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on Labor Markets - Supply, Demand, and Wages |
| By: | Duman, Anil |
| Abstract: | We develop a possibility to work index (PWI) taking the ability to work from home and workplace closures into account. By using the data from the HLFS in Turkey, we examine the individual level determinants of PWI. Our findings reveal that PWI and ability to work from home are significantly different, and essential or closed jobs are not necessarily concentrated at the bottom of the wage distribution. Therefore, from a policy perspective, PWI can be a more encompassing measure of risk and can assist the public authorities to design better targeted social policies. Our results also point out that wage inequality is likely to deteriorate as a result of the supply shocks from confinement policies. However, the overall negative distributional effects of lockdown and disparity between employees in different economic activities become more substantial with duration. These suggest that in order to avoid major increases in earning inequalities and related social problems, governments would be better off with shorter and stricter lockdowns. |
| Keywords: | workplace closures,wage loss,wage inequality,teleworking,developing countries |
| JEL: | D33 E24 J21 J31 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:602&r=all |
| By: | Davide Dottori (Bank of Italy, Ancona regional branch) |
| Abstract: | Increased robot diffusion has raised concerns for its possible negative impact on employment. Following an empirical approach in line with those applied to the US and Germany with contrasting results, this paper provides evidence about the effect of robots on employment outcomes in Italy (second European economy for robot stock) from the early 1990s up to 2016, both at the local labour market (LLM) level and at the worker level. In order to purge from demand and other confounding shocks, the identification relies on an instrumental variables strategy based on robots’ sectoral growth in other European countries. No harmful impact on total employment emerges from the LLM analysis; the estimated effect is negative when limited to manufacturing employment, but its statistical significance is weak or absent once concurrent trends relating to trade and ICT are controlled for. Results at the worker level show that incumbent workers in manufacturing were not damaged on average, with an overall positive (though not large) employment effect, driven by longer working relationships with the original firm; conditional on them remaining at the original firm, the impact is also positive on wages. On the other hand, robot diffusion turns out to have contributed to reshaping the sectoral distribution of the new labour force inflows towards less robot intensive industries. |
| Keywords: | robot, automation, employment, local labour markets, wages |
| JEL: | J23 J31 L11 L60 O33 R11 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:opques:qef_572_20&r=all |
| By: | Bleynat, Ingrid; Challú, Amílcar; Segal, Paul |
| Abstract: | Historical wage and incomes data are informative both as normative measures of living standards, and as indicators of patterns of economic development. We show that, given limited historical data, median incomes are most appropriate for measuring welfare and inequality, while urban unskilled wages can be used to test dualist models of development. We present a new dataset including both series in Mexico from 1800 to 2015 and find that both have historically failed to keep up with aggregate growth: per worker GDP is now over eight times higher than in the nineteenth century, while unskilled urban real wages are only 2.2 times higher, and median incomes only 2.0 times. From the perspective of inequality and social welfare, our findings confirm that there is no automatic positive relationship between economic growth and rising living standards for the majority. From the perspective of development, we argue that these findings are consistent with a dual economy model based on Lewis’s assumption of a reserve army of labour, and explain why Kuznets's predicted decline in inequality has not occurred. |
| Keywords: | inequality; living standards; Kuznets curve; Mexico |
| JEL: | D31 N36 O15 |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:105215&r=all |
| By: | Giordano Mion; Luca David Opromolla; Gianmarco I.P. Ottaviano |
| Abstract: | Understanding why certain jobs are ‘better’ than others and what implications they have for a worker’s career is clearly an important but still relatively unexplored question. We provide both a theoretical frame-work and a number of empirical results that help distinguishing ‘good’ from ‘bad’ jobs in terms of their impact on a worker’s lifetime wage income profile through wage jumps occurring upon changing job (‘static effects’) or through increases in the wage growth rate (‘dynamic effects’). We find that the distinction between internationally active firms and domestic firms is a meaningful empirical dividing line between employers providing ‘good’ and ‘bad’ jobs. First, in internationally active firms the experience-wage profile is much steeper than in domestic firms, especially for managers as opposed to blue-collar workers. Second, the higher lifetime wage income for managers in internationally active firms relies on the stronger accumulation of experience that these firms allow for and on the (almost) perfect portability of the accumulated dynamic wage gains to other firms. Static effects are instead much more important for blue-collar workers. Finally, the distinction between internationally active and domestic firms is relevant also at a more aggregate level to explain cross-sectional differences in wages among workers and spatial differences in average wages across regions within a country. |
