A (Working) Class of Their Own

Kevin Lewis

May 18, 2010

Joblessness and Perceptions about the Effectiveness of Democracy

Duha Tore Altindag & Naci Mocan
NBER Working Paper, May 2010

Using micro data on more than 130,000 individuals from 69 countries, we analyze the extent to which joblessness of the individuals and the prevailing unemployment rate in the country impact perceptions of the effectiveness of democracy. We find that personal joblessness experience translates into negative opinions about the effectiveness of democracy and it increases the desire for a rouge leader. Evidence from people who live in European countries suggests that being jobless for more than a year is the source of discontent. We also find that well-educated and wealthier individuals are less likely to indicate that democracies are ineffective, regardless of joblessness. People's beliefs about the effectiveness of democracy as system of governance are also shaped by the unemployment rate in countries with low levels of democracy. The results suggest that periods of high unemployment and joblessness could hinder the development of democracy or threaten its existence.


Business Volatility, Job Destruction, and Unemployment

Steven Davis, Jason Faberman, John Haltiwanger, Ron Jarmin & Javier Miranda
American Economic Journal: Macroeconomics, April 2010, Pages 259-287

Unemployment inflows fell from 4 percent of employment per month in the early 1980s to 2 percent by the mid 1990s. Using low frequency movements in industry-level data, we estimate that a 1 percentage point drop in the quarterly job destruction rate lowers the monthly unemployment inflow rate by 0.28 points. By our estimates, declines in job destruction intensity account for 28 (55) percent of the fall in unemployment inflows from 1982 (1990) to 2005. Slower job destruction accounts for similar fractions of long-term declines in the rate of unemployment.


Does the color of the collar matter? Employment and earnings after plant closure

Guido Schwerdt, Andrea Ichino, Oliver Ruf, Rudolf Winter-Ebmer & Josef Zweimüller
Economics Letters, forthcoming

We investigate whether the costs of job displacement differ between blue and white collar workers. In the short run earnings and employment losses are substantial for both groups but stronger for white collars. In the long run, there are only weak effects for blue collar workers but strong and persistent effects for white collars.


Capital Structure as a Strategic Variable: Evidence from Collective Bargaining

David Matsa
Journal of Finance, June 2010, Pages 1197-1232

I analyze the strategic use of debt financing to improve a firm's bargaining position with an important supplier - organized labor. Because maintaining high levels of corporate liquidity can encourage workers to raise their wage demands, a firm with external finance constraints has an incentive to use the cash flow demands of debt service to improve its bargaining position with workers. Using both firm-level collective bargaining coverage and state changes in labor laws to identify changes in union bargaining power, I show that strategic incentives from union bargaining appear to have a substantial impact on corporate financing decisions.


Unequal Effects of Trade on Workers with Different Abilities

Elhanan Helpman, Oleg Itskhoki & Stephen Redding
Journal of the European Economic Association, April/May 2010, Pages 421-433

In recent research, we have proposed a new framework for examining the determinants of income inequality, which emphasizes firm and worker heterogeneity and selection into export markets. In this paper, we use our framework to examine how wage inequality and unemployment vary across workers with different abilities. Both in the closed and open economy, the unemployment rate is decreasing in worker ability, whereas both the average wage and wage inequality are increasing in worker ability. Upon opening the economy to trade, however, intermediate-ability workers experience reductions in average wages and increases in unemployment rates relative to both lower and higher ability workers.


The Contribution of Trade to Wage Inequality: The Role of Skill, Gender, and Nationality

Michael Klein, Christoph Moser & Dieter Urban
NBER Working Paper, May 2010

International trade has been cited as a source of widening wage inequality in industrial nations. Consistent with this claim, we find a significant export wage premium for high-skilled workers in German manufacturing and an export wage discount for lower skilled workers, using matched employer-employee data. Estimates suggest that the export wage premium to high-skilled workers represents up to one third of their overall skill premium. But, while an increase in exports increases wage inequality along the dimension of skill, it diminishes the wage inequality associated with both gender and nationality. In this way, trade contributes to narrowing wage gaps and mitigating wage inequality in German manufacturing.


