Labor Markets

  • Michael Hout
  • Gregory Acs
  • David Card
  • Jesse Rothstein

Leaders: Gregory Acs, David Card, Michael Hout, Jesse Rothstein

The labor market was of course hit very heavily by the Great Recession, as evidenced by (a) the slow recovery of the unemployment rate, (b) and the even slower recovery of the long-term unemployment rate and the prime-age employment ratio (defined as the ratio of employed 25-54 year-olds to the population of that same age). This “jobs problem,” which is especially prominent among low-skill workers, has led to a sharp rise in the number of poor households without any working adults. It also underlies, in part, the sharp increase in the number of disability insurance claims and awards, which in turn has further reduced the supply of labor among low-skilled individuals.

If the first type of “jobs problem” is that there still are not enough of them, the second is that the jobs that are available do not always provide the requisite hours, wages, or security that are needed for a sure pathway out of poverty. As a result, low-skill individuals are not just working less but, even when they are working, there is no guarantee that their jobs will lift them and their families out of poverty. The Labor Markets RG is tasked with conducting research on these and related problems and exploiting administrative and other data to assess possible policy responses to them. We list below a few examples of the work being carried out in this group.

Long-run effects of work incentives: As nonworking poverty increases, the U.S. might well want to turn to new types of work incentive programs. Have these programs worked elsewhere?

Minimum wages and poverty: Throughout the west coast, there are a host of minimum wage “experiments” underway, experiments that have the potential to reset the low-wage labor market in quite fundamental ways. How are these experiments playing out?

Labor Markets - CPI Research

Title Author Media
Payroll Taxes, Firm Behavior, and Rent Sharing: Evidence from a Young Workers’ Tax Cut in Sweden Emmanuel Saez, Benjamin Schoefer, David Seim

Payroll Taxes, Firm Behavior, and Rent Sharing: Evidence from a Young Workers’ Tax Cut in Sweden

Author: Emmanuel Saez, Benjamin Schoefer, David Seim
Publisher: NBER
Date: 10/2017

This paper uses administrative data to analyze a large and long-lasting employer payroll tax rate cut from 31% down to 15% for young workers (aged 26 or less) in Sweden. We find a zero effect on net-of-tax wages of young treated workers relative to slightly older untreated workers, even in the medium run (after six years). Simple graphical cohort analysis shows compelling positive effects on the employment rate of the treated young workers, of about 2-3 percentage points, which arise primarily from fewer separations (rather than more hiring). These employment effects are larger in places with initially higher youth unemployment rates. We also analyze the firm-level effects of the tax cut. We sort firms by the size of the tax windfall and trace out graphically the time series of firms' outcomes. We proxy a firm's windfall with its share of treated young workers just before the reform. First, heavily treated firms expand after the reform: employment, capital, sales, value added, and profits all increase. These effects appear stronger in credit-constrained firms, consistent with liquidity effects. Second, heavily treated firms increase the wages of all their workers – young as well as old – collectively, perhaps through rent sharing. Wages of low paid workers rise more in percentage terms. Rather than canonical market-level adjustment, we uncover a crucial role of firm-level mechanisms in the transmission of payroll tax cuts.

Scraping by: Income and Program Participation After the Loss of Extended Unemployment Benefits Jesse Rothstein, Robert G. Valletta

Scraping by: Income and Program Participation After the Loss of Extended Unemployment Benefits

Author: Jesse Rothstein, Robert G. Valletta
Publisher: Journal of Policy Analysis and Management
Date: 08/2017

Many Unemployment Insurance (UI) recipients do not find new jobs before exhausting their benefits, even when benefits are extended during recessions. Using Survey of Income and Program Participation (SIPP) panel data covering the 2001 and 2007 to 2009 recessions and their aftermaths, we identify individuals whose jobless spells outlasted their UI benefits (exhaustees) and examine household income, program participation, and health-related outcomes during the six months following UI exhaustion. For the average exhaustee, the loss of UI benefits is only slightly offset by increased participation in other safety net programs (e.g., food stamps), and family poverty rates rise substantially. Self-reported disability also rises following UI exhaustion. These patterns do not vary dramatically across household demographic groups, broad income level prior to job loss, or the two business cycles. The results highlight the unique, important role of UI in the U.S. social safety net.

