The Union Threat
Review of Economic Studies, forthcoming
This paper develops a search theory of labor unions in which the possibility of unionization distorts the behavior of nonunion firms. In the model, unions arise endogenously through a majority election within firms. As union wages are set through a collective bargaining process, unionization compresses wages and lowers profits. To prevent unionization, nonunion firms over-hire high-skill workers — who vote against the union — and under-hire low-skill workers — who vote in its favor. As a consequence of this distortion in hiring, firms that are threatened by unionization hire fewer workers, produce less and pay a more concentrated distribution of wages. In the calibrated economy, the threat of unionization has a significant negative impact on aggregate output, but it also reduces wage inequality.
Unclear Signals, Uncertain Prospects: The Labor Market Consequences of Freelancing in the New Economy
Social Forces, forthcoming
The advent of various types of contingent jobs complicates selection criteria for full-time employment. While previous studies analyzed the penalties associated with other forms of contingent work, the labor market consequences of freelancing have been overlooked. I argue that freelancing works have features of both “good” and “bad” jobs, transcend the demarcation between “primary” and “secondary” sectors implied by segmentation theorists, and thus embed uncertainty around their categorization and meaning. Drawing on the “signal clarity” concept from management scholarship, I extend existing sociological works on employer perceptions of candidates by proposing a model to theorize how a history of freelancing affects workers’ prospects at the hiring stage. I present results from two interrelated studies. First, I use a field experiment that involves submitting nearly 12,000 fictitious resumes to analyze the causal effect of a freelancing work history on the likelihood of getting callbacks. The experiment reveals that freelancing decreases workers’ odds of securing full-time employment by about 30 percent. Second, I use data from 42 in-depth interviews with hiring officers to illustrate two mechanisms that could account for that observed effect. Interview data demonstrate that freelancing sends decidedly unclear competence signals: employers are hesitant to hire freelancers not because these candidates lack skills but because verifying these skills is difficult. Freelancing also sends clearer and negative commitment signals. This study sheds new lights on labor market segmentation theory and deepens our understanding of how nonstandard work operates as a vehicle for inequality in the new economy.
In search of a job: Forecasting employment growth using Google Trends
Daniel Borup, Erik Christian & Montes Schütte
Journal of Business & Economic Statistics, forthcoming
We show that Google search activity on relevant terms is a strong out-of-sample predictor for future employment growth in the US over the period 2004-2019 at both short and long horizons. Starting from an initial search term “jobs”, we construct a large panel of 172 variables using Google’s own algorithms to find semantically related search queries. The best Google Trends model achieves an out-of-sample R2 between 29% and 62% at horizons spanning from one month to one year ahead, strongly outperforming benchmarks based on a single search query or a large set of macroeconomic, financial, and sentiment predictors. This strong predictability is due to heterogeneity in search terms and extends to industry-level and state-level employment growth using state-level specific search activity. Encompassing tests indicate that when the Google Trends panel is exploited using a non-linear model, it fully encompasses the macroeconomic forecasts and provides significant information in excess of those.
The Lost Generation? Labor Market Outcomes for Post Great Recession Entrants
NBER Working Paper, July 2020
I study cohort patterns in the labor market outcomes of recent college graduates, examining changes surrounding the Great Recession. Recession entrants have lower wages and employment than those of earlier cohorts; more recent cohorts’ employment is even lower, but the newest entrants’ wages have risen. I relate these changes to "scarring" effects of initial conditions. I demonstrate that adverse early conditions permanently reduce new entrants’ employment probabilities. I also replicate earlier results of medium-term scarring effects on wages that fade out by the early 30s. But scarring cannot account for the employment collapse for recent cohorts. There was a dramatic negative structural break in college graduates’ employment rates, beginning around the 2005 entry cohort, that shows no sign of abating.
