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
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.

The Effect of Unemployment Benefits on the Duration of Unemployment Insurance Receipt: New Evidence from a Regression Kink Design in Missouri, 2003-2013 David Card, Andrew Johnston, Pauline Leung, Alexandre Mas, Zhuan Pei

The Effect of Unemployment Benefits on the Duration of Unemployment Insurance Receipt: New Evidence from a Regression Kink Design in Missouri, 2003-2013

Author: David Card, Andrew Johnston, Pauline Leung, Alexandre Mas, Zhuan Pei
Publisher: American Economic Review
Date: 05/2015

We provide new evidence on the effect of the unemployment insurance (UI) weekly benefit amount on unemployment insurance spells based on administrative data from the state of Missouri covering the period 2003-2013. Identification comes from a regression kink design that exploits the quasi-experimental variation around the kink in the UI benefit schedule. We find that UI durations are more responsive to benefit levels during the recession and its aftermath, with an elasticity between 0.65 and 0.9 as compared to about 0.35 pre-recession.

labor markets - CPI Affiliates

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
John Van Reenen's picture John Van Reenen Professor of Applied Economics
Massachusetts Institute of Technology
Jonas Pontusson's picture Jonas Pontusson Professor of Comparative Politics
University of Geneva

Pages

Labor Markets - Other Research

Title Author Media
The Great Recession and Fathers' Health Allison Corr

The Great Recession and Fathers' Health

Author: Allison Corr
Publisher: Russell Sage Foundation
Date: 10/2015

Economic recessions can have detrimental impacts on individual and family wellbeing. New research by Janet Currie of Princeton University and Valentina Duque of Columbia University assesses how the Great Recession affected the health of fathers with young children. The analysis yields two main findings. First, high unemployment was associated with declines in physical health but little change in health-compromising behaviors. Second, changes in physical health were concentrated among fathers in the lower end and middle of the education distribution.

Estimating labour supply elasticities based on cross-country micro data: A bridge between micro and macro estimates? Markus Jäntti, Jukka Pirttilä, Håkan Seline

Estimating labour supply elasticities based on cross-country micro data: A bridge between micro and macro estimates?

Author: Markus Jäntti, Jukka Pirttilä, Håkan Seline
Publisher: Journal of Public Economics
Date: 07/2015

The Nordic model relies on high tax rates to finance an extensive welfare state. If labour supply elasticities are large, the burden of financing the model can be large even if, arguably, the practice of providing subsidised goods that support labour supply is likely to mitigate these effects. We utilise repeated cross sections of micro data from several countries, including the four major Nordic countries, available from the Luxembourg Income Study, LIS, to estimate labour supply elasticities, both at the intensive and extensive margins. The data span over four decades and include a large number of tax reform episodes, with tax rate variation arising both from cross-sectional and country-level differences. Using these data, we investigate whether micro and macro estimates differ in a systematic way. The results do not provide strong support for the view that elasticities at the macro level would be higher than the corresponding micro elasticities.

The Great Recession and Parents' Relationships Christopher Wimer

The Great Recession and Parents' Relationships

Author: Christopher Wimer
Publisher: Russell Sage Foundation
Date: 06/2015

Economic downturns are stressful experiences for those affected by them, as well as those connected to affected family members and loved ones. Did the recent Great Recession lead to significant changes in the relationships between parents of young children?

Leave policies in challenging times: what have we learned? What lies ahead? Janet Gornick

Leave policies in challenging times: what have we learned? What lies ahead?

Author: Janet Gornick
Publisher: Community, Work & Family
Date: 05/2015

This article reflects on the studies included in this special issue on leave policies during challenging economic times. It highlights three major conclusions: (1) the regime-type framework remains illuminating; (2) the recent period is characterized by resilience of leave provisions; and (3) persistent gender disparities in leave-taking continue to shape policy debates. Three recommendations are made for future lines of work: (1) adopt a life course perspective; (2) reassess the growing emphasis on instrumental justifications for policy provision; and (3) continue to assess the possibility of unintended consequences, in particular the potential for harmful effects on women’s employment outcomes.

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.

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