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 More Things Change, the More They Stay the Same? The Safety Net and Poverty in the Great Recession Marianne Bitler, Hilary Hoynes

The More Things Change, the More They Stay the Same? The Safety Net and Poverty in the Great Recession

Author: Marianne Bitler, Hilary Hoynes
Publisher: Journal of Labor Economics
Date: 01/2016

Much attention has been given to the large increases in safety net spending during the Great Recession. We examine the relationship between poverty, the safety net, and business cycles historically and test whether there has been a significant change in this relationship. We find that post-welfare reform, Temporary Assistance for Needy Families did not respond during the Great Recession and extreme poverty is more cyclical than in prior recessions. Food Stamps and Unemployment Insurance are providing more protection--or no less protection--in the Great Recession, and there is some evidence of less cyclicality for 100% poverty.

Wage Adjustment in the Great Recession and Other Downturns: Evidence from the United States and Great Britain Michael Elsby, Donggyun Shin, Gary Solon

Wage Adjustment in the Great Recession and Other Downturns: Evidence from the United States and Great Britain

Author: Michael Elsby, Donggyun Shin, Gary Solon
Publisher: Journal of Labor Economics
Date: 01/2016

Using 1979-2012 CPS data for the United States and 1975-2012 NES data for Great Britain, we study wage behavior in both countries, with particular attention to the Great Recession. Real wages are procyclical in both countries, but the procyclicality of real wages varies across recessions, and does so differently between the two countries, in ways that defy simple explanations. We devote particular attention to the hypothesis that downward nominal wage rigidity plays an important role in cyclical employment and unemployment fluctuations. We conclude that downward wage rigidity may be less binding and have lesser allocative consequences than is often supposed.

Inference on Causal Effects in a Generalized Regression Kink Design David Card, Zhuan Pei , David Lee , Andrea Weber

Inference on Causal Effects in a Generalized Regression Kink Design

Author: David Card, Zhuan Pei , David Lee , Andrea Weber
Publisher: Econometrica
Date: 11/2015

We consider nonparametric identification and estimation in a nonseparable model where a continuous regressor of interest is a known, deterministic, but kinked function of an observed assignment variable. This design arises in many institutional settings where a policy variable (such as weekly unemployment benefits) is determined by an observed but potentially endogenous assignment variable (like previous earnings). We provide new results on identification and estimation for these settings, and apply our results to obtain estimates of the elasticity of joblessness with respect to UI benefit rates. We characterize a broad class of models in which a sharp “Regression Kink Design” (RKD, or RK Design) identifies a readily interpretable treatment-on-the-treated parameter (Florens et al. (2008)). We also introduce a “fuzzy regression kink design” generalization that allows for omitted variables in the assignment rule, noncompliance, and certain types of measurement errors in the observed values of the assignment variable and the policy variable. Our identifying assumptions give rise to testable restrictions on the distributions of the assignment variable and predetermined covariates around the kink point, similar to the restrictions delivered by Lee (2008) for the regression discontinuity design. We then use a fuzzy RKD approach to study the effect of unemployment insurance benefits on the duration of joblessness in Austria, where the benefit schedule has kinks at the minimum and maximum benefit level. Our preferred estimates suggest that changes in UI benefit generosity exert a relatively large effect on the duration of joblessness of both low-wage and high-wage UI recipients in Austria.

State of the States: Labor Markets Michael Hout, Erin Cumberworth

State of the States: Labor Markets

Author: Michael Hout, Erin Cumberworth
Publisher: Stanford Center on Poverty and Inequality
Date: 09/2015

The Great Recession spread to every state, though employment fell more in some states than in others. The ongoing increases in the total number of jobs and ongoing declines in the official unemployment rate disguise a very slow recovery in prime-age (25-54) employment.

The Effect of Extended Unemployment Insurance Benefits: Evidence from the 2012-2013 Phase-Out Henry S. Farber , Jesse Rothstein, Robert G. Valletta

The Effect of Extended Unemployment Insurance Benefits: Evidence from the 2012-2013 Phase-Out

Author: Henry S. Farber , Jesse Rothstein, Robert G. Valletta
Publisher: American Economic Review
Date: 05/2015

Unemployment Insurance benefit durations were extended during the Great Recession, reaching 99 weeks for most recipients. The extensions were rolled back and eventually terminated by the end of 2013. Using matched CPS data from 2008-2014, we estimate the effect of extended benefits on unemployment exits separately during the earlier period of benefit expansion and the later period of rollback. In both periods, we find little or no effect on job-finding but a reduction in labor force exits due to benefit availability. We estimate that the rollbacks reduced the labor force participation rate by about 0.1 percentage point in early 2014.

