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on Labor Markets - Supply, Demand, and Wages |
| By: | Sydnee Caldwell; Ingrid Haegele; Jörg Heining |
| Abstract: | Whether and how workers search on the job depends on their beliefs about pay and working conditions in other firms. Yet little is known about workers' knowledge of outside pay. We use a large-scale survey of full-time German workers, linked to their Social Security records, to elicit pay expectations and preferences over specific outside firms. Workers believe that they face considerable heterogeneity in their outside pay options, and direct their search toward firms they believe would pay them more. Workers' expected firm-specific pay premia are highly correlated with pay policies observed in administrative records and with workers' valuations of firm-specific amenities. Most workers are unwilling to search for a new job—or leave their current firm—even for substantial pay increases. Switching costs are equivalent to 7 to 18% of a worker’s annual pay. Attachment varies across firms, and cannot be explained by either differences in firm-specific amenities or switching costs. |
| JEL: | J0 J3 J30 J31 J32 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33445 |
| By: | Carlos Carrillo-Tudela; Fraser Summerfield; Ludo Visschers |
| Abstract: | We investigate cyclical changes in workers’ task portfolios, highlighting their direction, magnitude, and distribution. Task changes are not only very common but provide information about the skills required across jobs. During recessions, a larger share of employer switches do not involve task changes. When changes occur, they tend to be more substantial. The cyclicality of task changes among employer-to-employer movers contrasts sharply with that of hires from unemployment. We link our findings to the “sullying” and “cleansing” effects of recessions, uncovering a novel cleansing effect associated with employer-to-employer transitions and a sullying effect tied to employer changes through unemployment. |
| Keywords: | career change, occupational mobility, tasks, business cycles |
| JEL: | E32 J24 J62 E24 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11660 |
| By: | Jackie M.L. Chan; Michael Irlacher; Michael Koch; Luca Macedoni |
| Abstract: | This paper reveals a new determinant of wage markdowns at the firm level, namely, the product scope. Using matched employer-employee data on Danish manufacturing firms, we document a negative elasticity between wages and firm scope, which is of a similar magnitude but opposite sign as the firm-size wage premium. We rationalize the wage discount using a theory where workers value the opportunity to switch product lines as an amenity. Multiproduct firms exercise their monopsony power to offer lower wages. Our findings have important implications for understanding labor market dynamics in times of rising concentration from the contribution of large multiproduct firms. |
| Keywords: | multiproduct firms, monopsony power, wages, amenities, labor share |
| JEL: | J31 J42 L25 D21 F10 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11674 |
| By: | Nilsson, Pia (Research Institute of Industrial Economics (IFN)); Andersson, Hans (The Swedish University of Agricultural Sciences); Heldt, Tobias (Center for Tourism and Leisure Research, Dalarna University) |
| Abstract: | Using matched employer–employee data, this paper provides evidence from an industry that is gaining attention due to its contributions to rural and regional growth and preservation of permanent grasslands. The equine industry exemplifies a rural industry where specialized knowledge is central to the experiences, products and services provided, but where there is little evidence of the productivity gains associated with skilled labour. We apply control function and IV methods for estimating a long-run production function (2010-2022) that accounts for simultaneity bias and adjustment frictions in rural labour markets. Several variables are used to measure firms’ access to skilled labour, such as the employment share with specialized training in horse breeding and hippology, the accumulated stock of occupation-specific experience for all workers belonging to a firm and firms’ access to a local pool of skilled labour. Results show that occupation-specific training is associated with an average productivity premium of 11% across firms in the industry. Examinations of intra-industry heterogeneity reveals large differences and it is only firms specializing in horse racing that can obtain productivity advantages by increasing the share of workers with specialized skills. The results of this paper have implications for policy and the investment decisions made by firms. |
| Keywords: | Human capital; Skills; Firm productivity; Rural Economics |
| JEL: | D22 D24 J24 Q10 |
| Date: | 2025–02–21 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:iuiwop:1522 |
| By: | Ural Marchand, Beyza (University of Alberta, Department of Economics) |
| Abstract: | This paper examines the impact of imports from developed countries on industry-specific employment in India between 1983 and 2010. The identification strategy relies on comparing differential changes in import exposure across regions to the differential changes in employment within industries. The variation in the changes in imports to other developing countries is used to identify the component of the changes in imports driven by world demand. The results suggest that the increase in import exposure during the post-liberalization period reduced agricultural employment but increased employment in manufacturing, business, and social services. No significant impacts were found in the pre-liberalization period. |
