Underemployment in the US and Europe
David Bell & David Blanchflower
NBER Working Paper, August 2018
Large numbers of part-time workers around the world, both those who choose to be part-time and those who are there involuntarily and would prefer a full-time job, report they want more hours. Full-timers who say they want to change their hours mostly say they want to reduce them. When recession hit in most countries, the number of hours of those who said they wanted more hours rose sharply and there was a fall in the number of hours that full-timers wanted their hours reduced by. Even though the unemployment rate has returned to its pre-recession levels in many advanced countries, underemployment in most has not. We produce estimates for a new, and better, underemployment rate for twenty-five European countries. In most, underemployment remains elevated. We provide evidence for the UK and the US as well as some international evidence that underemployment rather than unemployment lowers pay in the years after the Great Recession. We also find evidence for the US that falls in the home ownership rate have helped to keep wage pressure in check. Underemployment replaces unemployment as the main influence on wages in the years since the Great Recession.
Labor Market Effects of U.S. Sick Pay Mandates
Stefan Pichler & Nicolas Ziebarth
Journal of Human Resources, forthcoming
This paper exploits temporal and spatial variation in the implementation of nine city- and four state-level U.S. sick pay mandates to assess their labor market consequences. We use the Synthetic Control Group Method and traditional Difference-in-Differences models along with the Quarterly Census of Employment and Wages to estimate the causal effects of mandated sick pay on employment and wages. We do not find much evidence that employment or wages were significantly affected by the mandates that typically allow employees to earn one hour of paid sick leave per work week, up to seven days per year. Employment decreases of 2 percent lie outside the 92 percent confidence interval and wage decreases of 3 percent lie outside the 95 percent confidence interval.
Minimum Wage Increases and Individual Employment Trajectories
Ekaterina Jardim et al.
NBER Working Paper, October 2018
Using administrative employment data from the state of Washington, we use short-duration longitudinal panels to study the impact of Seattle’s minimum wage ordinance on individuals employed in low-wage jobs immediately before a wage increase. We draw counterfactual observations using nearest-neighbor matching and derive effect estimates by comparing the “treated” cohort to a placebo cohort drawn from earlier data. We attribute significant hourly wage increases and hours reductions to the policy. On net, the minimum wage increase from $9.47 to as much as $13 per hour raised earnings by an average of $8-$12 per week. The entirety of these gains accrued to workers with above-median experience at baseline; less-experienced workers saw no significant change to weekly pay. Approximately one-quarter of the earnings gains can be attributed to experienced workers making up for lost hours in Seattle with work outside the city limits. We associate the minimum wage ordinance with an 8% reduction in job turnover rates as well as a significant reduction in the rate of new entries into the workforce.
The Value of Working Conditions in the United States and Implications for the Structure of Wages
Nicole Maestas et al.
NBER Working Paper, October 2018
This paper documents variation in working conditions among workers in the United States, presents new estimates of how workers value these conditions, and assesses the impact of working conditions on estimates of the wage structure and inequality. We use evidence from a series of stated-preference experiments to estimate workers’ willingness-to-pay for a broad set of job characteristics, which we validate with actual job choices. We find that working conditions vary substantially across workers, play a significant role in job choice decisions, and are central components of the compensation received by workers. Preferences vary by demographic groups and throughout the wage distribution. We find that accounting for differences in preferences for working conditions often exacerbates wage differentials by race, age, and education, and intensifies measures of wage inequality.
Infrastructure investments and entrepreneurial dynamism in the U.S.
