulthood, whereas extrinsic work values increased only in the 1996 cohort. Job entitlement beliefs decreased on average but less so in the 1996 cohort and in women. Predictors of intraindividual change depended on the outcome but included gender, academic experiences at age 18 (grades and post-secondary aspirations), post-high school labour market (unemployment) and educational experiences (obtaining a university degree), and adult statuses at age 25 (full-time worker, parent).
----------------------
The Effect of the Minimum Wage on Covered Teenage Employment
Nicole Coomer & Walter Wessels
Journal of Labor Research, September 2013, Pages 253-280
Abstract:
Unlike previous studies on the minimum wage, which focused on its effect on total teenage employment, we examine its effect on covered employment. A covered job was defined to be one paying the minimum wage or more. Using contemporary wages to classify workers this way may inflate the estimated effect of minimum wages on covered employment. To avoid this bias, covered jobs are identified using a logit procedure run over years in which the minimum age was not increased. We find that minimum wages reduced covered employment significantly more than total employment. We also show that covered employment may be overstated in the period following an increase in the minimum wage.
----------------------
Effects of the Minimum Wage on Employment Dynamics
Jonathan Meer & Jeremy West
NBER Working Paper, August 2013
Abstract:
The voluminous literature on minimum wages offers little consensus on the extent to which a wage floor impacts employment. For both theoretical and econometric reasons, we argue that the effect of the minimum wage should be more apparent in new employment growth than in employment levels. In addition, we conduct a simulation showing that the common practice of including state-specific time trends will attenuate the measured effects of the minimum wage on employment if the true effect is in fact on the rate of job growth. Using a long state-year panel on the population of private-sector employers in the United States, we find that the minimum wage reduces net job growth, primarily through its effect on job creation by expanding establishments.
----------------------
Age, Human Capital, and the Quality of Work: New Evidence from Old Masters
Thomas Bayer et al.
B.E. Journal of Economic Analysis & Policy, forthcoming
Abstract:
The links between individual ability, human capital investment, and quality of output are generally hard to examine because in most situations output results from multiple inputs and often through complex contracting processes. We overcome these problems by examining life-cycle artistic output quality as reflected in art auction prices. First, we observe an inverted U-shaped age-quality of work profile similar to the conventional age–wage profile. Second, we find that the degree of concavity increases for those with higher native ability. Third, we find that working for a patron rather than selling directly to the market is associated with a flatter age profile. Fourth, we find evidence that formal education increases the concavity of the age-quality of work profile. These results are consistent with the theory and demonstrate that artists respond to incentives to invest in human capital.
----------------------
The Effect of Disability Insurance Receipt on Labor Supply: A Dynamic Analysis
Eric French & Jae Song
American Economic Journal: Economic Policy, forthcoming
Abstract:
This paper estimates the effect of Disability Insurance receipt on labor supply, accounting for the dynamic nature of the application process. Exploiting the effectively random assignment of judges to disability insurance cases, we use instrumental variables to address the fact that those allowed benefits are a selected sample. We find that benefit receipt reduces labor force participation by 26 percentage points three years after a disability determination decision when not considering the dynamic nature of the applications process. OLS estimates are similar to instrumental variables estimates. We also find that over 60% of those denied benefits by an Administrative Law Judge are subsequently allowed benefits within 10 years, showing that most applicants apply, re-apply, and appeal until they get benefits. Next, we estimate a dynamic programming model of optimal labor supply and appeals choices. Consistent with the law, we assume that people cannot work and appeal at the same time. We match labor supply, appeals, and subsequent allowance decisions predicted by the model to the decisions observed in the data. We use the model to predict labor supply responses to benefit denial when there is no option to appeal. We find that if there was no appeals option, those denied benefits are 35 percentage points more likely to work. However, there is considerable heterogeneity in responses. Most individuals in their 40s would return to work if denied benefits, for example. Our results suggest that many of those denied benefits not because they are unable to work, but because they remain out of the labor force in order to appeal their benefit denial.
----------------------
Performance pay and changes in U.S. labor market dynamics
Francesco Nucci & Marianna Riggi
Journal of Economic Dynamics and Control, forthcoming
Abstract:
A shift in the design of labor compensation occurred at around the mid-1980s in the U.S. and deals with an increased role of performance pay in driving the cyclical movements of wages. Using a DSGE model we show that this structural change accounts at least qualitatively for many observed changes in the U.S. labor market dynamics. It generates the disappearance of the procyclical response of labor productivity to non-technology shocks and the reduction of the contractionary effects of technology shocks on hours. Moreover, it is conducive to a drop in the volatility of output, a parallel increase in the volatility of wages and to changes in unconditional correlations consistent with what documented in the U.S. between the pre- and post-1984 period.
----------------------
Labor productivity and vocational training: Evidence from Europe
Hector Sala & José Silva
Journal of Productivity Analysis, August 2013, Pages 31-41
Abstract:
In this paper we show that vocational training is an important determinant of productivity growth. We construct a multy-country, multi-sectoral dataset, and quantify empirically to what extent vocational training has contributed to increase the growth rate of labor productivity in Europe between 1999 and 2005. We find that one extra hour of training per employee accelerates the rate of productivity growth by around 0.55 % points.
----------------------
Happiness in the arts — International evidence on artists’ job satisfaction
Trine Bille et al.
Economics Letters, October 2013, Pages 15–18
Abstract:
Many artists are prone to high unemployment and low incomes suggesting low job satisfaction. Our analysis including 49 countries paints a different picture. On average artists enjoy higher job satisfaction than other employees, mainly due to more autonomy