Labor Markets - CPI Affiliates

Gavin Wright William Robertson Coe Professor of American Economic History Stanford University
George Farkas Professor of Sociology and Demography The Pennsylvania State University
Gosta Esping-An... Full Professor Universitat Pompeu Fabra
Hans-Peter Blossfeld Professor Bamberg University
Hiroshi Ishida Professor University of Tokyo

Pages

Labor Markets - Other Research

Title Author Media
The Great Recession and the Private Safety Net Christopher Wimer

The Great Recession and the Private Safety Net

Author: Christopher Wimer
Publisher: Russell Sage Foundation
Date: 02/2015

In a recent paper, Princeton University’s Aaron Gottlieb and Columbia University’s Natasha Pilkauskas and Irwin Garfinkel provide some of the first insights into how families’ private safety nets responded to the Great Recession. Using data from the Fragile Families and Child Wellbeing Study (FFCWS), the authors investigate whether the Great Recession was associated with increased transfers to parents of young children by anyone other than the child’s father.

Race, Self-Selection, and the Job Search Process Devah Pager, David S. Pedulla

Race, Self-Selection, and the Job Search Process

Author: Devah Pager, David S. Pedulla
Publisher: American Journal of Sociology
Date: 01/2015

While existing research has documented persistent barriers facing African-American job seekers, far less research has questioned how job seekers respond to this reality. Do minorities self-select into particular segments of the labor market to avoid discrimination? Such questions have remained unanswered due to the lack of data available on the positions to which job seekers apply. Drawing on two original data sets with application-specific information, we find little evidence that blacks target or avoid particular job types. Rather, blacks cast a wider net in their search than similarly situated whites, including a greater range of occupational categories and characteristics in their pool of job applications. Additionally, we show that perceptions of discrimination are associated with increased search breadth, suggesting that broad search among African-Americans represents an adaptation to labor market discrimination. Together these findings provide novel evidence on the role of race and self-selection in the job search process.

Is It Worth It? Postsecondary Education and Labor Market Outcomes for the Disadvantaged Ben Backes, Harry J Holzer, Erin Dunlop Velez

Is It Worth It? Postsecondary Education and Labor Market Outcomes for the Disadvantaged

Author: Ben Backes, Harry J Holzer, Erin Dunlop Velez
Publisher: IZA Journal of Labor Policy
Date: 01/2015

In this paper we examine a range of postsecondary education and labor market outcomes, with a particular focus on minorities and/or disadvantaged workers. We use administrative data from the state of Florida, where postsecondary student records have been linked to UI earnings data and also to secondary education records. Our main findings can be summarized as follows: 1) Gaps in secondary school achievement can account for a large portion of the variation in postsecondary attainment and labor market outcomes between the disadvantaged and other students, but meaningful gaps also exist within achievement groups, and 2) Earnings of the disadvantaged are hurt by low completion rates in postsecondary programs, poor performance during college, and not choosing high-earning fields. In particular, significant labor market premia can be earned in a variety of more technical certificate and Associate (AA) programs, even for those with weak earlier academic performance, but instead many disadvantaged (and other) students choose general humanities programs at the AA (and even the BA level) with low completion rates and low compensation afterwards. A range of policies and practices might be used to improve student choices as well as their completion rates and earnings.

Household Wealth Trends in the United States, 1962-2013: What Happened Over the Great Recession? Edward N. Wolff

Household Wealth Trends in the United States, 1962-2013: What Happened Over the Great Recession?

Author: Edward N. Wolff
Publisher: The National Bureau of Economic Research
Date: 12/2014

Asset prices plunged between 2007 and 2010 but then rebounded from 2010 to 2013. The most telling finding is that median wealth plummeted by 44 percent over years 2007 to 2010, almost double the drop in housing prices. The inequality of net worth, after almost two decades of little movement, was also up sharply. Relative indebtedness expanded, particularly for the middle class, though the proximate causes were declining net worth and income rather than an increase in absolute indebtedness. The sharp fall in median net worth and the rise in overall wealth inequality over these years are traceable primarily to the high leverage of middle class families and the high share of homes in their portfolio. The racial and ethnic disparity in wealth also widened considerably. Households under age 45 saw their relative and absolute wealth declined sharply. Rather remarkably, there was virtually no change in median wealth from 2010 to 2013 despite the rebound in asset prices. The proximate cause was the high dissavings of the middle class, though their debt continued to fall. Wealth inequality and the racial and ethnic wealth gap also remained largely unchanged, though there was some recovery of net worth for young households.

Wealth Levels, Wealth Inequality, and the Great Recession Fabian T. Pfeffer, Sheldon Danziger, Robert F. Schoeni

Wealth Levels, Wealth Inequality, and the Great Recession

Author: Fabian T. Pfeffer, Sheldon Danziger, Robert F. Schoeni
Publisher: Russell Sage Foundation
Date: 05/2014

This research brief assesses two questions about the extent to which the Great Recession altered the level and distribution of wealth through 2013--the most recent year of data available on wealth held by American families. 1. By how much did wealth levels decline during the Great Recession, and by how much did they recover through 2013? 2. Did wealth inequality increase, decrease, or remain steady during the Great Recession?