Getting the job done

Kevin Lewis

May 31, 2017

Robots and Jobs: Evidence from US Labor Markets
Daron Acemoglu & Pascual Restrepo
NBER Working Paper, March 2017


As robots and other computer-assisted technologies take over tasks previously performed by labor, there is increasing concern about the future of jobs and wages. We analyze the effect of the increase in industrial robot usage between 1990 and 2007 on US local labor markets. Using a model in which robots compete against human labor in the production of different tasks, we show that robots may reduce employment and wages, and that the local labor market effects of robots can be estimated by regressing the change in employment and wages on the exposure to robots in each local labor market — defined from the national penetration of robots into each industry and the local distribution of employment across industries. Using this approach, we estimate large and robust negative effects of robots on employment and wages across commuting zones. We bolster this evidence by showing that the commuting zones most exposed to robots in the post-1990 era do not exhibit any differential trends before 1990. The impact of robots is distinct from the impact of imports from China and Mexico, the decline of routine jobs, offshoring, other types of IT capital, and the total capital stock (in fact, exposure to robots is only weakly correlated with these other variables). According to our estimates, one more robot per thousand workers reduces the employment to population ratio by about 0.18-0.34 percentage points and wages by 0.25-0.5 percent.

The Role of Unemployment in the Rise in Alternative Work Arrangements
Lawrence Katz & Alan Krueger
American Economic Review, May 2017, Pages 388-392


The share of U.S. workers in alternative work arrangements has increased substantially in recent decades. Micro longitudinal analyses show that unemployed workers are much more likely to transition into alternative work arrangements than other workers. Macro time-series evidence shows that weak labor market conditions lead to an increase in non-traditional work. But the estimated magnitudes imply that the Great Recession and high unemployment in the 2000s can account for only a modest part of the rise in alternative work. Secular factors associated with rising inequality and technological changes making it easier to contract out work appear to be the driving forces.

Employment Protection and the Market for Innovations
Andreas Bastgen & Christian Holzner
Labour Economics, June 2017, Pages 77–93


We study the effects of employment protection taking into account that firms can – as a second best response – invest in R&D or buy new technologies in order to restore their productivity. To do so we develop an equilibrium matching model with an imperfect labor and innovation market. If employment protection is introduced, firms’ willingness to pay for product or process innovations increases. This shifts economic activity towards firms specializing in process and product innovation and triggers entry of new start-ups. We calibrate our model to match aggregate US labor and product market statistics and show that our model generates the negative impact of wrongful dismissal laws in the US on productivity and the positive effect on the number of innovations and firms found by the literature.

Survival of the Fittest: The Impact of the Minimum Wage on Firm Exit
Dara Lee Luca & Michael Luca
Harvard Working Paper, April 2017


We study the impact of the minimum wage on firm exit in the restaurant industry, exploiting recent changes in the minimum wage at the city level. The evidence suggests that higher minimum wages increase overall exit rates for restaurants. However, lower quality restaurants, which are already closer to the margin of exit, are disproportionately impacted by increases to the minimum wage. Our point estimates suggest that a one dollar increase in the minimum wage leads to a 14 percent increase in the likelihood of exit for a 3.5-star restaurant (which is the median rating), but has no discernible impact for a 5-star restaurant (on a 1 to 5 star scale).

State Minimum Wage Changes and Employment: Evidence from 2 Million Hourly Wage Workers
Radhakrishnan Gopalan et al.
Washington University in St. Louis Working Paper, May 2017


We use detailed wage data on 2 million hourly wage employees from over 300 firms spread across twelve two-digit NAICS industries to estimate the effect of six minimum wage changes on employment. The effect of minimum wages on employment is nuanced. While the proportion of low-wage employees within firms in states that increase the minimum wage declines, the overall level of employment in these establishments is unaffected - i.e. firms substitute low-wage employees with marginally higher skilled labor. Firms are more likely to reduce hiring rather than increase turnover to rebalance their work force. Employees directly affected by the increase to the minimum wage are no less likely to remain employed than their otherwise identical counterparts in states that do not change their minimum wage. Finally, we document significant heterogeneity in the effect of the minimum wage across industries, but not across states. This cautions against drawing broad conclusions from single industry studies.

Push and Pull: Disability Insurance, Regional Labor Markets, and Benefit Generosity in Canada and the United States
Kevin Milligan & Tammy Schirle
NBER Working Paper, May 2017


Disability insurance take-up has expanded substantially in the past twenty years in the United States while shrinking in Canada. We empirically assess these trends by measuring the strength of the ‘push’ from weak labor markets versus the ‘pull’ of more generous benefits. Using an instrumental variables strategy comparing benefit changes across country, age, and year, we find that both benefits and regional wages matter. Simulations suggest that the upswing in disability insurance take-up in the United States would be reversed, dropping the caseload by one third, if benefits and wages had followed the growth path observed in Canada.

