Findings

Finding the Jobs

Kevin Lewis

July 21, 2025

Artificial Intelligence in the Knowledge Economy
Enrique Ide & Eduard Talamas
Journal of Political Economy, forthcoming

Abstract:
Artificial Intelligence (AI) can transform the knowledge economy by automating non-codifiable work. To analyze this transformation, we incorporate AI into an economy where humans form hierarchical organizations: Less knowledgeable individuals become "workers" doing routine work, while others become "solvers" handling exceptions. We model AI as a technology that converts computational resources into "AI agents" that operate autonomously (as co-workers and solvers/co-pilots) or non-autonomously (solely as co-pilots). Autonomous AI primarily benefits the most knowledgeable individuals; non-autonomous AI benefits the least knowledgeable. However, output is higher with autonomous AI. These findings reconcile contradictory empirical evidence and reveal tradeoffs when regulating AI autonomy.


Eurosclerosis at 40: Labor Market Institutions, Dynamism, and European Competitiveness
Benjamin Schoefer
NBER Working Paper, June 2025

Abstract:
This paper explores a repositioning of Europe's labor market institutions as potential drivers of the transatlantic gap in macroeconomic performance. Institutional diagnoses were prominent in times of high European unemployment in the 1980-90s. But interest waned as joblessness fell -- even though the decline was uneven, precarious work arrangements have grown, and labor markets remain largely unreformed (unlike product and financial markets). Yet, rigid labor market institutions might continue to matter because they can stifle labor market and business dynamism: Europeans switch jobs much less frequently, and restructuring is much rarer. Recent research argues that such immobility impedes wage and productivity growth. Moreover, this low dynamism might contribute to Europe's specific underperformance in tech, R&D, disruptive innovation, ICT adoption -- where creative destruction requires fluid reallocation. This institutional labor market perspective on European competitiveness complements prevailing diagnoses focused on capital and product market fragmentation. Tight labor markets, lower unemployment, and shrinking labor supply might keep this nexus timely.


Why Is Manufacturing Productivity Growth So Low?
Enghin Atalay et al.
Federal Reserve Working Paper, July 2025

Abstract:
We examine the recent slow growth in manufacturing productivity. We show that nearly all measured TFP growth since 1987 -- and its post-2000s decline -- comes from a few computer-related industries. We argue conventional measures understate manufacturing productivity growth by failing to fully capture quality improvements. We compare consumer to producer and import price indices. In industries with rapid technological change, consumer price indices indicate less inflation, suggesting mismeasurement in standard industry deflators. Using an input-output framework, we estimate that TFP growth is understated by 1.7 percentage points in durable manufacturing, 0.4 percentage points in nondurable manufacturing, with no mismeasurement in nonmanufacturing industries.


Did California's Fast Food Minimum Wage Reduce Employment?
Jeffrey Clemens, Olivia Edwards & Jonathan Meer
NBER Working Paper, July 2025

Abstract:
We analyze the effect of California's $20 fast food minimum wage, which was enacted in September 2023 and went into effect in April 2024, on employment in the fast food sector. In unadjusted data from the Quarterly Census of Employment and Wages, we find that employment in California's fast food sector declined by 2.7 percent relative to employment in the fast food sector elsewhere in the United States from September 2023 through September 2024. Adjusting for pre-AB 1228 trends increases this differential decline to 3.2 percent, while netting out the equivalent employment changes in non-minimum-wage-intensive industries further increases the decline. Our median estimate translates into a loss of 18,000 jobs in California's fast food sector relative to the counterfactual.


Minimum Wages and Homelessness
Seth Hill
Southern Economic Journal, forthcoming

Abstract:
Economic theory offers competing predictions about how minimum wage policies might affect homelessness. While minimum wages might reduce homelessness by raising incomes, they could also trigger employment disruptions and negative income shocks identified in the literature as proximate causes of homelessness. Policy effects might be heterogeneous because the risk factors for homelessness -- substance abuse, mental illness, unstable support network, and so on -- correlate with lower labor market competitiveness. Using synthetic and local-projection difference-in-differences methods with Department of Housing and Urban Development point-in-time counts, I find minimum wage increases between 2006 and 2019 led to more homelessness in American municipalities. This finding could help explain why homelessness surged in places that substantially increased minimum wages like New York, Seattle, and San Francisco while falling in localities with inflation-adjusted declines. Further analysis suggests employment effects more likely drove these increases than housing prices or migration. The findings highlight distributional consequences of minimum wage policies and add to our understanding of homelessness.