| Keywords: | good jobs, international experience, managers, sorting, wage growth, wage premium |
| JEL: | J30 M12 J62 F16 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8430&r=all |
| By: | Eichhorst, Werner (IZA); Hemerijck, Anton (European University Institute); Scalise, Gemma (University of Bergamo) |
| Abstract: | Barely having had the time to digest the economic and social aftershocks of the Great Recession, European welfare states are confronted with the even more disruptive coronavirus pandemic as probably, threatening the life of the more vulnerable, while incurring job losses for many as the consequence of the temporal "freezing of the economy" by lockdown measures. Before the Covid-19 virus struck, the new face of the digital transformation and the rise of the 'platform' economy already raised existential questions for future welfare provision. The Great Lockdown - if anything - is bound to accelerate these trends. Greater automation will reinforce working from home to reduce Covid-19 virus transmission risks. At the same time, the Great Lockdown will reinforce inequality, as the poor find it more difficult to work from home, while low-paid workers in essential service in health care, supermarket retail, postal services, security and waste disposal, continue to face contagion risks. And although popular conjectures of 'jobless growth' and 'routine-biased' job polarization, driven by digitization and artificial intelligence, may still be overblown, intrusive change in the nature of work and employment relations require fundamental rethinking of extant labour market regulation and social protection. Inspired more by adverse family demography than technological change, social investment reform has been the fil rouge of welfare recalibration since the turn of the century. Is social investment reform still valid in the new era of 'disruptive' technological transformation in aftermath of Coronavirus pandemic that is likely to turn into the worst recession since the second world war? Empirically, this chapter explores how Germany, Italy and the Netherlands, in terms of the strengths and vulnerabilities of their labour market to digitization, together with their respective social investment aptitude, are currently preparing their welfare states for the intensification of technological change in the decade ahead. |
| Keywords: | COVID-19, Italy, technological change, Netherlands, social investment, digital transition, Germany |
| JEL: | J21 J24 J42 |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp13391&r=all |
| By: | Verdugo, Gregory (University of Evry); Allègre, Guillaume (OFCE) |
| Abstract: | We document how differences in labour demand by gender explain the contrasting evolutions of labour force participation between men and women during the Great Recession in Europe. We first highlight that Europe is characterized by high levels of occupational segregation by gender. As a result, the large job losses in middle-paid occupations during the Great Recession affected male workers disproportionally. In contrast, the fact that higher- and lower-paid occupations were less affected was more favourable to women. Using individual panel data, we investigate how the labour force participation and regional mobility of men and women responded to these shocks. We find that the labour force participation of women increased considerably in the regions most affected by the destruction of men's jobs and with relatively higher labour demand in occupations more likely to employ women. Women with higher levels of education were also more likely to move to regions with higher labour demand in these occupations. We find that not considering the mobility of women with higher education levels can bias the estimates of the impact of labour demand shocks on participation. For men, unemployment increased in response to regional declines in male labour demand. However, regional shocks explain none of the decline in male labour force participation. |
| Keywords: | labor force participation, Great Recession, job polarization |
| JEL: | J21 J23 J24 |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp13425&r=all |
| By: | Lopez-Acevedo, Gladys (World Bank); Freije-Rodriguez, Samuel (World Bank); Vergara Bahena, Mexico Alberto (World Bank); Cardozo Medeiros, Diego (University of Chicago) |
| Abstract: | The unemployment and labor force participation gender gaps narrowed in Mexico after the 2008 global economic crisis, when female labor force participation increased. This paper aims to understand female labor force participation growth and identify its main determinants. For that purpose, the paper estimates a probit model with data from the National Employment Survey of 2007 and 2017, when the unemployment rate returned to the pre-crisis level. Broadly, the results show that increasing labor force participation of women ages 36 to 65 sustained the growth of overall female labor force participation, women's educational attainment can offset any individual or household obstacle to women's employability, and childcare availability significantly supports mothers' employability. |
| Keywords: | female labor force participation, Mexico, gender gap, female education, childcare services |
| JEL: | J21 J22 O54 |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp13404&r=all |
| By: | Robin Döttling (Erasmus University Rotterdam); Enrico Perotti (University of Amsterdam) |
