Jobs plan
The Rise and Fall of Unions in the United States
Emin Dinlersoz & Jeremy Greenwood
Journal of Monetary Economics, October 2016, Pages 129-146
Abstract:
Union membership in the United States displayed a ∩-shaped pattern over the 20th century, while income inequality sketched a ∪. A model of unions is developed to analyze these facts. There is a distribution of productivity across firms in the economy. Firms hire capital, plus skilled and unskilled labor. Unionization is a costly process. A union chooses how many firms to organize and the union wage. Simulation of the model establishes that skill-biased technological change, which affects the productivity of skilled labor relative to unskilled labor, can potentially explain the observed paths for union membership and income inequality.
---------------------
Bad Credit, No Problem? Credit and Labor Market Consequences of Bad Credit Reports
Will Dobbie et al.
NBER Working Paper, October 2016
Abstract:
Credit reports are used in nearly all consumer lending decisions and, increasingly, in hiring decisions in the labor market, but the impact of a bad credit report is largely unknown. We study the effects of credit reports on financial and labor market outcomes using a difference-in-differences research design that compares changes in outcomes over time for Chapter 13 filers, whose personal bankruptcy flags are removed from credit reports after 7 years, to changes for Chapter 7 filers, whose personal bankruptcy flags are removed from credit reports after 10 years. Using credit bureau data, we show that the removal of a Chapter 13 bankruptcy flag leads to a large increase in credit scores, and an economically significant increase in credit card balances and mortgage borrowing. We study labor market effects using administrative tax records linked to personal bankruptcy records. In sharp contrast to the credit market effects, we estimate a precise zero effect of flag removal on e mployment and earnings outcomes. We conclude that credit reports are important for credit market outcomes, where they are the primary source of information used to screen applicants, but are of limited consequence for labor market outcomes, where employers rely on a much broader set of screening mechanisms.
---------------------
The Rise and Nature of Alternative Work Arrangements in the United States, 1995-2015
Lawrence Katz & Alan Krueger
NBER Working Paper, September 2016
Abstract:
To monitor trends in alternative work arrangements, we conducted a version of the Contingent Worker Survey as part of the RAND American Life Panel in late 2015. The findings point to a significant rise in the incidence of alternative work arrangements in the U.S. economy from 2005 to 2015. The percentage of workers engaged in alternative work arrangements - defined as temporary help agency workers, on-call workers, contract workers, and independent contractors or freelancers - rose from 10.7 percent in February 2005 to 15.8 percent in late 2015. The percentage of workers hired out through contract companies showed the largest rise, increasing from 1.4 percent in 2005 to 3.1 percent in 2015. Workers who provide services through online intermediaries, such as Uber or Task Rabbit, accounted for 0.5 percent of all workers in 2015. About twice as many workers selling goods or services directly to customers reported finding customers through offline intermediaries than through online intermediaries.
---------------------
Does the United States Have a Productivity Slowdown or a Measurement Problem?
David Byrne, John Fernald & Marshall Reinsdorf
Brookings Papers on Economic Activity, Spring 2016, Pages 109-182
Abstract:
After 2004, measured growth in labor productivity and total factor productivity slowed. We find little evidence that this slowdown arises from growing mismeasurement of the gains from innovation in information technology-related goods and services. First, the mismeasurement of information technology hardware is significant preceding the slowdown. Because the domestic production of these products has fallen, the quantitative effect on productivity was larger in the 1995-2004 period than since then, despite mismeasurement worsening for some types of information technology. Hence, our adjustments make the slowdown in labor productivity worse. The effect on total factor productivity is more muted. Second, many of the tremendous consumer benefits from the “new” economy such as smartphones, Google searches, and Facebook are, conceptually, nonmarket: Consumers are more productive in using their nonmarket time to produce services they value. These benefits raise consume r well-being but do not imply that market sector production functions are shifting out more rapidly than measured. Moreover, estimated gains in nonmarket production are too small to compensate for the loss in overall well-being from slower market sector productivity growth. In addition to information technology, other measurement issues that we can quantify (such as increasing globalization and fracking) are also quantitatively small relative to the slowdown.