Journal of Business Venturing, forthcoming
Investments in physical infrastructure induce environmental changes that serve both an enabling and disabling function, potentially acting to simultaneously stimulate new business establishment and provoke exit by some incumbent establishments. The opening of a new establishment results in the creation of jobs that did not previously exist. Similarly, the closing of an establishment results in the permanent loss of jobs. I develop a theoretical model that depicts this external enabler/disabler process and test the model's predictions empirically tested using annual state-level data spanning the period 1993-2015. The results from dynamic panel system GMM estimation suggest that public and private infrastructure investments exert opposite effects on dynamism. Whereas private infrastructure investment is positively and significantly associated with the creation of businesses and jobs, public infrastructure investments are associated with the destruction of businesses and jobs. These results point to private infrastructure investment serving primarily an entrepreneurial enabler role and public infrastructure investment an entrepreneurial disabler role.
STEM Careers and Technological Change
David Deming & Kadeem Noray
NBER Working Paper, September 2018
Science, Technology, Engineering, and Math (STEM) jobs are a key contributor to economic growth and national competitiveness. Yet STEM workers are perceived to be in short supply. This paper shows that the “STEM shortage” phenomenon is explained by technological change, which introduces new job tasks and makes old ones obsolete. We find that the initially high economic return to applied STEM degrees declines by more than 50 percent in the first decade of working life. This coincides with a rapid exit of college graduates from STEM occupations. Using detailed job vacancy data, we show that STEM jobs changed especially quickly over the last decade, leading to flatter age-earnings profiles as the skills of older cohorts became obsolete. Our findings highlight the importance of technology-specific skills in explaining life-cycle returns to education, and show that STEM jobs are the leading edge of technology diffusion in the labor market.
The veteran wage differential
Francesco Renna & Amanda Weinstein
Applied Economics, forthcoming
There is debate in the literature as to whether military service is rewarded in the economy and the extent to which veterans receive either a wage premium or penalty. In this paper, we take a new approach to this question by conducting a wage decomposition of the veteran wage differential and decomposing the wage distribution of veterans and civilians instead of focusing only on the standard wage gap analysis at the averages. We find the veteran wage differential is driven by observable factors such as education, occupation, and industry, but also by location choice, a factor that has been previously overlooked in the literature. At the average, we find white men experience a veteran penalty whereas black men and women experience a veteran premium consistent with the bridging hypothesis. Additionally, we find that as we move along the wage distribution for all demographic groups, the veteran premium tends to become a veteran penalty, even after accounting for selection into military service. However, once we account for selection, we find that the premium for veteran black men disappears.
State Collective Bargaining Laws and Public-Sector Pay
Eric Brunner & Andrew Ju
ILR Review, forthcoming
Using the Public Use Microdata Sample from the 2005 to 2015 American Community Survey, the authors provide new evidence on how state collective bargaining laws affect public-sector wages. To isolate the causal effect of bargaining laws on public-sector pay, they examine wage differentials between otherwise similar public- and private-sector employees located in the same local labor market. They estimate difference-in-differences (DD) models that exploit two sources of plausibly exogenous variation: 1) policy discontinuities along state borders and 2) variation within states in collective bargaining laws in states where the majority of public workers are without collective bargaining rights. Findings show that mandatory collective bargaining laws increase public-sector wages by approximately 5 to 8 percentage points. Results therefore suggest that mandatory collective bargaining laws provide a formal mechanism through which public-sector workers are able to bargain for increased compensation.
What do government unions do? Public sector unions and nonunion wages, 1977-2015
Jake Rosenfeld & Patrick Denice
Social Science Research, forthcoming
In this article we investigate the connection between public sector union memberships and nonunion worker pay. We leverage nearly four decades of Current Population Survey (CPS) data on millions of U.S. workers to test whether public sector union density, measured at the state-level, is associated with higher average wages among unorganized workers. We find stable and substantively large positive effects of state-level public sector union strength on nonunion public sector workers’ wages. These results are robust to the inclusion of a range of state-level controls, including GDP, average educational attainment, public sector size, and the strength of private sector unions. Analyses of public sector unions and nonunion private sector pay reveal a robust positive relationship - but one limited to women, revealing how occupational segregation interacts with pay-setting institutions to influence wage outcomes.