Uncertainty through the Production Network: Sectoral Origins and Macroeconomic Implications
Matteo Cacciatore & Giacomo Candian
NBER Working Paper, June 2025

Abstract:
We study how uncertainty propagates through production networks. First, we construct a highly disaggregated, forward-looking measure of industry-level uncertainty using option-implied volatility data for U.S. firms. Second, we identify the effects of higher uncertainty within industries, across the supply chain, and at the aggregate level. We find that heightened uncertainty in upstream industries (e.g., chemical manufacturing, iron and steel mills) behaves like a negative supply shock -- raising prices and lowering employment across the production network. In contrast, greater uncertainty in downstream industries (e.g., automotive manufacturing, insurance carriers) behaves like an adverse demand shock, reducing both prices and employment. At the aggregate level, the inflation response depends on where uncertainty originates within the supply chain. A multi-sector model with time-varying sectoral uncertainty demonstrates that production linkages play a central role in explaining these empirical findings.


Lucy and the Chocolate Factory: Warehouse Robotics and Worker Safety
Gordon Burtch, Brad Greenwood & Kiron Ravindran
ILR Review, August 2025, Pages 587-613

Abstract:
The authors examine the implications of robotics for warehouse worker safety. While warehouse automation has the potential to reduce injuries by eliminating high-risk tasks, it may also increase injuries among remaining non-automated tasks because of reduced task variety and an accelerated pace of work. Findings provide evidence of both effects: Warehouse robotics are associated with a 40% decrease in severe injuries but a 77% increase in non-severe injuries. The authors provide subsequent evidence that the rise in non-severe injuries is at least partially attributable to the increased pace of work at robotics facilities. The implications of the findings for regulators, policymakers, workers, and firms are discussed.


The Geography of Innovative Firms
Craig Chikis, Benny Kleinman & Marta Prato
NBER Working Paper, July 2025

Abstract:
Most U.S. innovation output originates from firms that operate R&D facilities across multiple local markets. We study how this geographic structure influences aggregate innovation and growth, and whether it is socially optimal. First, we develop an endogenous growth model featuring multi-market innovative firms that generate knowledge spillovers to geographically proximate firms. In equilibrium, firms may operate in too few or too many local markets, depending on how sensitive are the local spillovers they generate to their local size. Second, to quantify these effects, we link the model to data on firms' R&D locations, patents, and citation networks. Using an event-study design, we show that firms' spatial expansion increases spillovers to other firms and estimate how these spillovers depend on a firm's local footprint. Our estimates imply that U.S. innovative firms operate in too few markets relative to the social optimum. Third, using quantitative counterfactuals, we find that policies promoting broader spatial scope yield larger welfare gains than standard R&D subsidies. Moreover, unlike R&D subsidies, such policies can also reduce regional inequality.


How veteran-nonveteran wage gaps across the wage distribution have evolved over time
James Fuller & Kelly Vosters
Contemporary Economic Policy, forthcoming

Abstract:
We examine how veteran-nonveteran wage gaps evolved over 1979-2017. Specifically, we estimate veteran wage differentials at each decile across the unconditional wage distribution to allow for heterogeneity in the size and direction of the wage gaps. Low-earning veterans have consistently earned a wage premium, though it has declined in magnitude. High-earning veterans earned a premium early on, albeit smaller (in percentage terms) than low-earning veterans; the premium disappeared by the 1990s, becoming a wage penalty in recent decades. Decompositions of the estimated gaps reveal that lower returns to education -- which worsen over time -- contribute to the observed wage gap dynamics.


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