Work in progress
Does Employment Protection Raise Stress? A Cross-Country and Cross-Province Analysis
Nicolas Lepage-Saucier & Etienne Wasmer
Journal of Human Capital, Spring 2016, Pages 33-66
Abstract:
This paper investigates the effects of employment protection legislation (EPL) on workers' stress and well-being. EPL increases job security, but it may also have adverse effects on workers, even in partial equilibrium: costly separations may induce firms to exert pressure on workers or raise the intensity of monitoring. Using several individual surveys, we obtain positive and significant effects of EPL on stress in high-turnover sectors relative to low-turnover sectors, with causal interpretation. As to the net effect of EPL, it raises workers' stress in high-turnover sectors while it generally reduces it in lower-turnover sectors.
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'No More Credit Score': Employer Credit Check Bans and Signal Substitution
Daniel Shoag & Robert Clifford
Harvard Working Paper, February 2016
Abstract:
In the past decade, most states have banned or have considered banning the use of credit checks in hiring decisions, a screening tool that is widely used by employers. Using new Equifax data on employer credit checks, the Federal Reserve Bank of New York Consumer Credit Panel/Equifax, and the LEHD Origin-Destination Employment data, we show that these bans increased employment of residents in the lowest credit score areas. The largest gains occurred in higher-paying jobs and in the government-sector. At the same time, using a large database of job postings, we show that employers increased their demands for other signals of applicants' job performance, like education and experience. On net, the changes induced by these bans generate relatively worse outcomes for those with mid-to-low credit scores, for those under 22 years old, and for Blacks, groups commonly thought to benefit from such legislation.
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Jorge Guzman & Scott Stern
NBER Working Paper, March 2016
Abstract:
While official measures of business dynamism have seen a long-term decline, early-stage venture financing of new companies has reached levels not observed since the late 1990s, resulting in a sharp debate about the state of American entrepreneurship. Building on Guzman and Stern (2015a; 2015b), this paper offers new evidence to inform this debate by estimating measures of entrepreneurial quality based on predictive analytics and comprehensive business registries. Our estimates suggest that the probability of a significant growth outcome (either an IPO or high-value acquisition) is highly skewed and predicted by observables at or near the time of business registration: 69% of realized growth events are in the top 5% of our estimated growth distribution. This high level of skewness motivates the development of three new economic statistics that simultaneously account for both the quantity as well as the quality of entrepreneurship: the Entrepreneurial Quality Index (EQI, measuring the average quality level among a group of start-ups within a given cohort), the Regional Entrepreneurship Cohort Potential Index (RECPI, measuring the growth potential of firms founded within a given region and time period) and the Regional Entrepreneurship Acceleration Index (REAI, measuring the performance of a region over time in realizing the potential of firms founded there). We use these statistics to establish several new findings about the history and state of US entrepreneurship using data for 15 states (covering 51% of the overall US economy) from 1988 through 2014. First, in contrast the secular decline in the aggregate quantity of entrepreneurship observed in series such as the Business Dynamic Statistics (BDS), the growth potential of start-up companies (RECPI relative to GDP) has followed a cyclical pattern that seems sensitive to the capital market environment and overall economic conditions. Second, while the peak value of RECPI is recorded in 2000, the level during the first decade during this century was actually higher than the late 1980s and first half of the 1990s, and also has experienced a sharp upward swing beginning in 2010. Even after controlling for changes in the overall size of the economy, the second highest level of entrepreneurial growth potential is registered in 2014. Third, the likelihood of start-up firms for a given quality level to realize their potential (REAI) declined sharply in the late 1990s, and did not recover through 2008. These findings suggest that divergent assessments of the state of American entrepreneurship can potentially be reconciled by explicitly adopting a quantitative approach to the measurement of entrepreneurial quality.
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When Is a Good Time to Raise the Minimum Wage?
Samuel Lundstrom
Contemporary Economic Policy, forthcoming
Abstract:
I analyze changes in the target efficiency of the federal minimum wage over the past 25 years. Using static simulation methods I find that minimum wage target efficiency is currently close to its 25-year peak - of the total monetary benefits generated by a 12% increase in the federal minimum wage, 16.8% would flow to workers in poverty. This exceeds the least target efficient year over this period by 4.7 percentage points and is only 0.6 percentage points below the peak. Furthermore, I find a very strong positive relationship between minimum wage target efficiency and the real federal minimum wage. The implication is that, from an efficiency standpoint, a good time to raise the minimum wage is when it is already high. This discovery raises the possibility that the minimum wage increases the employment of low-skilled poor individuals relative to the employment of low-skilled non-poor individuals. Moreover, this discovery may bolster the rationale for an indexed minimum wage whereby it is prevented from falling to less efficient levels.
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Promises Unfulfilled: Right-to-Work's Early Economic Track Record in Indiana
Frank Manzo
Labor Studies Journal, December 2015, Pages 379-395
Abstract:
This article examines the early economic track record of Indiana's "right-to-work" (RTW) law on labor market outcomes. It analyzes various labor market metrics to compare the experience in Indiana relative to nine neighboring states, as well as to the United States in the aggregate. Data are analyzed both 36 months before and 36 months after Indiana passed RTW. Initial "difference-in-difference" estimates find that the labor market performance of Indiana has not surpassed that of neighboring states following passage of the law, contrary to the claims promised by its proponents. Wage and employment growth in Indiana's construction industry, in particular, has fallen significantly behind the rest of the region. Regression analyses are subsequently performed, which conclude that RTW's unique effect has been to lower hourly wages in the state economy by 1.1 to 1.5 percent on average and have little to no impact on employment. The combination of effects results in state income tax revenues that are annually $16 to $52 million lower than they would be in the absence of the RTW policy.
