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
The Determinants and Welfare Implications of US Workers’ Diverging Location Choices by Skill: 1980-2000 Rebecca Diamond

The Determinants and Welfare Implications of US Workers’ Diverging Location Choices by Skill: 1980-2000

Author: Rebecca Diamond
Publisher: American Economic Review
Date: 03/2016

From 1980 to 2000, the rise in the US college/high school graduate wage gap coincided with increased geographic sorting as college graduates concentrated in high wage, high rent cities. This paper estimates a structural spatial equilibrium model to determine causes and welfare consequences of this increased skill sorting. While local labor demand changes fundamentally caused the increased skill sorting, it was further fueled by endogenous increases in amenities within higher skill cities. Changes in cities' wages, rents, and endogenous amenities increased inequality between high school and college graduates by more than suggested by the increase in the college wage gap alone.

Credential Privilege or Cumulative Advantage? Prestige, Productivity, and Placement in the Academic Sociology Job Market Spencer Headworth, Jeremy Freese

Credential Privilege or Cumulative Advantage? Prestige, Productivity, and Placement in the Academic Sociology Job Market

Author: Spencer Headworth, Jeremy Freese
Publisher: Social Forces
Date: 03/2016

Using data on the population of US sociology doctorates over a five-year period, we examine different predictors of placement in a research-oriented, tenure-track academic sociology jobs. More completely than prior studies, we document the enormous relationship between PhD institution and job placement that has, in part, prompted a popular metaphor that academic job allocation processes are like a caste system. Yet we also find comparable relationships between PhD program and both graduate student publishing and awards. Overall, we find results more consistent with PhD prestige operating indirectly through mediating achievements or as a quality signal than as a “pure prestige” effect. We suggest sociologists think of stratification in their profession as not requiring exceptionalist historical metaphors, but rather as involving the same ordinary but powerful processes of cumulative advantage that pervade contemporary life.

Firms and Labor Market Inequality: Evidence and Some Theory David Card, Ana Rute Cardoso, Jörg Heining , Patrick Kline

Firms and Labor Market Inequality: Evidence and Some Theory

Author: David Card, Ana Rute Cardoso, Jörg Heining , Patrick Kline
Publisher: IZA
Date: 03/2016

We review the literature on firm-level drivers of labor market inequality. There is strong evidence from a variety of fields that standard measures of productivity – like output per worker or total factor productivity – vary substantially across firms, even within narrowly-defined industries. Several recent studies note that rising trends in the dispersion of productivity across firms mirror the trends in the wage inequality across workers. Two distinct literatures have searched for a more direct link between these two phenomena. The first examines how wages are affected by differences in employer productivity. Studies that focus on firm-specific productivity shocks and control for the non-random sorting of workers to more and less productive firms typically find that a 10% increase in value-added per worker leads to somewhere between a 0.5% and 1.5% increase in wages.A second literature focuses on firm-specific wage premiums, using the wage outcomes of job changers. This literature also concludes that firm pay setting is important for wage inequality, with many studies finding that firm wage effects contribute approximately 20% of the overall variance of wages. To interpret these findings, we develop a model where workplace environments are viewed as imperfect substitutes by workers, and firms set wages with some degree of market power. We show that simple versions of this model can readily match the stylized empirical findings in the literature regarding rent-sharing elasticities and the structure of firm-specific pay premiums.

State of the Union 2016: Labor Markets Michael Hout

State of the Union 2016: Labor Markets

Author: Michael Hout
Publisher:
Date: 02/2016
The prime-age employment rate in the U.S. still languishes well below pre-recession levels. If the current (slow) rate of improvement continues, the U.S. will likely fall into another recession before the male rate returns to its pre-recession level. 
    Unemployment Insurance and Disability Insurance in the Great Recession Andreas I. Mueller, Jesse Rothstein, Till M. von Wachter

    Unemployment Insurance and Disability Insurance in the Great Recession

    Author: Andreas I. Mueller, Jesse Rothstein, Till M. von Wachter
    Publisher: Journal of Labor Economics
    Date: 01/2016

    Social Security Disability Insurance (SSDI) awards rise during recessions. If marginal applicants are able to work but unable to find jobs, countercyclical Unemployment Insurance (UI) benefit extensions may reduce SSDI uptake. Exploiting UI extensions in the Great Recession as a source of variation, we find no indication that expiration of UI benefits causes SSDI applications and can rule out effects of meaningful magnitude. A supplementary analysis finds little overlap between the two programs’ recipient populations: only 28% of SSDI awardees had any labor force attachment in the prior calendar year, and of those, only 4% received UI.

