It's your job
Creative Destruction and Subjective Wellbeing
Philippe Aghion et al.
NBER Working Paper, April 2015
Abstract:
In this paper we analyze the relationship between turnover-driven growth and subjective wellbeing, using cross-sectional MSA level US data. We find that the effect of creative destruction on wellbeing is (i) unambiguously positive if we control for MSA-level unemployment, less so if we do not; (ii) more positive on future wellbeing than on current well-being; (iii) more positive in MSAs with faster growing industries or with industries that are less prone to outsourcing; (iv) more positive in MSAs within states with more generous unemployment insurance policies.
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Declining Desire to Work and Downward Trends in Unemployment and Participation
Regis Barnichon & Andrew Figura
Federal Reserve Working Paper, March 2015
Abstract:
The US labor market has witnessed two apparently unrelated trends in the last 30 years: a decline in unemployment between the early 1980s and the early 2000s, and a decline in labor force participation since the early 2000s. We show that a substantial factor behind both trends is a decline in desire to work among individuals outside the labor force, with a particularly strong decline during the second half of the 90s. A decline in desire to work lowers both the unemployment rate and the participation rate, because a nonparticipant who wants to work has a high probability to join the unemployment pool in the future, while a nonparticipant who does not want to work has a low probability to ever enter the labor force. We use cross-sectional variation to estimate a model of nonparticipants' propensity to want a job, and we find that changes in the provision of welfare and social insurance, possibly linked to the mid-90s welfare reforms, explain about 50 percent of the decline in desire to work.
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Why are American Workers getting Poorer? China, Trade and Offshoring
Avraham Ebenstein, Ann Harrison & Margaret McMillan
NBER Working Paper, March 2015
Abstract:
We suggest that the impact of globalization on wages has been missed because its effects must be captured by analyzing occupational exposure to globalization. In this paper, we extend our previous work to include recent years (2003-2008), a period of increasing import penetration, China's entry into the WTO, and growing US multinational employment abroad. We find significant effects of globalization, with offshoring to low wage countries and imports both associated with wage declines for US workers. We present evidence that globalization has led to the reallocation of workers away from high wage manufacturing jobs into other sectors and other occupations, with large declines in wages among workers who switch, explaining the large differences between industry and occupational analyses. While other research has focused primarily on China's trade, we find that offshoring to China has also contributed to wage declines among US workers. However, the role of trade is quantitatively much more important. We also explore the impact of trade and offshoring on labor force participation rates. While offshoring to China has a negative impact on US labor force participation, other factors such as increasing computer use and substitution of capital for labor are significantly more important determinants of US employment rates across occupations.
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Leadership Activities and Future Earnings: Is There a Causal Relation?
Ozkan Eren & Serkan Ozbeklik
Journal of Human Capital, Spring 2015, Pages 45-63
Abstract:
This paper revisits the effect of high school leadership activities on young men's earnings. Using several data sets and extending a recently developed econometric technique, we show that even a small amount of selection on unobservables explains the entire high school leadership effect on earnings. We also show that the use of observables to address nonrandom selection bias may yield misleading results if the fixed effects are not dealt with properly.
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Robots Are Us: Some Economics of Human Replacement
Seth Benzell et al.
NBER Working Paper, February 2015
Abstract:
Will smart machines replace humans like the internal combustion engine replaced horses? If so, can putting people out of work, or at least out of good work, also put the economy out of business? Our model says yes. Under the right conditions, more supply produces, over time, less demand as the smart machines undermine their customer base. Highly tailored skill- and generation-specific redistribution policies can keep smart machines from immiserating humanity. But blunt policies, such as mandating open-source technology, can make matters worse.
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Is temporary employment a cause or consequence of poor mental health? A panel data analysis
Chris Dawson et al.