---------------------
Mismatch Unemployment and the Geography of Job Search
Ioana Marinescu & Roland Rathelot
NBER Working Paper, September 2016
Abstract:
Could we significantly reduce U.S. unemployment by helping job seekers move closer to jobs? Using data from the leading employment board CareerBuilder.com, we show that, indeed, workers dislike applying to distant jobs: job seekers are 35% less likely to apply to a job 10 miles away from their ZIP code of residence. However, because job seekers are close enough to vacancies on average, this distaste for distance is fairly inconsequential: our search and matching model predicts that relocating job seekers to minimize unemployment would decrease unemployment by only 5.3%. Geographic mismatch is thus a minor driver of aggregate unemployment.
---------------------
The Consequences of Long Term Unemployment: Evidence from Matched Employer-Employee Data
Katharine Abraham et al.
U.S. Census Bureau Working Paper, September 2016
Abstract:
It is well known that the long-term unemployed fare worse in the labor market than the short term unemployed, but less clear why this is so. One potential explanation is that the long-term unemployed are “bad apples” who had poorer prospects from the outset of their spells (heterogeneity). Another is that their bad outcomes are a consequence of the extended unemployment they have experienced (state dependence). We use Current Population Survey (CPS) data on unemployed individuals linked to wage records for the same people to distinguish between these competing explanations. For each person in our sample, we have wage record data that cover the period from 20 quarters before to 11 quarters after the quarter in which the person is observed in the CPS. This gives us rich information about prior and subsequent work histories not available to previous researchers that we use to control for individual heterogeneity that might be affecting subsequent labor market outco mes. Even with these controls in place, we find that unemployment duration has a strongly negative effect on the likelihood of subsequent employment. This finding is inconsistent with the heterogeneity (“bad apple”) explanation for why the long-term unemployed fare worse than the short-term unemployed. We also find that longer unemployment durations are associated with lower subsequent earnings, though this is mainly attributable to the long-term unemployed having a lower likelihood of subsequent employment rather than to their having lower earnings once a job is found.
---------------------
Understanding Declining Fluidity in the U.S. Labor Market
Raven Molloy et al.
Brookings Papers on Economic Activity, Spring 2016, Pages 183-259
Abstract:
In this paper, we first document a clear, downward trend in labor market fluidity that is common across a variety of measures of worker and job turnover. This trend began in the early 1980s, if not somewhat earlier. Next, we present evidence for a variety of hypotheses that might explain this downward trend, which is only partly related to population demographics and is not due to the secular shift in industrial composition. Moreover, this decline in labor market fluidity seems unlikely to have been caused by an improvement in worker-firm matching or by mounting regulatory strictness in the labor or housing markets. Plausible avenues for further exploration include changes in the worker-firm relationship, particularly with regard to compensation adjustment; changes in firm characteristics, such as firm size and age; and a decline in social trust, which may have increased the cost of job searches or made both parties in the hiring process more risk averse.
---------------------
Can welfare abuse be welfare improving?
Karol Mazur
Journal of Public Economics, September 2016, Pages 11-28
Abstract:
In this paper, I analyze quantitatively a model of labor search with unemployment insurance (UI), savings, voluntary quits and various labor attachment requirements. In particular, I study welfare consequences of a powerful reform giving UI entitlement to workers quitting their jobs voluntarily in order to search for another one. Results of the model calibrated to the US labor market show that there are significant welfare gains associated with pursuing a generous entitlement policy for quitters as compared to the US status-quo. Moreover, I employ the assumption of monetary search costs and show that it can explain the empirically documented unemployed worker search behavior. Finally, by inducing different unemployment benefit eligibility requirements, the model identifies a concrete policy that could help us understand differences in the unemployment rate, match quality and income inequality between the US and Europe.
---------------------
The Effects of Algorithmic Labor Market Recommendations: Evidence from a Field Experiment
John Horton
Journal of Labor Economics, forthcoming
Abstract:
Algorithmically recommending workers to employers for the purpose of recruiting can substantially increase hiring: in an experiment conducted in an online labor market, employers with technical job vacancies that received recruiting recommendations had a 20% higher fill rate compared to the control. There is no evidence that the treatment crowded-out hiring of non-recommended candidates. The experimentally induced recruits were highly positively selected and were statistically indistinguishable from the kinds of workers employers recruit “on their own.” Recommendations were most effective for job openings that were likely to receive a smaller applicant pool.