The Effects of the Affordable Care Act on Health Insurance Coverage and Labor Market Outcomes Mark Duggan, Gopi Shah Goda, Emilie Jackson

The Effects of the Affordable Care Act on Health Insurance Coverage and Labor Market Outcomes

Author: Mark Duggan, Gopi Shah Goda, Emilie Jackson
Publisher: NBER
Date: 07/2017

The Affordable Care Act (ACA) includes several provisions designed to expand insurance coverage that also alter the tie between employment and health insurance. In this paper, we exploit variation across geographic areas in the potential impact of the ACA to estimate its effect on health insurance coverage and labor market outcomes in the first two years after the implementation of its main features. Our measures of potential ACA impact come from pre-existing population shares of uninsured individuals within income groups that were targeted by Medicaid expansions and federal subsidies for private health insurance, interacted with each state’s Medicaid expansion status. Our findings indicate that the majority of the increase in health insurance coverage since 2013 is due to the ACA and that areas in which the potential Medicaid and exchange enrollments were higher saw substantially larger increases in coverage. While labor market outcomes in the aggregate were not significantly affected, our results indicate that labor force participation reductions in areas with higher potential exchange enrollment were offset by increases in labor force participation in areas with higher potential Medicaid enrollment

State of the Union 2017: Earnings Colin Peterson, C. Matthew Snipp, Sin Yi Cheung

State of the Union 2017: Earnings

Author: Colin Peterson, C. Matthew Snipp, Sin Yi Cheung
Publisher: Stanford Center on Poverty and Inequality
Date: 06/2017

Between 1970 and 2010, the earnings gap between whites and other groups has narrowed, but most of that decline was secured in the immediate aftermath of the Civil Rights Movement. Except in the case of Asians, more recent trends are less favorable, with the post-1980 earnings gap either growing larger (e.g., Hispanics) or remaining roughly stable in size (e.g., black men).

State of the Union 2017: Employment Michael Hout

State of the Union 2017: Employment

Author: Michael Hout
Publisher: Stanford Center on Poverty and Inequality
Date: 06/2017

Full recovery from the job losses of the Great Recession eluded African-American men even as the rest of the population approached full employment. Job loss can also unsettle those who haven’t lost their jobs. 1 in 9 African-Americans and 1 in 6 Hispanic Americans fear a job loss within one year, while just 1 in 18 whites do.

labor markets - CPI Affiliates

David Card's picture David Card Labor Markets Research Group Leader, Class of 1950 Professor of Economics; Director of the Labor Studies Program at the National Bureau of Economic Research; Director, Center for Labor Economics (CLE); Director, Econometrics Laboratory (EML)
University of California, Berkeley
Gregory Acs's picture Gregory Acs Labor Markets Research Group Leader, Director of Income and Benefits Policy Center
The Urban Institute
Jesse Rothstein's picture Jesse Rothstein Labor Markets Research Group Leader; Professor of Public Policy and Economics; Director of Institute for Research on Labor and Employment (IRLE); Research Associate, National Bureau of Economic Research; Co-Director, California Policy Lab
University of California, Berkeley
Michael Hout's picture Michael Hout Labor Markets Research Group Leader, Professor of Sociology
New York University
Cecilia Elena Rouse's picture Cecilia Elena Rouse Dean, Woodrow Wilson School, Lawrence and Shirley Katzman and Lewis and Anna Ernst Professor in the Economics of Education
Princeton University

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Labor Markets - Other Research

Title Author Media
Social Capital and Labor Market Networks Brian J. Asquith, Judith K. Hellerstein, Mark J. Kutzbach, David Neumark

Social Capital and Labor Market Networks

Author: Brian J. Asquith, Judith K. Hellerstein, Mark J. Kutzbach, David Neumark
Publisher: NBER
Date: 11/2017

We explore the links between social capital and labor market networks at the neighborhood level. We harness rich data taken from multiple sources, including matched employer-employee data with which we measure the strength of labor market networks, data on behavior such as voting patterns that have previously been tied to social capital, and new data – not previously used in the study of social capital – on the number and location of non-profits at the neighborhood level. We use a machine learning algorithm to identify potential social capital measures that best predict neighborhood-level variation in labor market networks. We find evidence suggesting that smaller and less centralized schools, and schools with fewer poor students, foster social capital that builds labor market networks, as does a larger Republican vote share. The presence of establishments in a number of non-profit oriented industries are identified as predictive of strong labor market networks, likely because they either provide public goods or facilitate social contacts. These industries include, for example, churches and other religious institutions, schools, country clubs, and amateur or recreational sports teams or clubs.