Social Science & Medicine, June 2015, Pages 50-58
Abstract:
Mental health status has an association with labour market outcomes. If people in temporary employment have poorer mental health than those in permanent employment then it is consistent with two mutually inclusive possibilities: temporary employment generates adverse mental health effects and/or individuals with poorer mental health select into temporary from permanent employment. We apply regression analyses to longitudinal data corresponding to about 50,000 observations across 8,000 individuals between 1991 and 2008 drawn from the British Household Panel Survey. We find that permanent employees who will be in temporary employment in the future have poorer mental health than those who never become temporarily employed. We also reveal that this relationship is mediated by greater job dissatisfaction. Overall, these results suggest that permanent workers with poor mental health appear to select into temporary employment thus signalling that prior cross section studies may overestimate the influence of employment type on mental health.
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Firm Leverage and Unemployment during the Great Recession
Xavier Giroud & Holger Mueller
NBER Working Paper, April 2015
Abstract:
We argue that firms' balance sheets were instrumental in the propagation of shocks during the Great Recession. Using establishment-level data, we show that firms that tightened their debt capacity in the run-up ("high-leverage firms") exhibit a significantly larger decline in employment in response to household demand shocks than firms that freed up debt capacity ("low-leverage firms"). In fact, all of the job losses associated with falling house prices during the Great Recession are concentrated among establishments of high-leverage firms. At the county level, we find that counties with a larger fraction of establishments belonging to high-leverage firms exhibit a significantly larger decline in employment in response to household demand shocks. Thus, firms' balance sheets also matter for aggregate employment.
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Explaining the Public-Sector Pay Gap: The Role of Skill and College Major
Max Schanzenbach
Journal of Human Capital, Spring 2015, Pages 1-44
Abstract:
This paper reassesses the public-sector pay gap using AFQT score and college major as measures of skill. Among the college educated, there is strong evidence that those with lower skills enter the public sector. In contrast to the private sector, for college-educated public-sector workers, AFQT score is not correlated with pay, and college major is only weakly predictive of pay. Furthermore, simple controls for college major explain most of the public-private-sector pay gap. I conclude that the public-sector pay gap is much smaller than previously estimated and pay rigidities cause significant skill-based selection between the sectors.
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The Recent Decline of Single Quarter Jobs
Henry Hyatt & James Spletzer
U.S. Census Bureau Working Paper, January 2015
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.
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Creating a More Quit-Friendly National Workforce? Individual Layoff History and Voluntary Turnover
Paul Davis, Charlie Trevor & Jie Feng
Journal of Applied Psychology, forthcoming
Abstract:
Although Bureau of Labor Statistics data reveal that U.S. employers laid off over 30 million employees since 1994, virtually no research has addressed the behavior of layoff victims upon reemployment. In a first step, we investigate how layoffs shape voluntary turnover behavior in subsequent jobs. Utilizing a recently developed fixed effects specification of survival analysis, we find that a layoff history is positively associated with quit behavior. This effect is partially mediated by underemployment and job satisfaction in the postlayoff job. The remaining direct effect is consistent with the notion that layoffs produce a psychological spillover to postlayoff employment, which then manifests in quit behavior. We also find that layoff effects on turnover attenuate as an individual's layoffs accumulate and vary in magnitude according to the turnover "path" followed by the leaver.
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Aggregate Demand, Idle Time, and Unemployment
Pascal Michaillat & Emmanuel Saez
Quarterly Journal of Economics, forthcoming
Abstract:
This paper develops a model of unemployment fluctuations. The model keeps the architecture of the general-disequilibrium model of Barro and Grossman (1971) but takes a matching approach to the labor and product markets instead of a disequilibrium approach. On the product and labor markets, both price and tightness adjust to equalize supply and demand. Since there are two equilibrium variables but only one equilibrium condition on each market, a price mechanism is needed to select an equilibrium. We focus on two polar mechanisms: fixed prices and competitive prices. When prices are fixed, aggregate demand affects unemployment: with a higher aggregate demand, firms find more customers; this reduces the idle time of their employees and thus increases their labor demand; and this reduces unemployment. We combine the predictions of the model and empirical measures of product market tightness, labor market tightness, output, and employment to assess the sources of labor market fluctuations in the US. First, we find that product market tightness and labor market tightness fluctuate a lot, which implies that the fixed-price equilibrium describes the data better than the competitive-price equilibrium. Next, we find that labor market tightness and employment are positively correlated, which suggests that the labor market fluctuations are mostly due to labor demand shocks and not to labor supply or mismatch shocks. Last, we find that product market tightness and output are positively correlated, which suggests that the labor demand shocks mostly reflect aggregate demand shocks and not technology shocks.