---------------------
If I Leave Here Tomorrow: An Option View of Migration When Labor Market Quality Declines
John Gardner & Joshua Hendrickson
University of Mississippi Working Paper, September 2016
Abstract:
In this paper we provide a framework for determining when it is optimal to move when labor market opportunities are declining. We model the decision to migrate as akin to owning a financial option in which the exercise price is the fixed cost of moving. We show that a higher fixed cost associated with moving and a higher standard deviation of the quality of the labor market reduce the incentive to migrate. We then empirically examine whether the standard deviation of indicators of labor market quality reduce the likelihood of migration. Our findings strongly support this hypothesis, and imply that for the relatively mobile population of high-skilled workers, the counterfactual outmigration rates that would obtain if future labor-market quality were known with certainty are more than twice observed rates.
---------------------
Worker migration or job creation? Persistent shocks and regional recoveries
R. Greenaway-McGrevy & Kyle Hood
Journal of Urban Economics, November 2016, Pages 1-16
Abstract:
Although a large body of literature has documented the role of household out-migration in the recovery from regional downturns, the role that firms play in the recovery process has remained a neglected topic of research. Firms may choose to locate new jobs in depressed regions, thereby reducing unemployment through the job creation channel. We present a new empirical model of regional adjustment that permits us to decompose recoveries into both household and firm responses to local economic conditions. The model features a set of auxiliary serial dependence parameters that are used to filter out persistency in the identified labor market shocks, so that changes in employment obtained from the fitted model only reflect the endogenous firm response of interest, and not the ongoing exogenous job destruction from the original downturn. We find that the labor demand response is two to three times larger than the labor supply response, meaning that local job creation - and not household out-migration - is the main driver of recoveries in the US. This result is robust to a variety of model specifications, identification strategies, and estimation methods.
---------------------
The Effects of Negative House Price Changes on Migration: Evidence across U.S. Housing Downturns
Andrew Foote
Regional Science and Urban Economics, September 2016, Pages 292-299
Abstract:
I estimate the extent to which negative house price changes lower mobility for some homeowners. My identification strategy employs a reduced-form model that uses variation in state-year house price changes, as well as variation in a homeowner's exposure to house price changes, based on pre-existing leverage. I find that house price declines cause migration to decrease for homeowners that have low equity, but that there is no effect for the most leveraged homeowners. Differences in default costs across states do not appear to affect the mobility of homeowners in negative equity. Housing lock-in effects are larger in the most recent recession, affecting both in-state and interstate migration.
---------------------
Alex Bell et al.
Harvard Working Paper, June 2016
Abstract:
We use administrative records on the population of individuals who applied for or were granted a patent between 1996 and 2014 to characterize the lives of more than 1.2 million inventors in the United States. We show that children of low-income parents are much less likely to become inventors than their higher-income counterparts (as are minorities and women). Decompositions using third grade and older test scores indicate that this income-innovation gap can largely be accounted for by differences in human capital acquisition while children are growing up. We establish the importance of "innovation exposure effects" during childhood by showing that growing up in an area with a high innovation rate in a particular technology class is associated with a much higher probability of becoming an inventor specifically in that technology class. Similarly, exposure to innovation from parents or their colleagues in specific fields is also associated with greater future innovation by children in those same technological fields. Inventors' incomes are very skewed and uncertain at the start of their career. While our analysis does not directly identify the causal mechanisms that drive innovation, our descriptive findings shed light on which types of policy tools are likely to be most effective in sparking innovation. Calibrations suggest that "extensive margin" policies drawing more talented children from low-income families into the R&D sector have great potential to improve aggregate innovation rates.
---------------------
The recent decline of single quarter jobs
Henry Hyatt & James Spletzer
Labour Economics, forthcoming
Abstract:
Rates of hiring and job separation fell by as much as a third in the U.S. between the late 1990s and the early 2010s. Half of this decline is associated with the declining incidence of jobs that start and end in the same calendar quarter, employment events that we call “single quarter jobs.” We investigate this unique subset of jobs and its decline using matched employer-employee data for the years 1996-2012. We characterize the worker demographics and employer characteristics of single quarter jobs, and demonstrate that changes over time in workforce and employer composition explain little of the decline in these jobs. We find that the decline in these jobs accounts for about a third of the decline in the fraction of the population that holds a job in the private sector that occurred from the mid-2000s to the early 2010s. We also find little evidence that single quarter jobs are stepping stones into longer-term employment. Finally, we show that the inclusion or exclusion of these single quarter jobs creates divergent trends in average earnings and the dispersion of earnings for the years 1996-2012. To the extent that administrative records measure the volatile tail of the employment distribution better than conventional household surveys, these findings show that measurement of short duration jobs matters for economic analysis.