| Abstract: | We study the redistributive effects of a gradual productivity shift from tangible to intangible capital. Intangible asset creation relies on the commitment of skilled human capital. To ensure retention,firms reward innovators by deferred compensation, so funding demand by firms drops as the importance of intangible assets rises. Since human capital income is not tradable,the supply of investable assets falls and innovator rents rise.The general equilibrium effect is a fall in interest rates, while surplus savings are stored in higher asset valuations. This shift leads to increasing inequality and skewness in both the capital and labor income share.Rising house prices and wage inequality lead to higher household leverage. |
| Keywords: | Intangible capital, skill-biased technological change, human capital, excess savings,house prices |
| JEL: | D33 E22 G32 |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:ajk:ajkdps:006&r=all |
| By: | Jesse Rothstein |
| Abstract: | 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. |
| JEL: | E24 J2 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:27516&r=all |
| By: | John T. Addison; Liwen Chen; Orgul D. Ozturk |
| Abstract: | Although the adverse labor market effects of economic recessions have been well documented, a notable omission in the literature is how recessions impact workers’ job match quality. This paper considers the short and longer-term losses in productivity associated with the job changing brought in train by the two most recent recessions. Changes in match quality are the mechanism, with dislocated workers being reemployed in jobs for which they are more mismatched. Using monthly data from the 1979 and 1997 cohorts of the National Longitudinal Survey of Youth and the Current Population Survey (CPS), we document direct changes in occupational match quality and the associated changes in wages. We first investigate how workers’ match qualities change over the lifecycle and report that the total amount of mismatch averaged over all workers of the younger cohort actually decreased through time. For the older cohort, we then explore the role of age, education, gender, and occupational task groups. Economic recessions are shown to disproportionately harm the match quality of mid-aged workers versus that of young workers; to have more serious consequences for the match quality of men than women, especially highly educated men; and lead to occupational polarization, thereby amplifying the skill mismatch of mid-aged workers. |
| Keywords: | recessions, match quality, mismatch, wage loss, mid-career effects, mancessions, downskilling |
| JEL: | E24 J24 J63 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8390&r=all |
| By: | Michele Battisti; Ryan Michaels; Choonsung Park |
| Abstract: | There is substantial variation in working time even within employer-employee matches, and yet estimates of the Frisch elasticity of labor supply can be near zero. This paper proposes a tractable theory of earnings and working time to interpret these observations. Production complementarities attenuate the response of working time to idiosyncratic, or worker-specific, shocks, but firm-wide shocks are mediated by preference parameters. The model can be identified using firm-worker matched data, revealing a Frisch elasticity of around 0.5. A quasi-experimental approach that mimics the design of earlier studies by exploiting only idiosyncratic variation would find an elasticity less than half this. |
| Keywords: | Intensive margin; production complementarities; bargaining; employeeemployer data. |
| JEL: | J22 J23 J31 |
| Date: | 2020–07–17 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedpwp:88449&r=all |
| By: | Sebastian Graves |
| Abstract: | The responsiveness of job creation to shocks is procyclical, while the responsiveness of job destruction is countercyclical. This new finding can be explained by a heterogeneous-firm model in which hiring costs lead to lumpy employment adjustment. The model predicts that policies that aim to stimulate employment by encouraging job creation, such as hiring subsidies, are significantly less effective in recessions: These are times when few firms are near their hiring threshold and many firms are near their firing threshold. Policies that target the job destruction margin, such as employment protection subsidies, are particularly effective at such times. |
| Keywords: | Labor market frictions; Hiring costs; Hiring subsidies; Employment stabilization policies; Time-varying volatility |
| JEL: | E24 E32 E63 |
| Date: | 2020–07–08 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgif:1290&r=all |
| By: | Jan Aleksander Baran (Faculty of Economic Sciences, University of Warsaw) |
| Abstract: | The paper investigates persistency of overeducation from individual perspective. Following aspects of mobility are analysed: probability of staying in employment, upward occupational mobility and wage dynamics. Data for Poland are used. The results show that overeducated individuals are more likely to stay in employment compared to their properly matched colleagues. The overeducated workers as well as undereducated ones tend to move toward jobs for which they are more properly matched. However, the rate of this adjustment is low and one can fairly claim that in Poland overeducation is a persistent phenomenon from individual perspective. In line with other studies, the overeducated workers are found to experience faster wage growth compared to properly matched individuals. However, it can be largely attributed to overeducated workers improving their match status over time. It means that initially overeducated workers can expect faster wage growth than properly matched workers especially when they move to jobs requiring more schooling. |
| Keywords: | overeducation, educational mismatch, occupational mobility, earnings mobility |