Contingent wage subsidy
Journal of Public Economic Theory, August 2020, Pages 1105-1119
This paper proposes a policy aimed at tackling unemployment that arises from macroeconomic coordination failure. The policy offers firms wage subsidies payable only if the total number of new hires made across the economy is below a prespecified threshold. Subsidies provide incentives for firms to create jobs but the policy's goal is to generate a sufficiently large amount of employment spillovers to set off hiring complementarities taking employment beyond the threshold. Thus, subsidies are not distributed but the policy achieves a Pareto improvement. The market structure is important for policy design. Aggregative game techniques prove useful for the oligopsonistic case.
Parental Proximity and Earnings after Job Displacements
Pawel Krolikowski, Mike Zabek & Patrick Coate
Labour Economics, forthcoming
The earnings of young adults living in their parents’ neighborhoods completely recover after a job displacement, while the earnings of those living farther away permanently decline. Nearby workers appear to benefit from help with childcare. Earnings improvements are larger in states with expensive childcare and among workers in inflexible occupations, and workers’ parents do less market work following their child’s displacement. Differences in job search durations, transfers of housing services, and geographic mobility are too small to explain the result. Our results are also consistent with workers benefiting from parental employment networks.
Long‐Run Labor Market Effects of the Job Corps Program: Evidence from a Nationally Representative Experiment
Journal of Policy Analysis and Management, forthcoming
Job Corps is the nation's largest and most comprehensive career technical training and education program for at‐risk youth ages 16 to 24. Using the sample from a large‐scale experiment of the program from the mid‐1990s, this article uses tax data through 2015 (20 years later) to examine long‐term labor market impacts. The study finds some long‐term beneficial effects for the older students, with employment gains of 4 percentage points, 40 percent reductions in disability benefit receipt, and 10 percent increases in tax filing rates in 2015. For these students, program benefits exceeded program costs from the social perspective. This study is the first to establish that a national program for disconnected youth can produce long‐term labor market gains, and can be a positive investment made for society. The results suggest that intensive, comprehensive services that focus on developing both cognitive and noncognitive skills are important for improving labor market prospects for this population.
The Dependency Structure of Bad Jobs: How Market Constraint Undermines Job Quality
Richard Benton & Ki-Jung Kim
ILR Review, forthcoming
Power and dependence in economic exchange shape industry structure. When a focal industry faces powerful suppliers or buyers, this can reduce industry rents. The authors argue that these dynamics also affect job quality by reducing the economic surplus available to be shared with workers. Drawing on ideas from power-dependency theory, this article explains industry earnings and job quality differences by examining inter-industry exchange patterns. The authors build on Ronald Burt’s seminal analysis of structural constraint in economic exchange using industry input-output tables. They calculate market constraint measures for recent years in the United States and link these with CPS data on wages and benefits. Analyses reveal that workers in more buyer-constrained industries (dependence on powerful buyers) experience lower wages and benefits. Findings also show that market constraint reduces the economic surplus available for union bargaining. Theory and results suggest that market concentration reduces suppliers’ economic rents, harming job quality.
Do Youth Employment Programs Work? Evidence from the New Deal
Anna Aizer et al.
NBER Working Paper, June 2020
We study the Civilian Conservation Corps (CCC) – the first and largest youth training program in the U.S. in operation between 1933 and 1942 – to provide the first comprehensive assessment of the short- and long-term effects of means-tested youth employment programs. We use digitized enrollee records from the CCC program in Colorado and New Mexico and matched these records to the 1940 Census, WWII enlistment records, Social Security Administration records, and death certificates. We find that enrollees who spent more time in CCC training grew taller, lived longer lives and had higher lifetime earnings as a result of their participation in the program. We also find modest increases in the educational attainment of the participants and increases in short term geographic mobility. In contrast, we find no evidence that their labor force participation or wages increased in the short run. To assess the internal and external validity of the results, we compare our estimates to those derived from a randomized evaluation of Job Corps, the modern version of the CCC, conducted in the 1990s. The RCT’s results show that our empirical strategy delivers estimates that are in line with the experimental estimates. Overall, we find significant long-term benefits in both longevity and earnings, suggesting short and medium-term evaluations underestimate the returns of training programs, as do those that fail to consider effects on longevity.