Cross-State Differences in the Minimum Wage and Out-of-state Commuting by Low-Wage Workers
Terra McKinnish
Regional Science and Urban Economics, May 2017, Pages 137–147


The 2009 federal minimum wage increase, which compressed cross-state differences in the minimum wage, is used to investigate the claim that low-wage workers are attracted to commute out of state to neighboring states that have higher minimum wages. The analysis focuses on Public Use Microdata Areas (PUMAs) that experience commuting flows with one or more neighboring state. A difference-in-differences-in-differences model compares PUMAs that experienced a sizeable increase or decrease in their cross-border minimum wage differential to those that experience smaller change in the cross-border differential. Out-of-state commuting of low wage workers (less than 10 dollars an hour) is then compared to that of moderate wage workers (10–13 dollars an hour). The results suggest that an increase in own state's minimum wage, relative to neighbor's, increases the frequency with which low-wage workers commute out of the state. The analysis is replicated on the subset of PUMAs that experience commuting flows with more than one neighboring state, so that the estimates are identified entirely within PUMA. As a whole, the results suggest that low-wage workers tend to commute away from minimum wage increases rather than towards them.

Minimum Wage and Retail Price Pass-Through: Evidence and Estimates from Consumption Data
Sharat Ganapati & Jeffrey Weaver
Yale Working Paper, May 2017


This paper utilizes transaction-level data to examine the effect of the minimum wage on US retail prices. We find minimal price pass-through across a variety of identification strategies. Additionally, there is no evidence of anticipation/retrospective adjustment in prices, heterogeneous responses based on the size of increase, or heterogeneous effects on consumers of different income groups. Labor cost data rationalize these findings. Since labor is a small portion of costs in this sector and the effect of the minimum wage on labor costs is modest, price responses are small. Estimates from other industries suggest that minimal pass-through holds more generally.

Minimum Wage and Corporate Policy
Matthew Gustafson & Jason Kotter
Pennsylvania State University Working Paper, January 2017


We provide evidence that minimum wage changes significantly affect the investment and financing policies of labor intensive public firms. Our identification strategy exploits cross-state and intertemporal variation in whether a state’s minimum wage is bound by the federal minimum wage. Difference-in-differences estimates indicate that labor intensive firms in bound state-years respond to federal minimum wage increases by quickly and significantly reducing both investment and leverage, relative to similar labor intensive firms in other states. These findings persist in a triple differencing specification that uses non-labor intensive firms to control for differences in state-level economic conditions.

Is Modern Technology Responsible for Jobless Recoveries?
Georg Graetz & Guy Michaels
American Economic Review, May 2017, Pages 168-173


Since the early 1990s, recoveries from recessions in the US have been plagued by weak employment growth. We investigate whether a similar problem afflicts other developed economies, and whether technology is a culprit. We study recoveries from 71 recessions in 28 industries and 17 countries from 1970-2011. We find that though GDP recovered more slowly after recent recessions, employment did not. Industries that used more routine tasks, and those more exposed to robotization, did not recently experience slower employment recoveries. Finally, middle-skill employment did not recover more slowly after recent recessions, and this pattern was no different in routine-intensive industries.

Offshore Profit Shifting and Domestic Productivity Measurement
Fatih Guvenen et al.
NBER Working Paper, April 2017


Official statistics display a significant slowdown in U.S. aggregate productivity growth that begins in 2004. In this paper, we investigate a source of mismeasurement in official statistics, which arises from offshore profit shifting by multinational enterprises operating in the United States. This profit shifting causes part of the economic activity generated by these multinationals to be attributed to their foreign affiliates, leading to an understatement of measured U.S. gross domestic product. Profit-shifting activity has increased significantly since the mid-1990s, resulting in an understatement of measured U.S. aggregate productivity growth. We construct adjustments to correct for the effects of profit shifting on measured gross domestic product. The adjustments raise aggregate productivity growth rates by 0.1 percent annually for 1994–2004, 0.25 percent annually for 2004–2008, and leave productivity unchanged after 2008; Our adjustments mitigate, but do not overturn, the productivity slowdown in the official statistics. The adjustments are especially large in R&D-intensive industries, which are most likely to produce intangible assets that are easy to move across borders. The adjustments boost value added in these industries by as much as 8.0 percent annually in the mid-2000s.

