Labor Issues
Artificial Intelligence and Technological Unemployment
Ping Wang & Tsz-Nga Wong
NBER Working Paper, May 2025
Abstract:
How large is the impact of artificial intelligence (AI) on labor productivity and unemployment? This paper introduces a labor-search model of technological unemployment, conceptualizing the generative aspect of AI as a learning-by-using technology. AI capability improves through machine learning from workers and in turn enhances their labor productivity, but eventually displaces workers if wage renegotiation fails. Three distinct equilibria emerge: no AI, some AI with higher unemployment, or unbounded AI with sustained endogenous growth and little impact on employment. By calibrating to the U.S. data, our model predicts more than threefold improvements in productivity in some-AI steady state, alongside a long-run employment loss of 23%, with half this loss occurring over the initial five-year transition. Plausible change in parameter values could lead to global and local indeterminacy. The mechanism highlights the considerable uncertainty of AI's impacts in the presence of labor-market frictions. In the unbounded-AI equilibrium, technological unemployment would not occur. We further show that equilibria are inefficient despite adherence to the Hosios condition. By improving job-finding rate and labor productivity, the optimal subsidy to jobs facing the replacement risk of AI can generate a welfare gain from 26.6% in the short run to over 50% in the long run.
'Nobody Wants to Work Anymore': Lifetime Wage Experiences and the Decline of Male LFP in the United States
Remy Levin & Daniela Vidart
University of Connecticut Working Paper, March 2025
Abstract:
Male labor force participation (MLFP) has declined sharply over the past 50 years in the United States. We show that a key driver of this decline is changes in mens' beliefs about the returns to work, shaped by their lifetime experiences of aggregate male wages. Using PSID data tracking individual labor histories linked to state-level real male wage time series, we find that prime-age MLFP increases with the average male wage in a man's state of birth over his lifetime, even after controlling for current labor market conditions and a host of fixed effects and covariates. A one standard deviation increase in the average experienced aggregate lifetime hourly wage -- corresponding to $0.33 and comparable to the difference in 2000 between being born in 1970 in Louisiana and Texas -- raises the probability of labor force participation by 10 percentage points. These effects persist for men who migrate and are stronger when restricting to same-race wages. Our findings suggest that lifetime wage experiences shape long-term beliefs about work, generating lasting spillovers from labor demand to labor supply.
Minimum Wage and Firm Automation Adoption: Text-Based Evidence from Investment Disclosures
Daniel Keum
Columbia University Working Paper, January 2025
Abstract:
We develop a novel measure of firm investment in automation adoption using the text in investment disclosures and provide evidence that minimum wage hikes induce a significant yet highly heterogeneous increase in automation among U.S. public firms. The increase is concentrated in routine-manual and low-wage industries, high-employment firms with greater potential for labor cost savings, financially constrained firms seeking to reduce operating costs, and years with lower electricity prices. Technological laggards that have been slower to automate also respond more strongly. These results are robust to controlling for unobserved local economic conditions using state-by-year fixed effects and to instrumenting minimum wage hikes with past Democratic control of state governments. Our findings suggest changes in firm production technology as a key channel through which minimum wage hikes affect firm behavior and long-run labor demand.
Do Workforce Development Programs Bridge the Skills Gap?
Eleanor Dillon et al.
University of Rochester Working Paper, April 2025
Abstract:
Most U.S. states have a workforce development program that offers firms grants to train their own workers. These training programs may help close skills gaps or may primarily serve local development goals. This paper explores the determinants and consequences of such programs. We create unique data linkages between participating firms and the Bureau of Labor Statistics business registry, as well as the Burning Glass job vacancy data (the near-universe of online job postings). We find that training grants are more prevalent in markets where firms face greater employee poaching risk, as well as in larger and higher-paying firms and markets. Using an event study and nearest-neighbor matching research design, we find that after training, firms experience growth in the number of postings and employees. Growth in job postings is concentrated in lower-skilled, front-line occupations and, even conditional on occupation mix, firms relax skill requirements after receiving a training grant. As such, program participation facilitates access to relatively high-quality firms. These low-skilled positions may complement those that received training or participating firms may have learned how to train workers themselves, rather than imposing up-front requirements. This collection of facts is consistent with the notion that these programs help overcome a market failure in updating worker skills.