---------------------
Insecure times? Workers' perceived job and labor market security in 23 OECD countries
Lena Hipp
Social Science Research, November 2016, Pages 1-14
Abstract:
By examining the association between employees' perceptions of job security and central labor market policies and characteristics, this paper seeks to understand the mechanisms through which institutions generate confidence and positive expectations among individuals regarding their economic future. The analyses distinguish between different facets of perceived job security and different institutional mechanisms. My multilevel analyses of a data set that contains information on 12,431 individuals and 23 countries show that some labor market policies and characteristics are more likely than others to provide workers with subjective security. Unemployment assistance in particular is an effective means of reducing workers' worries about job loss. Dismissal protection, by contrast, only unleashes its psychologically protective effects under certain conditions. The paper's main conclusion is that the effectiveness of policies varies and that different types of labor market institutions serve as complements rather than as substitutes.
---------------------
Firing Costs and Capital Structure Decisions
Matthew Serfling
Journal of Finance, October 2016, Pages 2239-2286
Abstract:
I exploit the adoption of state-level labor protection laws as an exogenous increase in employee firing costs to examine how the costs associated with discharging workers affect capital structure decisions. I find that firms reduce debt ratios following the adoption of these laws, with this result stronger for firms that experience larger increases in firing costs. I also document that, following the adoption of these laws, a firm's degree of operating leverage rises, earnings variability increases, and employment becomes more rigid. Overall, these results are consistent with higher firing costs crowding out financial leverage via increasing financial distress costs.
---------------------
Impact of Labor Constraints on Firm Investment: Evidence from Right-to-Work Laws
Sudheer Chava, Andras Danis & Alex Hsu
Georgia Institute of Technology Working Paper, September 2016
Abstract:
We analyze the impact of staggered introduction of state level right-to-work (RTW) laws on corporate investment using a difference-in-differences estimation. We find that RTW law passage is associated with a 14.47% higher investment-to-asset ratio for firms headquartered in the state, with the effect being more pronounced for financially unconstrained firms. We ameliorate endogeneity concerns using a geographic regression discontinuity design. Our evidence is consistent with both a wage channel, where RTW laws lead to lower wages, and a debt channel, where they affect the leverage ratio, which then influences investment. Our results highlight how labor market frictions can have spillover effects on corporate policies.
---------------------
The Relationships between Economic Freedom and Economics Dynamism
Keith Barnatchez & Robert Lester
Contemporary Economic Policy, forthcoming
Abstract:
We analyze the consequences of economic freedom on economic dynamism across U.S. states and over time. Using data from the Economic Freedom of North America index, we show that states with greater economic freedom have higher rates of gross and net job creation and establishment entry. The results are robust to the inclusion of many different control variables and alternative specifications, suggesting a connection between freedom and dynamism. This evidence supports theories in which government policies may impede business dynamism.
---------------------
The Changing Benefits of Early Work Experience
Charles Baum & Christopher Ruhm
Southern Economic Journal, forthcoming
Abstract:
We examine whether the benefits of high school work experience have changed over the last 20 years by comparing effects for the 1979 and 1997 cohorts of the National Longitudinal Survey of Youth. Our main specifications suggest that the future annual earnings benefits of working 20 h per week in the senior year of high school have fallen from 17.4% for the earlier cohort, measured in 1987-1989, to 12.1% for the later cohort, in 2008-2010. The gains have diminished by similar amounts for men and women but much more substantially for those who do not later attend college than for those who do. We further show that most of the differential between cohorts can be attributed to the way that high school employment is related to subsequent adult work experience and occupational attainment.
---------------------
Educational mismatch and retirement
Keith Bender & John Heywood
Education Economics, forthcoming
Abstract:
Using a panel data set of scientists in the US, we examine the hypothesis that workers in jobs poorly matched to their education are more likely to retire. In pooled estimates, we confirm that the mismatched are more likely to retire and that among retirees, the mismatched retire at younger ages. Hazard function estimates also support the hypothesis. Workers with longer accumulated periods of mismatch are significantly more likely to retire in discrete-time duration models that account for both reasonable controls and worker heterogeneity. These findings suggest that educational mismatch and its consequences are concentrated among late-career employees.