Employer Screening Costs, Recruiting Strategies, and Labor Market Outcomes: An Equilibrium Analysis of On-Campus Recruiting
Labour Economics, December 2018, Pages 282-299
I analyze labor market matching with search and informational frictions, by studying employer recruiting on college campuses. Based on employer and university interviews, I develop a model describing firms’ choice of target campuses. The model predicts that with costly screening, firms concentrate (per student) at selective universities over those where high-quality students are larger in number, but smaller in proportion. Further, recruiting is affected by nearby universities’ selectivity. This prediction has strong support using data from 39 finance and consulting firms and the Baccalaureate and Beyond. For median-selectivity universities, a better regionally-ranked university is twice as likely to attract a consulting firm, and wages are higher by 4%. Halving screening costs, for example through algorithmic screening, structural estimation shows a 27% increase in the proportion of expected hires from universities outside the top selectivity quartile.
Unequal Use of Social Insurance Benefits: The Role of Employers
Sarah Bana et al.
NBER Working Paper, October 2018
California's Disability Insurance (DI) and Paid Family Leave (PFL) programs have become important sources of social insurance, with benefit payments now exceeding those of the state's Unemployment Insurance program. However, there is considerable inequality in program take-up. While existing research shows that firm-specific factors explain a significant part of the growing earnings inequality in the U.S., little is known about the role of firms in determining the use of public leave-taking benefits. Using administrative data from California, we find strong evidence that DI and PFL program take-up is substantially higher in firms with high earnings premiums. A one standard deviation increase in the firm premium is associated with a 57 percent higher claim rate incidence. Our results suggest that changes in firm behavior have the potential to impact social insurance use and thus reduce an important dimension of inequality in America.
Collective Action and the Origins of the American Labor Movement
Journal of Economic History, September 2018, Pages 744-784
This article examines the relationship between collective action and the size of worker and employer groups in the United States. It proposes and tests a theory of union formation and strikes. Using a new county-by-industry level dataset containing the location of unions, the location of strikes, average establishment size, and the number of establishments around the turn of the twentieth century, I find that unions were more likely to form and strikes were more likely to occur in counties with intermediate-sized worker groups and large employer groups.
The Effect of Lower Transaction Costs on Social Security Disability Insurance Application Rates and Participation
Andrew Foote, Michel Grosz & Stephanie Rennane
Journal of Policy Analysis and Management, forthcoming
Transaction costs pose significant barriers to participation in public programs. We analyze how Social Security Disability Insurance (SSDI) application behavior was affected by iClaim, a 2009 innovation that streamlined the online application process. We use a difference‐in‐differences design to compare application rates before and after 2009 across counties with varying degrees of access to high‐speed internet. We estimate that counties with internet connectivity one standard‐deviation above the mean experienced a 1.6 percent increase in SSDI applications, and a 2.8 percent increase in appeals after the reform. We estimate that the increase in applications due to iClaim can explain 15 percent of the overall increase in applications between 2008 and 2011. Higher exposure to the online application led to a slightly larger increase in SSDI awards, meaning there was a small but significant increase in the overall award rate. Application rates increased the most in rural areas, while appeals and awards had more significant increases in urban areas. These results suggest that the online application reduced transaction costs to applicants, and the lower costs improved the overall targeting efficiency of the application process.
Unlucky Cohorts: Estimating the Long-term Effects of Entering the Labor Market in a Recession in Large Cross-sectional Data Sets
Hannes Schwandt & Till von Wachter
NBER Working Paper, October 2018
This paper studies the differential persistent effects of initial economic conditions for labor market entrants in the United States from 1976 to 2015 by education, gender, and race using labor force survey data. We find persistent earnings and wage reductions especially for less advantaged entrants that increases in government support only partly offset. We confirm the results are unaffected by selective migration and labor market entry by also using a double-weighted average unemployment rate at labor market entry for each birth cohort and state-of-birth cell based on average state migration rates and average cohort education rates from Census data.