Labor Share
License to Layoff? Unemployment Insurance and the Moral Cost of Layoffs
Dongil Daniel Keum & Stephan Meier
Organization Science, forthcoming
Abstract:
This study presents moral cost as a novel behavioral constraint on firm resource adjustment, specifically layoff decisions that can cause severe harm to employees. Revising the prevailing negative view of managers as purely self-interested, we propose that managers care about their employees and incur moral cost from layoffs. We leverage expansions in unemployment insurance as a quasi-natural experiment that reduces economic hardship for laid-off workers and, in turn, the moral cost of layoffs to managers. We find that these expansions license larger layoffs. The effects are stronger for chief executive officers (CEOs) with stronger prosocial preferences who dismiss fewer workers despite low performance, such as non-Republican, internally promoted, small town, or family firm CEOs, and weaker for CEOs who lack the discretion to avoid moral cost due to shareholder or financial pressures. Our findings suggest that the role of moral cost is substantial but also highly heterogeneous and readily suppressed by external pressures.
Location, Location, Location
David Card, Jesse Rothstein & Moises Yi
NBER Working Paper, August 2023
Abstract:
We use data from the Longitudinal Employer-Household Dynamics program to study the causal effects of location on earnings. Starting from a model with employer and employee fixed effects, we estimate the average earnings premiums associated with jobs in different commuting zones (CZs) and different CZ-industry pairs. About half of the variation in mean wages across CZs is attributable to differences in worker ability (as measured by their fixed effects); the other half is attributable to place effects. We show that the place effects from a richly specified cross sectional wage model overstate the causal effects of place (due to unobserved worker ability), while those from a model that simply adds person fixed effects understate the causal effects (due to unobserved heterogeneity in the premiums paid by different firms in the same CZ). Local industry agglomerations are associated with higher wages, but overall differences in industry composition and in CZ-specific returns to industries explain only a small fraction of average place effects. Estimating separate place effects for college and non-college workers, we find that the college wage gap is bigger in larger and higher-wage places, but that two-thirds of this variation is attributable to differences in the relative skills of the two groups in different places. Most of the remaining variation reflects the enhanced sorting of more educated workers to higher-paying industries in larger and higher-wage CZs. Finally, we find that local housing costs at least fully offset local pay premiums, implying that workers who move to larger CZs have no higher net-of-housing consumption.
Does job insecurity shape policy preferences? An experimental manipulation of labor market risk
Mallory Compton & Andrew Philips
Journal of Politics, forthcoming
Abstract:
Research on political behavior and policy preferences has long argued that economic or labor-market risk should motivate support for social policy, especially social insurance. We test this expectation about political behavior using a survey experiment in the nationally-representative 2020 US Cooperative Congressional Election Study, through which we manipulate perceptions of labor market risk. Though our results suggest that our treatment successfully induced greater perceived labor market insecurity among respondents, we find no support for the expectation that risk of job loss translates into preferences for unemployment insurance policy design. We further find that Republicans react to the suggestion of macroeconomic change (either positive or negative) with a preference for rolling back unemployment insurance benefits, while Democrats' policy preferences are not significantly changed by the treatment. This result raises interesting questions for future analysis and research.
The Short-Term Effects of Generative Artificial Intelligence on Employment: Evidence from an Online Labor Market
Xiang Hui, Oren Reshef & Luofeng Zhou
Washington University in St. Louis Working Paper, July 2023
Abstract:
Generative Artificial Intelligence (AI) holds the potential to either complement knowledge workers by increasing their productivity or substitute them entirely. We examine the short-term effects of the recent release of the large language model (LLM), ChatGPT, on the employment outcomes of freelancers on a large online platform. We find that freelancers in highly affected occupations suffer from the introduction of generative AI, experiencing reductions in both employment and earnings. We find similar effects studying the release of other image-based, generative AI models. Exploring the heterogeneity by freelancers' employment history, we do not find evidence that high-quality service, measured by their past performance and employment, moderates the adverse effects on employment. In fact, we find suggestive evidence that top freelancers are disproportionately affected by AI. These results suggest that in the short term generative AI reduces overall demand for knowledge workers of all types, and may have the potential to narrow gaps among workers.
Remote Work and City Structure
Ferdinando Monte, Charly Porcher & Esteban Rossi-Hansberg
NBER Working Paper, July 2023
Abstract:
We study the adoption of remote work within cities and its effect on city structure and welfare. We develop a dynamic model of a city in which workers can decide to work in the central business district (CBD) or partly at home. Working in the CBD allows them to interact with other commuters, which enhances their productivity through a standard production externality, but entails commuting costs. Switching between modes of labor delivery is costly, and workers face idiosyncratic preference shocks for remote work. We characterize the parameter set in which the city exhibits multiple stationary equilibria. Within this set, a coordination mechanism can lead to stationary equilibria in which most workers commute or most of them work partially from home. In these cases, large shocks in the number of commuters, like the recent lockdowns and self-isolation generated by the COVID-19 pandemic, can result in dynamic paths that make cities converge to a stationary equilibrium with large fractions of remote workers. Using cell-phone-based mobility data for the U.S., we document that although most cities experienced similar reductions in CBD trips during the pandemic, trips in the largest cities have stabilized at levels that are only about 60% of pre-pandemic levels. In contrast, smaller cities have, on average, returned to pre-pandemic levels. House price panel data by city show consistent changes in house price CBD-distance gradients. We estimate the model for 274 U.S. cities and show that cities that have stabilized at a large fraction of remote work are much more likely to have parameters that result in multiple stationary equilibria. Our results imply welfare losses in these cities that average 2.7%.
Only the fit survive recessions: Estimating labor market penalties for the obese over the business cycle
Rachel Inafuku
Health Economics, October 2023, Pages 2322-2333
Abstract:
The obesity epidemic is a growing concern in the United States. Aside from the detrimental health effects of obesity, previous work has also documented a negative relationship between obesity and various labor market outcomes. Given that the American adult obesity rate is roughly 40%, obesity affects a large portion of the US labor market. In this study, I analyze the impact of obesity on income and employment over business cycle fluctuations. I find that during economic downturns, obese workers experience larger declines in income and employment relative to their healthy weight peers. These effects exist for both genders and are concentrated amongst younger adults.