    labor markets - CPI Affiliates

    Mark Granovetter's picture Mark Granovetter Joan Butler Ford Professor of Sociology
    Stanford University
    Marta Tienda's picture Marta Tienda Professor, Maurice P. During '22 Professor in Demographic Studies; Professor of Sociology and Public Affairs; Director, Program in Latino Studies
    Princeton University
    Martina Morris's picture Martina Morris Professor of Sociology and Statistics
    University of Washington - Seattle
    Mary C. Brinton Reischauer Institute Professor of Sociology
    Harvard University
    Patricia A. Roos's picture Patricia A. Roos Professor of Sociology
    Rutgers University-New Brunswick

    Pages

    Labor Markets - Other Research

    Title Author Media
    Cash on the Table: Why Traditional Theories of Market Failure Fail Robert H. Frank

    Cash on the Table: Why Traditional Theories of Market Failure Fail

    Author: Robert H. Frank
    Publisher: Journal of Economic Behavior & Organization
    Date: 06/2016

    Many modern progressives attribute the market's failings to conspiracies by powerful corporate actors to exploit workers and consumers. In this paper I defend the claim that many of the same failures are instead often rooted in competition among individuals for relative advantage. In the familiar stadium metaphor, all stand to get a better view, only to discover that no one sees any better than if all had remained comfortably seated. Analogous discrepancies between individual and collective incentives help explain the presence of overtime laws, workplace safety regulations, and many other institutional features of the modern welfare state. These features would be useful even if all consumers were perfectly informed and rational and markets took the perfectly competitive ideal form described in textbooks.

    International Migration and National Development: From Orthodox Equilibrium to Transnationalism Alejandro Portes

    International Migration and National Development: From Orthodox Equilibrium to Transnationalism

    Author: Alejandro Portes
    Publisher: Sociology of Development
    Date: 06/2016

    This article reviews theoretical perspectives on migration and development, starting with nineteenth-century political economy theories focused on “colonizing” migrations from England and other European powers and concluding with the emerging literature on immigrant transnationalism and its consequences for sending nations. The general concept of equilibrium has until currently dominated orthodox economic theories of both colonizing and labor migrations from peripheral regions to advanced nations. The counteroffensive, led by Gunnar Myrdal and theorists of the dependency school, centered on the notion of cumulative causation leading to increasing poverty and the depopulation of peripheral sending areas. Both perspectives registered numerous empirical anomalies, stemming from a common view of migration flows as occurring between separate politico-economic entities. An alternative conceptualization of such flows as internal to an overarching global system has improved our understanding of causes and consequences of labor migration and has framed the back-and-forth complexities of these movements captured in the novel notion of transnationalism.

    Social Mobility Among Second-Generation Latinos Van C. Tran

    Social Mobility Among Second-Generation Latinos

    Author: Van C. Tran
    Publisher: Contexts
    Date: 04/2016

    New data shows that Latinos weathered the recession well and are poised to seize opportunities for further social mobility.

    A Most Egalitarian Profession: Pharmacy and the Evolution of a Family-Friendly Occupation Claudia Goldin, Lawrence F. Katz

    A Most Egalitarian Profession: Pharmacy and the Evolution of a Family-Friendly Occupation

    Author: Claudia Goldin, Lawrence F. Katz
    Publisher: Journal of Labor Economics
    Date: 04/2016

    Pharmacy today is a highly remunerated female-majority profession with a small gender earnings gap and low earnings dispersion. Using extensive surveys of pharmacists, as well as the US Census, American Community Surveys, and Current Population Surveys, we explore the gender earnings gap, penalty to part-time work, demographics of pharmacists relative to other college graduates, and evolution of the profession during the last half-century. Technological changes increasing substitutability among pharmacists, growth of pharmacy employment in retail chains and hospitals, and related decline of independent pharmacies reduced the penalty to part-time work and contribute to the narrow gender earnings gap in pharmacy.

    The Value of Postsecondary Credentials in the Labor Market: An Experimental Study David J. Deming , Noam Yuchtman , Amira Abulafi , Claudia Goldin , Lawrence F. Katz

    The Value of Postsecondary Credentials in the Labor Market: An Experimental Study

    Author: David J. Deming , Noam Yuchtman , Amira Abulafi , Claudia Goldin , Lawrence F. Katz
    Publisher: American Economic Review
    Date: 03/2016

    We study employers' perceptions of the value of postsecondary degrees using a field experiment. We randomly assign the sector and selectivity of institutions to fictitious resumes and apply to real vacancy postings for business and health jobs on a large online job board. We find that a business bachelor's degree from a for-profit online institution is 22 percent less likely to receive a callback than one from a nonselective public institution. In applications to health jobs, we find that for-profit credentials receive fewer callbacks unless the job requires an external quality indicator such as an occupational license.