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The Minimum Wage and the Great Recession: Evidence from the Current Population Survey
Jeffrey Clemens
NBER Working Paper, December 2015
Abstract:
I analyze recent federal minimum wage increases using the Current Population Survey. The relevant minimum wage increases were differentially binding across states, generating natural comparison groups. I first estimate a standard difference-in-differences model on samples restricted to relatively low-skilled individuals, as described by their ages and education levels. I also employ a triple-difference framework that utilizes continuous variation in the minimum wage's bite across skill groups. In both frameworks, estimates are robust to adopting a range of alternative strategies, including matching on the size of states' housing declines, to account for variation in the Great Recession's severity across states. My baseline estimate is that this period's full set of minimum wage increases reduced employment among individuals ages 16 to 30 with less than a high school education by 5.6 percentage points. This estimate accounts for 43 percent of the sustained, 13 percentage point decline in this skill group's employment rate and a 0.49 percentage point decline in employment across the full population ages 16 to 64.
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Cashier or Consultant? Entry Labor Market Conditions, Field of Study, and Career Success
Joseph Altonji, Lisa Kahn & Jamin Speer
Journal of Labor Economics, January 2016, Pages S361-S401
Abstract:
We measure impacts of entry conditions on labor market outcomes for the US college graduating classes of 1974-2011. A large recession reduces initial earnings by 10%, through full-time work and wages, with small persistent impacts on wages. Those in high-paying majors experience smaller impacts on most labor market outcomes, widening earnings inequality across majors. In the Great Recession, early earnings losses are much larger than predicted given past patterns and the size of the recession. This is partially because the cyclical sensitivity of demand for college graduates has more than doubled. Recession effects also became more evenly distributed across majors.
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Where Has All The Skewness Gone? The Decline In High-Growth (Young) Firms In The U.S.
Ryan Decker et al.
NBER Working Paper, December 2015
Abstract:
The pace of business dynamism and entrepreneurship in the U.S. has declined over recent decades. We show that the character of that decline changed around 2000. Since 2000 the decline in dynamism and entrepreneurship has been accompanied by a decline in high-growth young firms. Prior research has shown that the sustained contribution of business startups to job creation stems from a relatively small fraction of high-growth young firms. The presence of these high-growth young firms contributes to a highly (positively) skewed firm growth rate distribution. In 1999, a firm at the 90th percentile of the employment growth rate distribution grew about 31 percent faster than the median firm. Moreover, the 90-50 differential was 16 percent larger than the 50-10 differential reflecting the positive skewness of the employment growth rate distribution. We show that the shape of the firm employment growth distribution changes substantially in the post-2000 period. By 2007, the 90-50 differential was only 4 percent larger than the 50-10, and it continued to exhibit a trend decline through 2011. This reflects a sharp drop in the 90th percentile of the growth rate distribution accounted for by the declining share of young firms and the declining propensity for young firms to be high-growth firms.
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Underemployment in the Early Careers of College Graduates Following the Great Recession
Jaison Abel & Richard Deitz
Federal Reserve Working Paper, December 2015
Abstract:
Though labor market conditions steadily improved following the Great Recession, underemployment among recent college graduates continued to climb, reaching highs not seen since the early 1990s. In this paper, we take a closer look at the jobs held by underemployed college graduates in the early stages of their careers during this period. We show that relatively few recent graduates were working in low-skilled service jobs, and that many of the underemployed worked in fairly well paid non-college jobs requiring some degree of knowledge and skill. We also find that the likelihood of being underemployed was lower for those with technically oriented and occupation-specific majors than it was for those with degrees in more general fields. Moreover, our analysis suggests that underemployment is a temporary phase for many recent college graduates as they transition to better jobs after spending some time in the labor market, particularly for those who start their careers in low-skilled service jobs.
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Does wage rigidity make firms riskier? Evidence from long-horizon return predictability
Jack Favilukis & Xiaoji Lin
Journal of Monetary Economics, April 2016, Pages 80-95
Abstract:
The relationship between sticky wages and risk has important asset pricing implications. Like operating leverage, sticky wages are a source of risk for the firm. Firms, industries, regions, or times with especially high or rigid wages are especially risky. If wages are sticky, then wage growth should negatively forecast future stock returns because falling wages are associated with even bigger falls in output, and increases in operating leverage. Indeed, this is the case in aggregate, industry, and U.S. state level data. Furthermore, this relation is stronger in industries and U.S. states with higher wage rigidity.
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Stephan Lindner
Journal of Human Resources, Winter 2016, Pages 62-94
Abstract:
This paper examines whether Unemployment Insurance (UI) benefits affect the decision to apply for Social Security Disability Insurance (DI). Using data from the Survey of Income and Benefits matched to administrative records on DI applications, I find that higher UI benefits reduce applications for DI. This substitution effect is imprecisely estimated but economically significant, implying that a $1.00 increase in UI benefits reduces DI expenditures by 15 cents. Recognizing this cost-saving effect would increase the optimal UI benefit level by more than 20 percent for coefficients of relative risk aversion ranging from two to five.
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Household Debt Overhang and Labor Supply
Asaf Bernstein
MIT Working Paper, November 2015
Abstract:
For households with homes worth less than the mortgage I test the effect of "household debt overhang" on their labor supply decisions. I utilize a new transaction-level dataset with comprehensive information on assets, liabilities, and deposits for all customers of a major U.S. financial institution from 2010-2014. I then exploit plausibly exogenous variation in the timing of home purchases among households in the same region and time as an instrument for the probability of negative home equity and find that negative equity causes a 2%-6% reduction in household labor supply. These results are robust to the inclusion of time-varying national cohort fixed effects as well as using a life-event driven proxy for the timing of home purchase based on the date of college attendance. Income-contingent loss mitigation creates implicit marginal tax rates that provide a plausible channel by which household debt overhang acts. Consistent with this explanation I find that the labor supply decline is larger in regions where mortgage modifications are more prevalent, even if foreclosures occur less frequently. Taken together these results provide evidence that the moral hazard problem caused by mortgage debt overhang can exacerbate employment declines and highlights the potential unintended consequences of mortgage assistance programs.
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Paul Jacobs & Christy Glass
Rural Sociology, December 2015, Pages 512-536
Abstract:
This study fills an important gap in the literature by analyzing the predictors of union attitude formation in rural, conservative, right-to-work states. Drawing on a survey of all licensed electrical workers in six counties in northern Utah and southern Idaho, we analyzed the impact of cultural orientation, job context, and perceived risk on union attitudes. We find that a conservative cultural orientation does not significantly predict union attitudes but job context and perceived risks of union activity do. Dissatisfaction with current working conditions and the belief that employers will oppose and retaliate against workers engaged in union activity significantly predict positive union attitudes. We consider the implications of these findings for scholarship on union attitude formation and for union organizing strategies in rural, conservative right-to-work contexts.