| Keywords: | Import Competition; Trade; Employment |
| JEL: | F16 J21 J23 O33 |
| Date: | 2025–02–27 |
| URL: | https://d.repec.org/n?u=RePEc:ris:albaec:2025_002 |
| By: | Magne Mogstad; Kjell G. Salvanes; Gaute Torsvik |
| Abstract: | Policymakers, public commentators, and researchers often cite the Nordic countries as examples of a social and economic model that successfully combines low income inequality with prosperity and growth. This article aims to critically assess this claim by integrating theoretical perspectives and empirical evidence to illustrate how the Nordic model functions and why these countries experience low inequality. Our analysis suggests that income equality in the Nordics is primarily driven by a significant compression of hourly wages, reducing the returns to labor market skills and education. This appears to be achieved through a wage bargaining system characterized by strong coordination both within and across industries. This finding contrasts with other commonly cited explanations for Nordic income equality, such as redistribution through the tax-transfer system, public spending on goods that complement employment, and public policies aimed at equalizing skills and human capital distribution. We consider the potential lessons for other economies that seek to reduce income equality. We conclude by discussing several underexplored or unresolved questions and issues. |
| JEL: | J3 J5 O0 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33444 |
| By: | Philippe d'Astous; Vyacheslav Mikhed; Sahil Raina; Barry Scholnick |
| Abstract: | Using wealth windfalls from lottery winnings and matched employer-employee tax files, we compare the effect of additional wealth on the entrepreneurial activity of older and younger individuals. We find that additional wealth leads older winners (aged 55 and older) to reduce business ownership and scale. In contrast, additional wealth leads younger winners to increase business ownership and performance. We also show that extra lottery wealth reduces the wage labor supply of both younger and older individuals. Thus, while younger lottery winners reduce wage labor to increase entrepreneurship, older lottery winners reduce both wage labor and entrepreneurship to retire. |
| Keywords: | Wealth, Age, Entrepreneurship, Labor Supply |
| JEL: | G5 G51 J22 L26 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:rsi:irersi:17 |
| By: | Morten Bennedsen; Antoine Bertheau; Marianna Kudlyak; Birthe Larsen |
| Abstract: | We use a novel large-scale survey of firms, implemented in Denmark in 2021 and linked to administrative data, to study why firms lay off workers instead of cutting wages. Our questions on layoffs, wage cuts, and the link between them provide new insights into firms’ strategies for adjusting labor in response to adverse shocks. We find that layoffs are more prevalent than wage cuts, but wage cuts are not rare in firms experiencing revenue reduction and were used by 15% of such firms. Employers are hesitant to cut wages in many instances because they see wage cuts as a poor substitute for layoffs. First, firms report that lowering wages triggers costs through the impact on morale and quits. Comparing these costs with potential savings from wage cuts, most employers in the survey agree that a wage reduction would not have saved jobs. Second, firms report that a crisis is an opportune time for layoffs because of lower opportunity costs of restructuring and because layoffs during a crisis are perceived by workers as more fair. We find that firms that report such opportunistic layoffs are less likely to implement wage cuts. |
| Keywords: | wage rigidity; layoffs |
| JEL: | D22 J30 J63 J23 |
| Date: | 2025–02–07 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedfwp:99558 |
| By: | Keenan, Enda (Central Bank of Ireland) |
| Abstract: | This paper explores the wage premium associated with job switching in Ireland by utilising newly available gross pay data from the Labour Force Survey (LFS) linked to administrative data on individual earnings. Job switching, or moving directly from one job to another, is often driven by the potential for wage increases and improved job matches. While job switching behaviour tends to vary with business cycles, this analysis finds that job switchers in Ireland experience a wage premium. By controlling for demographic factors such as age, education and sector, the estimated wage premium for job switchers lies between 2.3 per cent and 2.4 per cent in the quarter immediately following a job change. |
| Keywords: | Job switching, Labour mobility, Job-to-job flows, Wage premium, Employment. |
| JEL: | J31 J62 C23 |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:cbi:wpaper:7/rt/24 |
| By: | Silva, Jose I.; Okabe, Tomohito; Urzay, Sergi |