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Chelsea Smith, Robert Crosnoe & Shih-Yi Chao
Research in Social Stratification and Mobility, forthcoming
Abstract:
The oft-discussed lengthening of the transition into adulthood is unlikely uniform across diverse segments of the population. This study followed youth in the National Longitudinal Survey of Youth 1979 and 1997 cohorts (n = 12,686 and 8,984, respectively) from 16 to 32 years old to investigate this trend in the United States, examining cross-cohort changes in transitions with a focus on differences by family background. Logistic regressions revealed that young adults in the most recent cohort were less likely to have completed schooling, fully entered the labor force, married, or become parents by their 30s than those in the older cohort. The cross-cohort drop in young adults completing schooling was more pronounced among youth from more disadvantaged family backgrounds, the drop in entering the labor force and having children was more pronounced among those from more advantaged backgrounds, and the drop in marriage did not differ by family background.
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The Shifting Job Tenure Distribution
Henry Hyatt & James Spletzer
U.S. Census Bureau Working Paper, February 2016
Abstract:
There has been a shift in the U.S. job tenure distribution toward longer-duration jobs since 2000. This change is apparent both in the tenure supplements to the Current Population Survey and the Longitudinal Employer-Household Dynamics matched employer-employee data. A substantial portion of these changes are caused by the ageing of the workforce and the decline in the entry rate of new employer businesses. We show that the tenure distribution is a function of historical hiring rates and tenure-specific separation rates, and we use this framework to show that the shift in the tenure distribution is accounted for primarily by declines in the hiring rate, which are concentrated in the labor market downturns associated with the 2001 and 2007-2009 recessions. We also find that the increase in average real earnings since 2007 is less than what would be predicted by the shift toward longer-tenure jobs; this reflects declines in tenure-held-constant real earnings. Regression estimates of the returns to job tenure provide no evidence that the shift in the job tenure distribution is being driven by better matches between workers and employers.
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The Employment Impact of Motor Vehicle Assembly Plant Openings
Brian Adams
Regional Science and Urban Economics, May 2016, Pages 57-70
Abstract:
Local governments often offer motor vehicle assembly plants large subsidies to locate in their jurisdiction. A frequent justification is that an assembly plant will attract upstream parts suppliers to locate nearby and provide manufacturing jobs. Using propensity score matching, I find that an assembly plant brings an average of 500 additional parts suppliers jobs beyond the employment gains the region would have experienced without the assembly plant. This increase is far less than predicted by the input-output models that state development agencies often employ.
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Government Old-Age Support and Labor Supply: Evidence from the Old Age Assistance Program
Daniel Fetter & Lee Lockwood
NBER Working Paper, March 2016
Abstract:
Many major government programs transfer resources to older people and implicitly or explicitly tax their labor. In this paper, we shed new light on the labor supply effects of such programs by investigating the Old Age Assistance Program (OAA), a means-tested and state-administered pension program created by the Social Security Act of 1935. Using newly available Census data on the entire US population in 1940, we exploit the large differences in OAA programs across states to estimate the labor supply effects of OAA. Our estimates imply that OAA reduced the labor force participation rate among men aged 65-74 by 5.7 percentage points, nearly half of its 1930-40 decline. Estimating a structural model of labor supply, we find that the welfare costs to recipients of the high tax rates implicit in OAA's earnings test were quite small. Predictions based on our reduced-form estimates and our estimated model both suggest that Social Security could account for at least half of the large decline in late-life work from 1940 to 1960.
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Mallory Vachon
LSU Working Paper, May 2015
Abstract:
The Social Security Disability Insurance (DI) program is the largest income replacement program in the United States for non-elderly adults. Growth in the DI program since the 1970s coincided with a well-documented decline in wages and labor force participation of low-skilled workers. Since DI is more attractive as outside options decline, a key question in labor and public economics is the extent to which secular changes in the labor market have led to increases in DI program participation. In this paper, I exploit an exogenous positive labor demand shock caused by a boom in oil production in the Bakken formation covering parts of Montana, North Dakota, and South Dakota to estimate the impact of earnings growth on DI payments and participation. Using the value of county oil reserves as an instrument for earnings, my estimates suggest a strong negative relationship between local economic conditions and DI payments and participation. I find an elasticity of DI payments with respect to local earnings of -1 and an elasticity of DI participation with respect to earnings of -0.7.
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David Pedulla
American Sociological Review, April 2016, Pages 262-289
Abstract:
Millions of workers are employed in positions that deviate from the full-time, standard employment relationship or work in jobs that are mismatched with their skills, education, or experience. Yet, little is known about how employers evaluate workers who have experienced these employment arrangements, limiting our knowledge about how part-time work, temporary agency employment, and skills underutilization affect workers' labor market opportunities. Drawing on original field and survey experiment data, I examine three questions: (1) What are the consequences of having a nonstandard or mismatched employment history for workers' labor market opportunities? (2) Are the effects of nonstandard or mismatched employment histories different for men and women? and (3) What are the mechanisms linking nonstandard or mismatched employment histories to labor market outcomes? The field experiment shows that skills underutilization is as scarring for workers as a year of unemployment, but that there are limited penalties for workers with histories of temporary agency employment. Additionally, although men are penalized for part-time employment histories, women face no penalty for part-time work. The survey experiment reveals that employers' perceptions of workers' competence and commitment mediate these effects. These findings shed light on the consequences of changing employment relations for the distribution of labor market opportunities in the "new economy."