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
Long-Run Impacts of Childhood Access to the Safety Net Hilary Hoynes, Diane Whitmore Schanzenbach , Douglas Almond

Long-Run Impacts of Childhood Access to the Safety Net

Author: Hilary Hoynes, Diane Whitmore Schanzenbach , Douglas Almond
Publisher: American Economic Review
Date: 04/2016

We examine the impact of a positive and policy-driven change in economic resources available in utero and during childhood. We focus on the introduction of the Food Stamp Program, which was rolled out across counties between 1961 and 1975. We use the Panel Study of Income Dynamics to assemble unique data linking family background and county of residence in early childhood to adult health and economic outcomes. Our findings indicate access to food stamps in childhood leads to a significant reduction in the incidence of metabolic syndrome and, for women, an increase in economic self-sufficiency.

Penalized or Protected? Gender and the Consequences of Nonstandard and Mismatched Employment Histories David S. Pedulla

Penalized or Protected? Gender and the Consequences of Nonstandard and Mismatched Employment Histories

Author: David S. Pedulla
Publisher: American Sociological Review
Date: 04/2016

Millions of workers are employed in positions that deviate from the full-time, standard employment relationship or work in jobs that are mismatched with their skills, education, or experience. Yet, little is known about how employers evaluate workers who have experienced these employment arrangements, limiting our knowledge about how part-time work, temporary agency employment, and skills underutilization affect workers’ labor market opportunities. Drawing on original field and survey experiment data, I examine three questions: (1) What are the consequences of having a nonstandard or mismatched employment history for workers’ labor market opportunities? (2) Are the effects of nonstandard or mismatched employment histories different for men and women? and (3) What are the mechanisms linking nonstandard or mismatched employment histories to labor market outcomes? The field experiment shows that skills underutilization is as scarring for workers as a year of unemployment, but that there are limited penalties for workers with histories of temporary agency employment. Additionally, although men are penalized for part-time employment histories, women face no penalty for part-time work. The survey experiment reveals that employers’ perceptions of workers’ competence and commitment mediate these effects. These findings shed light on the consequences of changing employment relations for the distribution of labor market opportunities in the “new economy.”

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.

labor markets - CPI Affiliates

Richard B. Freeman's picture Richard B. Freeman Herbert Ascherman Chair in Economics; Director, Science and Engineering Workforce Project, NBER; Faculty Co-Director of the Labor and Worklife Program, Harvard Law School
Harvard University
Gosta Esping-Andersen's picture Gosta Esping-Andersen Professor of Sociology
Universitat Pompeu Fabra
Hans-Peter Blossfeld Professor of Sociology
Bamberg University
Hiroshi Ishida's picture Hiroshi Ishida Professor of Sociology, Institute of Social Sciences
University of Tokyo
John Mirowsky's picture John Mirowsky Professor of Sociology, Emeritus
University of Texas at Austin

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Labor Markets - Other Research

Title Author Media
Knowledge of Future Job Loss and Implications for Unemployment Insurance Nathaniel Hendren

Knowledge of Future Job Loss and Implications for Unemployment Insurance

Author: Nathaniel Hendren
Publisher: American Economic Review
Date: 07/2017

This paper studies the implications of individuals' knowledge of future job loss for the existence of an unemployment insurance (UI) market. Learning about job loss leads to consumption decreases and spousal labor supply increases. This suggests existing willingness to pay estimates for UI understate its value. But it yields new estimation methodologies that account for and exploit responses to learning about future job loss. Although the new willingness to pay estimates exceed previous estimates, I estimate much larger frictions imposed by private information. This suggests privately traded UI policies would be too adversely selected to be profitable, at any price.

Family Investments in Education during Periods of Economic Uncertainty: Evidence from the Great Recession Anna Lunn, Sabino Kornrich

Family Investments in Education during Periods of Economic Uncertainty: Evidence from the Great Recession

Author: Anna Lunn, Sabino Kornrich
Publisher: Sociological Perspectives
Date: 07/2017

At the beginning of the Great Recession, household spending on education across the income distribution was highly unequal. We examined how different income groups altered their spending on education for children under 18 during this economic crisis. As national and local economic conditions deteriorated during the recession, the difference in odds that a high-income household spent on education relative to a low-income family increased by 20 percent, and the difference in the amounts that high-income families spent on education relative to low-income families also increased by 20 percent. As state unemployment rates climbed and consumer confidence fell, high-income families’ educational spending increased relative to low-income families’ spending. Decreases in local housing prices were also associated with lower spending for low-income families. Given the importance of educational enrichment for children’s learning outcomes, increasing inequality in families’ educational investments during the Great Recession may contribute to future educational and social inequality.

Intimate Partner Violence in the Great Recession Antonina Pavlenko

Intimate Partner Violence in the Great Recession

Author: Antonina Pavlenko
Publisher: Russell Sage Foundation
Date: 09/2016

The study revealed that rapid increases in unemployment rates during the Great Recession were associated with increases in men's abusive behavior. This association persisted even after individual and household-level experiences with unemployment and material hardship were controlled for. The authors argue that these results indicate that economic uncertainty plays an important role in relationship dynamics, above and beyond its direct effects on job loss and material hardship. 

This brief was published as part of our Recession Trends initiative.

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.