Basic Income and the Dynamics of Employment and Human Capital in a Non-Urban Disadvantaged Setting
Jorge Luis García, Patrick Warren & Reed Watson
NBER Working Paper, June 2025
Abstract:
Why and when could basic income inhibit employment? We randomize 200 dollars of basic income per month for two years within a non-urban disadvantaged sample tracked using high-frequency administrative data. The amount provided is 21% of average all-source income. In the short term (0.5 years after baseline), relative to the control group, treatment-group employment decreases by 58%, average all-source income remains constant, and health-investment rates increase. In the longer term (1.25 years after baseline), employment and health-investment rates revert to their control-group counterparts. Treatment participants receive basic income, take time off work, address health needs, and, subsequently, reintegrate into employment.
The Role of the Fare in Welfare: Public Transportation Subsidies and Their Effects on Low-Income Households
Oluchi Mbonu & Seth Chizeck
Harvard Working Paper, April 2025
Abstract:
Can reducing public transit fares improve mobility and socioeconomic outcomes for low-income individuals? We conduct a randomized experiment that offers fare discounts to 9,544 low-income households in one large U.S. county. Households are randomly assigned to receive no discount, a 50% discount, or a 100% discount on all public transit trips for 16 to 19 months. We measure participants' mode-specific travel behavior using a combination of smartphone GPS data, high-frequency surveys, and farecard transactions. GPS data indicates that free fares increase transit ridership by 43% relative to status quo prices, accompanied by a shift away from private vehicle use along several margins. Half-price fares yield no change in transit ridership. Both discount levels improve self-reported mobility capacity, but neither one increases the overall frequency or spatial breadth of travel. Among those unemployed at baseline, free fares cause a 3.5 pp increase in the likelihood of being employed and a $2,845 increase in total earnings during the first six quarters. The social welfare impact of free fares exceeds the fiscal cost of the policy during the first two years. Fare-free transit shows promise as a means of helping disadvantaged job seekers and as a tool for mitigating the environmental externalities of car travel.
Adjusters and Casualties: The Anatomy of Labor Market Displacement
Eric Hanushek et al.
NBER Working Paper, May 2025
Abstract:
We analyze the full distribution of displaced workers’ earnings losses using a new method that combines matching and synthetic control group approaches at the individual level. We find that the distribution of earnings losses is highly skewed. Average losses, as estimated by conventional event studies, are driven by a small number of workers who suffer catastrophic losses, while most recover quickly. Observable worker characteristics explain only a small fraction of the variance in earnings losses. Instead, we find substantial heterogeneity in earnings losses even among workers displaced by the same firm who have identical observed characteristics such as education, age, and gender. Workers with minimal earnings losses adjust quickly by switching industries, occupations, and especially regions, while comparable workers with catastrophic losses adjust slowly, even though they are forced to make comparable numbers of switches in the long run.
City Size, Monopsony, and the Employment Effects of Minimum Wages
Priyaranjan Jha et al.
NBER Working Paper, May 2025
Abstract:
We assess how minimum wage effects on restaurant employment in the U.S. vary with labor market size and monopsony power. Using city-level data, we construct monopsony proxies based on labor flows and concentration. Minimum wages bind less in larger cities, consistent with the urban wage premium, and omitting this relationship overstates how labor market power reduces adverse employment effects of minimum wages. Nonetheless, accounting for city size, lower job market fluidity is linked to weaker negative employment effects, consistent with search models. By contrast, traditional concentration measures do not consistently predict variation in the effects of minimum wages.
In-Kind Housing Transfers and Labor Supply: A Structural Approach
Ning Zhang
Journal of Labor Economics, April 2025, Pages 585-633
Abstract:
This paper estimates a dynamic life cycle model to study the long-term impacts of housing vouchers on employment and examine how policy reforms affect labor supply and well-being. I show that the current program decreases female employment by 17% and male employment by 7%. Compared with the current program, a proposed reform that provides every recipient with a flat-rate subsidy increases female employment by 4% and leads to higher welfare. Policies that offer a lower subsidy to a larger population decrease employment by 3%–4% and increase welfare. Time-limited subsidies increase female employment by 4% and improve overall welfare.