| JEL: | I21 J24 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:war:wpaper:2020-23&r=all |
| By: | Baert, Stijn; Picchio, Matteo |
| Abstract: | This article contributes to the nascent literature on the effect of grade retention in school on later labour market success. A field experiment is conducted to rule out the endogeneity of both outcomes. More concretely, various treatments of grade retention are randomly assigned to fictitious résumés sent in application to real vacancies. Overall, grade retention does not significantly affect positive call-back by employers. However, when narrowing in on vacancies for occupations where on-the-job training is important, job candidates with a record of grade retention are 16% less likely to receive a positive reaction. This finding is consistent with Queuing theory. |
| Keywords: | grade retention,hiring youth,training,signalling,queuing |
| JEL: | I21 J23 J70 C93 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:598&r=all |
| By: | Johannes Becker; Daniel Hopp; Karolin Süß |
| Abstract: | Indirect reciprocity is defined as a specific kind of behavior: An agent rewards or penalizes another agent for having behaved kindly or unkindly toward a third party. This paper analyzes the question of what drives indirect reciprocity: Does the agent reward or penalize because she (altruistically) cares for the third party? Or does she take the other agent’s behavior as a signal of how the latter would treat her if they met? In order to measure the relative importance of the altruism motive versus the signaling motive, we consider a gift-exchange game with three players: an employer pays wages to a worker and a coworker, before the worker (but not the coworker) may reciprocate by exerting effort. We offer a theoretical framework to analyze both motives for indirect reciprocity and run a series of lab experiments. The treatments manipulate the worker’s information on wages. We find that, if only the coworker’s wage is observable, the worker’s effort increases in the coworker’s wage. In contrast, if the worker can observe her own wage, the coworker’s wage does not affect worker effort at all. We interpret this as support for the signaling motive: Indirect reciprocity is rather a byproduct of direct reciprocity than an act of altruism. |
| Keywords: | gift-exchange, indirect reciprocity, signaling |
| JEL: | A13 C92 D91 J31 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8423&r=all |
| By: | Can, Ege (University of Nevada, Reno); Fossen, Frank M. (University of Nevada, Reno) |
| Abstract: | The economic effects of non-compete agreements have received increasing attention from academics and policymakers. This paper investigates how non-compete policies affect different types of self-employment. We exploit policy reforms in Utah and Massachusetts in 2016 and 2018, which decreased the enforceability of non-compete covenants, as quasi-experiments. We separate self-employment into self-employment with incorporated businesses (as a proxy for entrepreneurship) and self-employment with unincorporated businesses. Using representative individual-level data from the American Community Survey and the Current Population Survey, we estimate the probability of being self-employed with these different types of businesses, as well as entry into self-employment, and how these probabilities changed due to the reforms. Our findings show that the decrease in the enforceability of non-compete agreements in the two states resulted in a higher rate of incorporated self-employment in these states. In contrast, there was no sizable effect on the rate of unincorporated self-employment. Our results imply that states can promote entrepreneurial activity by reducing the enforceability of non-compete agreements. |
| Keywords: | incorporated, non-compete agreements, entrepreneurship, unincorporated |
| JEL: | L26 O38 J23 |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp13414&r=all |
| By: | Hiroyuki Yamada (Faculty of Economics, Keio University); Yuki Kanayama (Faculty of Economics, Keio University); Kanako Yoshikawa (Osaka School of International Public Policy, Osaka University); Kyaw Wai Aung (STI Myanmar University) |
| Abstract: | Commercial sex is a prevalent but risky profession in many countries, including Myanmar. While risk attitude is a potentially important factor in determining risky behavior of female sex workers (FSWs), few studies have explicitly investigated the issue. This is one of the first studies to elicit the risk attitude of FSWs using a simple risk game. We conducted the risk game with FSWs in Yangon, Myanmar, where the average GDP per capita is very low, to study how risk attitude is related with observable characteristics and with risky behavior related to the use of condoms in the commercial sex market. We found that risk attitude is relatively independent of observable characteristics and the decision to use a condom. However, transaction prices were directly associated with risk attitude. |
| Keywords: | Commercial sex work, female sex worker, risk attitude, transaction price, Myanmar |
| JEL: | D81 E26 J46 O53 |
| Date: | 2020–07–21 |
| URL: | http://d.repec.org/n?u=RePEc:keo:dpaper:2020-013&r=all |
| By: | Muraközy, Balázs (University of Liverpool); Telegdy, Álmos (Corvinus University of Budapest) |