The Effects of Unemployment and Underemployment on Employment Opportunities: Results from a Correspondence Audit of the Labor Market for College Graduates
John Nunley et al.
ILR Review, May 2017, Pages 642-669


The authors use data from a résumé audit to estimate the impact of unemployment and underemployment on the employment prospects of recent college graduates. They find no statistical evidence linking unemployment spells of different durations to employment opportunities. By contrast, college graduates who are underemployed have callback rates that are 30% lower than those of applicants who are adequately employed. The null effects associated with unemployment and the adverse effects associated with underemployment are robust across cities with relatively tight and loose labor-market conditions. Internship experience obtained while completing one’s degree substantially reduces the negative effects of underemployment. The data support the proposition that employers view underemployment as a strong signal of lower expected productivity.

The Impact of Unemployment Insurance on Job Search: Evidence from Google Search Data
Scott Baker & Andrey Fradkin
Review of Economics and Statistics, forthcoming


Job search is a key choice variable in theories of labor markets but is difficult to measure directly. We develop a job search activity index based on Google search data, the Google Job Search Index (GJSI). We validate the GJSI with both survey- and web-based measures of job search. Unlike those measures, the GJSI is high-frequency, geographically precise, and available in real time. We demonstrate the GJSI's utility by using it to study the effects of unemployment insurance (UI) policy changes between 2008 and 2014. We find no evidence of an economically meaningful effect of these changes on aggregate search.

Labor Unions as Activist Organizations: A Union Power Approach to Estimating Union Wage Effects
Nathan Wilmers
Social Forces, June 2017, Pages 1451-1478


Amid the long decline of US unions, research on union wage effects has struggled with selection problems and inadequate theory. I draw on the sociology of labor to argue that unions use non-market sources of power to pressure companies into raising wages. This theory of union power implies a new test of union wage effects: does union activism have an effect on wages that is not reducible to workers’ market position? Two institutional determinants of union activity are used to empirically isolate the wage effect of union activism from labor market conditions: increased union revenue from investment shocks and increased union activity leading up to union officer elections. Instrumental variable analysis of panel data from the Department of Labor shows that a 1 percent increase in union spending increases a proxy for union members’ wages between 0.15 percent and 0.30 percent. These wage effects are larger in years of active collective bargaining, and when unions increase spending in ways that could pressure companies. The results indicate that non-market sources of union power can affect workers’ wages and that even in a period of labor weakness unions still play a role in setting wages for their members.

A Letter and Encouragement: Does Information Increase Post-Secondary Enrollment of UI Recipients?
Andrew Barr & Sarah Turner
NBER Working Paper, April 2017


For individuals who experience job loss, enrollment in post-secondary programs may provide an opportunity to improve future employment outcomes. However, decisions to enroll may be hampered by insufficient information about the benefits and costs and the necessary steps and assistance available to facilitate such investments. Using variation in the dissemination and timing of letters sent to UI recipients containing this information, we find that individuals sent the information are 40% more likely to enroll. These findings suggest that well-coordinated information interventions delivered with institutional support may be more effective than raising the generosity of existing government programs in increasing participation.

A Note on US Worker Turnover
Sekyu Choi & Javier Fernández-Blanco
Oxford Bulletin of Economics and Statistics, April 2017, Pages 276–289


The length of new employment relationships is of first-order importance for a number of questions in recent macro-labour research. We investigate it using data from the Survey of Income and Program Participation for the US from 1996 onwards, and document that above two-fifths of newly employed workers fall into non-employment within a year. We also find that the transition rate from employment to non-employment within the first year varies significantly for different groups of the population, increases with the duration of the previous non-employment spell, exhibits an acyclical or weakly procyclical pattern and a much higher volatility than the unemployment rate.

Do Airports Boost Economic Development by Attracting Talent? An Empirical Investigation at the Subcounty Level
Xinxiang Chen, Guanghua Chi & Guangqing Chi
Social Science Quarterly, forthcoming

Methods: Using the data collected in Wisconsin at the municipal level, a subcounty level, in a region of the North Central United States from 1970 to 2010 and the American Community Survey 2006–2010 five-year estimates, and random effects models and structural equation models, we employ descriptive and inferential statistics to examine the linkage from airports to talent to regional economic development.

Results: We find that the farther a location is away from the airport, the lower its talent share tends to be, while greater passenger flow at the nearest airport increases a location's talent share. Given the quantity of passenger flow, a longer distance from the airport also reduces a location's talent share. The results furthermore suggest that economic development is impacted positively by passenger flow and talent share and negatively by distance to an airport.

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