| Abstract: | This study examines the relationship between firms’ market power, captured by product markups and labor markdowns, and the labor share within European firms. Using firm-level data from the CompNet database, we develop a microeconomic framework linking the labor share to firms’ market power. Empirical results show that labor markdowns reduce the labor share, while product markups have a hump-shaped effect on it. Specifically, moderate increases in product markups initially lead to a rise in the labor share. However, as markups reach higher levels, firms with significant pricing power increasingly exercise monopsony power over their workers, amplifying markdowns and suppressing labor costs. Additionally, the analysis uncovers substantial cross-country heterogeneity in the relationship between markups, markdowns, and the labor share. |
| Keywords: | product markup, labor markdown, firms’ labor share. |
| JEL: | D21 D22 J31 L12 |
| Date: | 2025–01–24 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:123442 |
| By: | Bruno Merlevede; Annelies Van Maele (-) |
| Abstract: | This paper documents how the composition of value added per worker in Europe is distributed over manufacturing, services, and other industries based on a large panel of firmlevel data. We show that a non-negligible part of value added is accounted for by services industries. We then explore how micro-data at the firm level can be used to analyse this important component of aggregate productivity growth. We further discuss and explore using our data whether semi-parametric estimators of total factor productivity that are commonly found in the literature and typically tailored towards manufacturing are fit for analysing firms services sectors. |
| Keywords: | Productivity slowdown, firm-level data, services industries |
| JEL: | E24 J24 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:rug:rugwps:25/1109 |
| By: | Mohit Sharma and (Ph.D. scholar, Madras School of Economics, Chennai, Tamil Nadu, India, 600025); Brinda Viswanathan (Professor, Madras School of Economics, Chennai, Tamil Nadu, India, 600025) |
| Abstract: | This paper studies the minimum wage effect on the transitions of men and women workers from covered to uncovered sector as well as to unemployment and out of labour force. Using border discontinuity design, first differencing and the individual level panel data for the urban region for the years 2017-18 to 2022-23, and novel data on more than 1800 minimum wages, this paper finds that an increase in minimum wage results in transition of women workers out of the covered sector, however, for male workers this paper finds null employment transitions effects. The study on heterogenous effects reveal that the results are primarily driven by low-skilled female workers belonging to the regions of high labour market concentration where 10 percent increase in minimum wage result in a fall in probability that a worker remains in covered sector by 1.5 percent. Contrary to this, we find favorable labour market conditions for low-skilled male workers in the regions of high labour market concentration. The results are robust to various specification choices. |
| Keywords: | Minimum Wage, Employment transitions, Gender, India |
| JEL: | J16 J3 J42 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:mad:wpaper:2025-276 |
| By: | Ariell Reshef; Cailin Slattery |
| Abstract: | The employment share of legal services in the U.S. more than doubled during 1970–1990, in stark contrast to stability during 1850–1970 and after 1990. The relative wage of lawyers and law firm partners also doubled between 1970 and 1990. We argue that this demand shift was driven by important legislative and regulatory events, starting in the mid-1960s and lasting throughout the 1980s. These changes increased the scope of the law and uncertainty over legal outcomes. Consistent with this, we find that employment and compensation of lawyers are tightly correlated with federal regulation, fee-shifting statues and civil litigation, over a period of 100 years. These findings are supported by state-level and individual-level analysis. Other factors, e.g., changes in lawyers’ quality, industrial composition and technology are not important determinants of the demand shift. We calculate that 40% of payments to legal services in 1990 are in excess of what they would have been had their relative income remained at 1970 levels. This represents an excess cost of 75 billion dollars in 2024 alone. |
| Keywords: | legal services, lawyers, legislation, deregulation, litigation, labor demand |
| JEL: | J20 J30 N30 K00 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11661 |
| By: | Michael Dinerstein; Samuel Earnest; Dmitri K. Koustas; Constantine Yannelis |
| Abstract: | Student loan forgiveness has been proposed as a means to alleviate soaring student loan burdens. This paper uses administrative credit bureau data to study the distributional, consumption, borrowing, and employment effects of the largest event of student loan forgiveness in history. Beginning in March 2021, the United States federal government ordered $132 billion in student loans cancelled, or 7.8% of the total $1.7 trillion in outstanding student debt. We estimate that forgiven borrowers’ predicted monthly earnings were $115 higher than borrowers who did not receive forgiveness and $193 more than the general population. We find that student loan forgiveness led to increases in mortgage, auto, and credit card debt by 9 cents for every dollar forgiven. Borrowers’ monthly earnings and employment fell, at increasing rates for each month post forgiveness. The implied Marginal Propensities for Consumption (MPC) and Earnings (MPE) are 0.27 and -0.49, respectively. |
| JEL: | G51 I22 I28 J29 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33462 |