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Minimum Wage Channels of Adjustment
Barry Hirsch, Bruce Kaufman & Tetyana Zelenska
Industrial Relations, April 2015, Pages 199-239
Abstract:
We analyze the effects of minimum wage increases in 2007-2009 using a sample of restaurants from Georgia and Alabama. Store-level payroll records provide precise measures of compliance costs. We examine multiple adjustment channels. Exploiting variation in compliance costs across restaurants, we find employment and hours responses to be variable and in most cases statistically insignificant. Channels of adjustment to wage increases and to changes in nonlabor costs include prices, profits, wage compression, turnover, and performance standards.
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Agglomeration, Urban Wage Premiums, and College Majors
Shimeng Liu
University of Southern California Working Paper, April 2015
Abstract:
The aim of this paper is to examine the manner and extent to which worker skill type affects agglomeration economies that contribute to productivity in cities. I use college majors to proxy for skill types among workers with a Bachelor's degree. Workers with college training in information-oriented and technical fields (e.g. STEM areas such as Engineering, Physical Sciences, and Economics) are associated with economically important within-field agglomeration economies and also generate sizeable spillovers for workers in other fields. In contrast, within-field and across-field spillovers for workers with college training in the arts and humanities are much smaller and often non-existent. While previous research suggests proximity to college-educated workers enhances productivity, these findings suggest that not all college educated workers are alike. Instead, positive spillover effects appear to derive mostly from proximity to workers with college training in information-oriented and technical fields.
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The Importance of Unemployment Insurance as an Automatic Stabilizer
Marco Di Maggio & Amir Kermani
Columbia University Working Paper, March 2015
Abstract:
We assess the extent to which unemployment insurance (UI) mitigates the economy's sensitivity to shocks by working as an automatic stabilizer. Using a local labor market design based on the heterogeneity in UI generosity across regions (as defined as the percentage of household income recovered by the UI benefit), we estimate that a one standard deviation increase in UI generosity attenuates the effect of negative shocks on employment growth by 20% and on earning growth by 25%. Consistent with the hypothesis that the local demand channel is driving these results, we find that consumption is less responsive to local labor demand shocks in counties with more generous UI. Moreover, the average wage growth of employed workers is less elastic to local labor shocks when UI is more generous. Our results show that the local fiscal multiplier of UI expenditure is approximately 2. Overall, our results suggest that UI has a beneficial effect on the economy by decreasing the sensitivity of real economic activity to shocks.
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Out of Work and Into School: Labor Market Policies and College Enrollment During the Great Recession
Andrew Barr & Sarah Turner
Journal of Public Economics, April 2015, Pages 63-73
Abstract:
The Great Recession brought large increases in unemployment and college enrollment; we examine how the combination of changing state labor market conditions and state-specific variation in Unemployment Insurance (UI) interact to affect enrollment outcomes. We identify a substantial role of the UI program in affecting post-secondary enrollment choices. We provide some of the first evidence that the duration of UI affects a displaced individual's propensity to enroll, and suggestive evidence that these effects are larger in states with more inclusive approved training laws. These findings identify a substantial overlap between UI policy and post-secondary enrollment decisions, indicating the potential importance of UI in not only providing income but also facilitating investments in skills.
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Veterans' Labor Force Participation: What Role Does the VA's Disability Compensation Program Play?