Reference-Dependent Job Search: Evidence from Hungary Stefano DellaVigna, Attila Lindner, Balázs Reizer, Johannes F. Schmieder

Reference-Dependent Job Search: Evidence from Hungary

Author: Stefano DellaVigna, Attila Lindner, Balázs Reizer, Johannes F. Schmieder
Publisher: Quarterly Journal of Economics
Date: 11/2017

We propose a model of job search with reference-dependent preferences, with loss aversion relative to recent income (the reference point). In this model, newly unemployed individuals search hard since consumption is below their reference point. Over time, though, they get used to lower income and thus reduce their search effort. In anticipation of a benefit cut, their search effort rises again, then declines once they get accustomed to the lower postcut benefit level. The model fits the typical pattern of exit from unemployment, even with no unobserved heterogeneity. To distinguish between this and other models, we use a unique reform in the unemployment insurance (UI) benefit path. In 2005, Hungary switched from a single-step UI system to a two-step system, with overall generosity unchanged. The system generated increased hazard rates in anticipation of, and especially following, benefit cuts in ways the standard model has a hard time explaining. We estimate a model with optimal consumption, endogenous search effort, and unobserved heterogeneity. The reference-dependent model fits the hazard rates substantially better than plausible versions of the standard model, including habit formation. Our estimates indicate a slow-adjusting reference point and substantial impatience, likely reflecting present-bias. 

Seeing Like the Fed: Culture, Cognition, and Framing in the Failure to Anticipate the Financial Crisis of 2008 Neil Fligstein, Jonah Stuart Brundage, Michael Schultz

Seeing Like the Fed: Culture, Cognition, and Framing in the Failure to Anticipate the Financial Crisis of 2008

Author: Neil Fligstein, Jonah Stuart Brundage, Michael Schultz
Publisher: American Sociological Review
Date: 09/2017

One of the puzzles about the financial crisis of 2008 is why regulators, particularly the Federal Open Market Committee (FOMC), were so slow to recognize the impending collapse of the financial system and its broader consequences for the economy. We use theory from the literature on culture, cognition, and framing to explain this puzzle. Consistent with recent work on “positive asymmetry,” we show how the FOMC generally interpreted discomforting facts in a positive light, marginalizing and normalizing anomalous information. We argue that all frames limit what can be understood, but the content of frames matters for how facts are identified and explained. We provide evidence that the Federal Reserve’s primary frame for making sense of the economy was macroeconomic theory. The content of macroeconomics made it difficult for the FOMC to connect events into a narrative reflecting the links between foreclosures in the housing market, the financial instruments used to package the mortgages into securities, and the threats to the larger economy. We conclude with implications for the sociological literatures on framing and cognition and for decision-making in future crises.

Income and Poverty in the United States: 2016 Jessica L. Semega, Kayla R. Fontenot, Melissa A. Kollar

Income and Poverty in the United States: 2016

Author: Jessica L. Semega, Kayla R. Fontenot, Melissa A. Kollar
Publisher: U.S. Census Bureau
Date: 09/2017

Summary of findings:

Real median household income increased 3.2 percent between 2015 and 2016.2 This is the second consecutive annual increase in median household income.

The number of full-time, year-round workers increased by 2.2 million in 2016.

The 2016 female-to-male earnings ratio was 0.805, a 1.1 percent increase from the 2015 ratio. This is the first time the female-to-male earnings ratio has experienced an annual increase since 2007.

The official poverty rate decreased by 0.8 percentage points between 2015 and 2016. At 12.7 percent, the 2016 poverty rate is not statistically different from 2007 (12.5 percent), the year before the most recent recession.

The number of people in poverty fell by 2.5 m

Women’s Progress for Men’s Gain? Gender-Specific Changes in the Return to Education as Measured by Family Standard of Living, 1990 to 2009–2011 ChangHwan Kim, Arthur Sakamoto

Women’s Progress for Men’s Gain? Gender-Specific Changes in the Return to Education as Measured by Family Standard of Living, 1990 to 2009–2011

Author: ChangHwan Kim, Arthur Sakamoto
Publisher: Demography
Date: 08/2017

This study investigates gender-specific changes in the total financial return to education among persons of prime working ages (35–44 years) using U.S. Census data from 1990 and 2000, and the 2009–2011 American Community Survey. We define the total financial return to education as the family standard of living as measured by family income adjusted for family size. Our results indicate that women experienced significant progress in educational attainment and labor market outcomes over this time period. Ironically, married women’s progress in education and personal earnings has led to greater improvement in the family standard of living for married men than for women themselves. Gender-specific changes in assortative mating are mostly responsible for this paradoxical trend. Because the number of highly educated women exceeds the number of highly educated men in the marriage market, the likelihood of educational marrying up has substantially increased for men over time while women’s likelihood has decreased. Sensitivity analyses show that the greater improvement in the family standard of living for men than for women is not limited to prime working-age persons but is also evident in the general population. Consequently, women’s return to education through marriage declined while men’s financial gain through marriage increased considerably.