Pathways to the All-Volunteer Military

Glen Elder, Lin Wang, Naomi Spence, Daniel Adkins & Tyson Brown
Social Science Quarterly, June 2010, Pages 455-475

Objectives: The present study investigates the role of a disadvantaged background, the lack of social connectedness, and behavioral problems in channeling young men to the opportunities of the all-volunteer military instead of to college or the labor market. Methods: Data from three waves of the National Longitudinal Study of Adolescent Health in the United States are employed. The analytic sample consists of 6,938 white, black, and other males. Results: The greatest likelihood of military service versus college or the labor force occurs when young men of at least modest ability come from disadvantaged circumstances, experience minimal connectedness to others, and report a history of adolescent fighting. Discussion: Findings highlight the value of access to post high school education and worklife opportunities as a military service incentive for less advantaged young men in the all-volunteer era.


The Online Laboratory: Conducting Experiments in a Real Labor Market

John Horton, David Rand & Richard Zeckhauser
Harvard Working Paper, April 2010

Online labor markets have great potential as platforms for conducting experiments, as they provide immediate access to a large and diverse subject pool and allow researchers to conduct randomized controlled trials. We argue that online experiments can be just as valid - both internally and externally - as laboratory and field experiments, while requiring far less money and time to design and to conduct. In this paper, we first describe the benefits of conducting experiments in online labor markets; we then use one such market to replicate three classic experiments and confirm their results. We confirm that subjects (1) reverse decisions in response to how a decision-problem is framed, (2) have pro-social preferences (value payoffs to others positively), and (3) respond to priming by altering their choices. We also conduct a labor supply field experiment in which we confirm that workers have upward sloping labor supply curves. In addition to reporting these results, we discuss the unique threats to validity in an online setting and propose methods for coping with these threats. We also discuss the external validity of results from online domains and explain why online results can have external validity equal to or even better than that of traditional methods, depending on the research question. We conclude with our views on the potential role that online experiments can play within the social sciences, and then recommend software development priorities and best practices.


Job Displacement from Agriculture

Amy Kandilov & Ivan Kandilov
American Journal of Agricultural Economics, April 2010, Pages 591-607

Unlike manufacturing employers, "small" agricultural employers are generally not required to participate in the Unemployment Insurance system, which leaves many farm workers ineligible for unemployment benefits. Theory implies that displaced workers who are ineligible for benefits experience shorter jobless spells and a lower reemployment wage. With data from the Displaced Workers' Survey, we show that displaced agricultural workers spend 4.6 fewer weeks unemployed and upon reemployment earn 9% less than displaced manufacturing workers. Not surprisingly, in states where "small" agricultural employers are required to participate in the Unemployment Insurance program, postdisplacement outcomes for agricultural and manufacturing workers are similar.


Downsizing Effects on Survivors: Layoffs, Offshoring, and Outsourcing

Carl Maertz, Jack Wiley, Cynthia LeRouge & Michael Campion
Industrial Relations, April 2010, Pages 275-285

In a representative sample of 13,683 U.S. employees, we compared survivors of layoffs, offshoring, outsourcing, and their combinations to a group who experienced no downsizing. Survivors of layoffs perceived lower organizational performance, job security, affective attachment, calculative attachment, and had higher turnover intentions. Offshoring survivors perceived lower performance, fairness, and affective attachment, but outsourcing survivors generally did not have more negative outcomes than the no-downsizing group. Layoffs generally had more negative outcomes than other downsizing forms.


Political Partisanship, Race, and Union Strength from 1970 to 2000: A Pooled Time-Series Analysis

David Jacobs & Marc Dixon
Social Science Research, forthcoming

This paper reports findings that assess the relationship between the resurgence in conservative political strength and union density in the United States. The conservative Republican return to political power after 1968 is likely to have produced added declines in union membership. Yet despite close political regulation of labor-management disputes, sociologists have paid little attention to the influential political determinants of success in these contests. Using fixed-effects estimation, this analysis assesses the relationship between the political strength of the political party most hostile to labor and union density. With multiple factors held constant, the results suggest that increased Republican presence in the state legislatures along with Republican control of the presidency and the governor's office after 1989 helped to reduce union memberships. The results also indicate that increases in the percentage of African Americans produces greater union strength but not in the ex-Confederate states. Added findings suggest two policies controlled by the states have influential effects on this outcome.