Courtney Coile, Mark Duggan & Audrey Guo
NBER Working Paper, February 2015
Abstract:
We explore trends over time in the labor force participation of veterans and non-veterans and investigate whether these patterns are consistent with a rising role for the Veterans' Affairs Disability Compensation (DC) program, which pays benefits to veterans with service-connected disabilities and has grown rapidly since 2000. Using 35 years of March CPS data, we find that veterans' labor force participation declined over time in a way that coincides closely with DC growth and that veterans have become more sensitive to economic shocks. Our findings suggest that DC program growth has contributed to recent declines in veterans' labor force participation.
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Pamela Aronson, Thomas Callahan & Timothy Davis
Journal of Youth Studies, forthcoming
Abstract:
This study examines the challenges that recent college graduates face in a hard-hit US region during the Great Recession. In their poignant and sometimes heartbreaking perceptions of their 'biggest challenges,' graduates vividly illustrate the negative implications of degree completion during the recession. Based on an analysis of both closed and open-ended survey data of Michigan's 2012 graduates, we find that women and first generation college graduates fare the worst in terms of their employment status, debt and income levels, and subjective assessments of job opportunities and financial stress. In contrast, men, especially those whose parents have at least a bachelor's degree, were more likely than their counterparts to report that their 'biggest challenge' since graduation was linked with making the transition into adult roles. Taken together, these findings suggest widespread difficulty after graduating from college during the Great Recession, and the ways in which these difficulties are linked with gender and class inequalities.
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Engineering an incentive to search for work: A comparison groups approach
Oded Stark, Marcin Jakubek & Martyna Kobus
Economics Letters, July 2015, Pages 1-4
Abstract:
Social comparisons are important in the employment sphere. A "culture of unemployment" may evolve and prevail because it is optimal for an individual to remain unemployed when other unemployed individuals constitute his main reference group. We advance the idea that by making the receipt of unemployment benefits conditional on engagement in an incentive-enhancing activity (for example, work under state-sponsored employment schemes or participation in work-site-based training programs), a government can engineer a revision of the reference groups of an unemployed individual in order to induce him to seek work.
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Entrepreneurship, Information, and Growth
Devin Bunten et al.
Journal of Regional Science, forthcoming
Abstract:
We examine the contribution to economic growth of entrepreneurial marketplace information within a regional endogenous growth framework. Entrepreneurs are posited to provide an input to economic growth through the information revealed by their successes and failures. We empirically identify this information source with the regional variation in establishment births and deaths. To account for the potential endogeneity caused by forward-looking entrepreneurs, we utilize instruments based on historic mining activity. We find that the information spillover component of local establishment birth and death rates have significant positive effects on subsequent entrepreneurship and employment growth for U.S. counties and metropolitan areas.
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The stature of the self-employed and its relation with earnings and satisfaction
Cornelius Rietveld, Jolanda Hessels & Peter van der Zwan
Economics & Human Biology, April 2015, Pages 59-74
Abstract:
Taller individuals have on average a higher socio-economic status than shorter individuals. In countries where entrepreneurs have high social status, we may therefore expect that entrepreneurs are taller than wage workers. Using data from the German Socio-Economic Panel (2002-2012), we find that a 1 cm increase in an individual's height raises the probability of being self-employed (the most common proxy for entrepreneurship) versus paid employed by 0.15 percentage points. Within the self-employed, the probability of being an employer is increased by 0.10 percentage points as a result of a 1 cm increase in height, whereas this increase is 0.05 percentage points for an own-account worker. This result corroborates the higher social status of employers compared to own-account workers. We find a height premium in earnings for self-employed and paid-employed individuals: an additional 1 cm in height is associated with a 0.39% increase in hourly earnings for paid employees and a 0.52% increase for self-employed individuals. Our analysis reveals that approximately one third of the height premium in earnings is explained by differences in educational attainment. We also establish the existence of a height premium in terms of work and life satisfaction, which is more pronounced for paid employees than for self-employed individuals.