| Abstract: | This paper investigates the effects of non-repayable enterprise grants financed from the European Union's Structural and Cohesion Funds on firm outcomes in Hungary using firm- and worker-level information on all rejected and successful grant applications between 2004-2014. In our model, after paying the fixed cost of applying, firms can purchase capital at a reduced marginal cost and they share the rent generated from the grant with their workers. In line with the model's predictions, larger than average, more productive and faster growing firms are more likely to apply for a grant. We combine panel regression methods with matching techniques to estimate the effect of grants by comparing successful and unsuccessful applicants' outcomes. Subsidized firms increase their employment, sales, capital-to-labor ratio and labor productivity, but not total factor productivity. The skill composition of workers is not affected by the grant but wages grow, especially for skilled workers. Firms winning multiple grans benefit more already from the first grant and successive grants have even larger effects. According to our simple calculations, each year's subsidy program created jobs in grant winning firms equivalent to 0.3-0.5 percent of total SME employment and contributed by 0.3-0.7 percentage points to aggregate SME productivity growth – with an annual cost often in excess of 1 percent of total SME value added. These results suggest that these grants promote firm growth, but do not lead firms to introduce new forms of production or upgrade technology. |
| Keywords: | enterprise grants, EU grants, worker effects, matched employer-employee data, Hungary |
| JEL: | H25 D22 O16 J21 |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp13410&r=all |
| By: | George Economides; Pantelis Kammas; Thomas Moutos |
| Abstract: | We explain the public’s support for the minimum wage (MW) institution despite economists’ warnings that the MW is a “blunt instrument” for redistribution. To do so we build a model in which workers are heterogeneous in ability, and the government engages in redistribution through the public provision of private goods. We show that the MW institution is politically viable only when there is a limited degree of in-kind redistribution. To examine the empirical relevance of our hypothesis we investigate the relationship between the probability of adopting MW legislation and the size of primary government spending by employing a dataset of 38 -developing and developed- countries from 1960 to 2017. Probit model estimations yield support for our theoretical prediction that a decrease in government spending increases the likelihood of a country enacting MW legislation. This negative association remains highly robust under alternative empirical specifications and estimation techniques. |
| Keywords: | minimum wage, redistribution, heterogeneity, unemployment |
| JEL: | E21 E24 H23 J23 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8355&r=all |
| By: | Axel H. Börsch-Supan; Johannes Rausch; Nicolas Goll |
| Abstract: | As much like other industrialized countries, in recent decades the employment rate in Germany for those aged 55 to 69 had been declining first to considerably rise again afterwards. This paper investigates the role of structural policy changes, in particular reforms of the pension system, since 1980 in explaining this trend reversal. We summarize the institutional changes and pension reforms that may account for the trend reversal, and calculate an “implicit tax on working longer”. We find that for both men and women the increase in the employment rate coincides with a reduction in the early retirement incentive. The reduction of incentives mainly stems from the introduction of actuarial deductions for early retirement and from the abolishment of specific early retirement pathways. |
| JEL: | H55 J26 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:27518&r=all |
| By: | Laszlo Goerke |
| Abstract: | We analyse the implications of habit formation relating to wages in a multi-period efficiency-wage model. If employees have such preferences, their existence provides firms with incentives to raise wages and reduce employment over time. Greater intensity does not necessarily have the same consequences, because wage adjustments counteract the initial level impact. The firm’s response additionally depends on the wage-dependency of dismissal costs since such costs make an increasing wage profile more attractive and mitigate the effects of greater intensity of habit formation. We further show that short-lived productivity shocks have long-lasting wage and employment consequences. Moreover, habit concerns by firm owners reduce wages. |
| Keywords: | efficiency wages, habit formation, wage profile, wage rigidity |
| JEL: | D90 J31 J41 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8428&r=all |
| By: | Timothy DeStefano (OECD); Filipe Silva (OECD); Sho Haneda (Nihon University); Hyeog Ug Kwon (Nihon University) |
| Abstract: | This paper examines the determinants of structural adjustment in Japan and identifies several factors that explain the use of certain employment types. Its findings are based on a novel plant-level dataset that provides considerable detail on the types of employees used by Japanese manufacturers between 2001 and 2014. Analysis of this dataset shows that growth in the diffusion of robotics is linked to fewer non-regular employees, which seems to be partially driven by the positive association between robot adoption and the dismissal of certain types of non-regular workers. It also finds that offshoring from Japan to other countries contributes to the use of both regular and non-regular workers, while higher plant productivity is related to the use of more regular workers. Finally, establishments that experienced job dismissals appear to substitute non-regular workers for regular workers. |
| Keywords: | Employment composition, Layoffs, Structural adjustment |
| JEL: | J21 J23 |
| Date: | 2020–08–20 |
| URL: | http://d.repec.org/n?u=RePEc:oec:stiaaa:2020/08-en&r=all |