Polarization and the decline of the middle class: Canada and the U.S.

James Foster & Michael Wolfson
Journal of Economic Inequality, June 2010, Pages 247-273

Several recent studies have suggested that the distribution of income (earnings, jobs) is becoming more polarized. Much of the evidence presented in support of this view consists of demonstrating that the population share in an arbitrarily chosen middle income class has fallen. However, such evidence can be criticized as being range-specific - depending on the particular cutoffs selected. In this paper we propose a range-free approach to measuring the middle class and polarization, based on partial orderings. The approach yields two polarization curves which, like the Lorenz curve in inequality analysis, signal unambiguous increases in polarization. It also leads to an intuitive new index of polarization that is shown to be closely related to the Gini coefficient. We apply the new methodology to income and earnings data from the U.S. and Canada, and find that polarization is on the rise in the U.S. but is stable or declining in Canada. A cross-country comparison reveals the U.S. to be unambiguously more polarized than Canada.


Did U.S. wages become stickier between the world wars?

Ranjit Dighe & Elizabeth Dunne Schmitt
North American Journal of Economics and Finance, forthcoming

This paper attempts to determine whether nominal wages became less responsive to labor market and price fluctuations during the 1920s or 1930s. Results of modified Phillips curve regressions, in which the monthly value of wages depends on lagged values of employment or total man-hours and prices, indicate considerable stickiness of wages throughout the interwar period. Neither the beginning of the Great Depression in 1929 nor the start of the New Deal in 1933 is associated with any discernible increase in wage stickiness. And the "Great Deflation" of 1920-1922 apparently did not include a greater responsiveness of wages to prices or labor-market conditions.


A Review of the Empirical Evidence on Generational Differences in Work Attitudes

Jean Twenge
Journal of Business and Psychology, June 2010, Pages 201-210

Purpose: This article reviews the evidence for generational differences in work values from time-lag studies (which can separate generation from age/career stage) and cross-sectional studies (which cannot). Understanding generational shifts is especially important given the coming retirement of Baby Boomer workers and their replacement by those born after 1982 (GenMe/GenY/Millennials).

Findings: Most studies, including the few time-lag studies, show that GenX and especially GenMe rate work as less central to their lives, value leisure more, and express a weaker work ethic than Boomers and Silents. Extrinsic work values (e.g., salary) are higher in GenMe and especially GenX. Contrary to popular conceptions, there were no generational differences in altruistic values (e.g., wanting to help others). Conflicting results appeared in desire for job stability, intrinsic values (e.g., meaning), and social/affiliative values (e.g., making friends). GenX, and especially GenMe are consistently higher in individualistic traits. Overall, generational differences are important where they appear, as even small changes at the average mean that twice or three times as many individuals score at the top of the distribution.

Implications: To recruit GenMe, companies should focus on work-life balance issues and flexible schedules. Programs based on volunteering, altruistic values, social values, or meaning in work will likely be no more successful than they were for previous generations. The lack of generational differences in job hopping suggests that GenMe workers who are satisfied will be retained.


The labor supply effects of child care costs and wages in the presence of subsidies and the earned income tax credit

Chris Herbst
Review of Economics of the Household, June 2010, Pages 199-230

This paper uses CPS and SIPP data between 1990 and 2004 to examine the effects of child care expenditures and wages on the employment of single mothers. It adds to the literature in this area by incorporating explicit controls for child care subsidies and the EITC into the estimation. Doing so provides an opportunity to examine mothers' sensitivity to prices and wages net of policies that influence these amounts. Results suggest that lower child care expenditures, higher wages, and more generous subsidy and EITC benefits increase the likelihood of employment. Allowing the impact of child care subsidies and the EITC to vary with expenditures and wages reveals substantial heterogeneity. In particular, the largest labor supply effects of child care subsidies are generated for mothers with higher child care costs, while the largest labor supply effects of the EITC are found for mothers with lower wages.


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