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
When Labor's Lost: Health, Family Life, Incarceration, and Education in a Time of Declining Economic Opportunity for Low-Skilled Men Courtney Coile, Bruce Western

When Labor's Lost: Health, Family Life, Incarceration, and Education in a Time of Declining Economic Opportunity for Low-Skilled Men

Author: Courtney Coile, Bruce Western
Publisher: National Bureau of Economic Research
Date: 02/2019

The economic progress of U.S. men has stagnated in recent decades, with declining labor force participation and weak growth in real earnings, particularly for less educated and non-white men. In this paper, we illuminate the broader context in which prime-age men are experiencing economic stagnation. We explore changes for prime-age men over time in education, mortality, morbidity, disability program receipt, family structure, and incarceration rates, indicators that may be affected by men’s sluggish economic progress or play a role in explaining it, or both. While establishing causality for such a wide range of health and other outcomes is inherently difficult, we discuss clues provided by recent research.

Who Becomes an Inventor in America? The Importance of Exposure to Innovation Alex Bell, Raj Chetty, Xavier Jaravel, Neviana Petkova, John Van Reenen

Who Becomes an Inventor in America? The Importance of Exposure to Innovation

Author: Alex Bell, Raj Chetty, Xavier Jaravel, Neviana Petkova, John Van Reenen
Publisher: The Quarterly Journal of Economics
Date: 11/2018

We characterize the factors that determine who becomes an inventor in the United States, focusing on the role of inventive ability (“nature”) versus environment (“nurture”). Using deidentified data on 1.2 million inventors from patent records linked to tax records, we first show that children’s chances of becoming inventors vary sharply with characteristics at birth, such as their race, gender, and parents’ socioeconomic class. For example, children from high-income (top 1%) families are 10 times as likely to become inventors as those from below-median income families. These gaps persist even among children with similar math test scores in early childhood—which are highly predictive of innovation rates—suggesting that the gaps may be driven by differences in environment rather than abilities to innovate. We directly establish the importance of environment by showing that exposure to innovation during childhood has significant causal effects on children’s propensities to invent. Children whose families move to a high-innovation area when they are young are more likely to become inventors. These exposure effects are technology class and gender specific. Children who grow up in a neighborhood or family with a high innovation rate in a specific technology class are more likely to patent in exactly the same class. Girls are more likely to invent in a particular class if they grow up in an area with more women (but not men) who invent in that class. These gender- and technology class–specific exposure effects are more likely to be driven by narrow mechanisms, such as role-model or network effects, than factors that only affect general human capital accumulation, such as the quality of schools. Consistent with the importance of exposure effects in career selection, women and disadvantaged youth are as underrepresented among high-impact inventors as they are among inventors as a whole. These findings suggest that there are many “lost Einsteins”—individuals who would have had highly impactful inventions had they been exposed to innovation in childhood—especially among women, minorities, and children from low-income families.

Imprisonment and Labor Market Outcomes: Evidence from a Natural Experiment David J. Harding, Jeffrey D. Morenoff, Anh P. Nguyen, Shawn D. Bushway

Imprisonment and Labor Market Outcomes: Evidence from a Natural Experiment

Author: David J. Harding, Jeffrey D. Morenoff, Anh P. Nguyen, Shawn D. Bushway
Publisher: American Journal of Sociology
Date: 07/2018

Because of racially disproportionate imprisonment rates, the literature on mass incarceration has focused on the labor market consequence of imprisonment and the implications of those effects for racial inequality. Yet, the effects of imprisonment itself, as distinct from conviction, are not well understood. The authors leverage a natural experiment based on the random assignment of judges to felony cases in Michigan to examine the causal effect of being sentenced to prison as compared to probation, stratifying by race and work history. The most widespread effect of imprisonment on employment occurs through incapacitation in prison, both for the initial prison sentence and through the heightened risk of subsequent imprisonment. Negative postrelease effects of imprisonment on employment, employment stability, and employment outside the secondary labor market are concentrated among whites with a presentence work history. Postrelease effects of imprisonment on employment among those with no work history are positive but fade over time.

The Gender Earnings Gap in the Gig Economy: Evidence from over a Million Rideshare Drivers Cody Cook, Rebecca Diamond, Jonathan Hall, John A. List, Paul Oyer

The Gender Earnings Gap in the Gig Economy: Evidence from over a Million Rideshare Drivers

Author: Cody Cook, Rebecca Diamond, Jonathan Hall, John A. List, Paul Oyer
Publisher: NBER
Date: 06/2018

The growth of the “gig” economy generates worker flexibility that, some have speculated, will favor women. We explore this by examining labor supply choices and earnings among more than a million rideshare drivers on Uber in the U.S. We document a roughly 7% gender earnings gap amongst drivers. We completely explain this gap and show that it can be entirely attributed to three factors: experience on the platform (learning-by-doing), preferences over where to work (driven largely by where drivers live and, to a lesser extent, safety), and preferences for driving speed. We do not find that men and women are differentially affected by a taste for specific hours, a return to within-week work intensity, or customer discrimination. Our results suggest that there is no reason to expect the “gig” economy to close gender differences. Even in the absence of discrimination and in flexible labor markets, women’s relatively high opportunity cost of non-paid-work time and gender-based differences in preferences and constraints can sustain a gender pay gap.

How Race and Unemployment Shape Labor Market Opportunities: Additive, Amplified, or Muted Effects? David S. Pedulla

How Race and Unemployment Shape Labor Market Opportunities: Additive, Amplified, or Muted Effects?

Author: David S. Pedulla
Publisher: Social Forces
Date: 06/2018

The manner in which social categories combine to produce inequality lies at the heart of scholarship on social stratification. To date, scholars have largely pointed to two primary ways that negatively stereotyped categories may aggregate: 1) additive effects, whereby one category has similar consequences across the other category, and 2) amplified congruence, whereby a secondary category exacerbates the negative effects of the first category. This article develops an alternative potential aggregation pattern—muted congruence—which posits that when individuals evaluate others that occupy multiple social positions about which stereotypes are highly congruent, such as being black and being unemployed, the additional category membership will have limited influence over the ultimate evaluation. Using evidence from a field experiment, where fictitious applications were submitted to real job openings, I examine which aggregation pattern most accurately reflects how race and unemployment shape actual hiring decisions. In line with predictions from the “muted congruence” perspective, the findings indicate that racial discrimination is prominent, but that there are limited additional negative effects of unemployment for African American workers. I conclude by discussing the implications of these findings for understanding the aggregation of social categories in the production of inequality.

labor markets - CPI Affiliates

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
Francine D. Blau's picture Francine D. Blau Frances Perkins Professor of Industrial and Labor Relations and Labor Economics; Research Associate, NBER; Research Fellow of IZA
Cornell University
Harry Holzer's picture Harry Holzer John LaFarge Jr. SJ Professor of Public Policy, McCourt School of Public Policy; Institute Fellow, American Institutes for Research; Nonresident Senior Fellow, Economic Studies Program, Brookings Institution
McCourt School, Georgetown University
Lawrence F. Katz's picture Lawrence F. Katz Elisabeth Allison Professor of Economics, Research Associate, NBER; Co-Scientific Director and Co-Founder, J-PAL
Harvard University
Marianne Page's picture Marianne Page Professor of Economics; Deputy Director, Center for Poverty Research; Research Associate, National Bureau of Economic Research
University of California, Davis

Pages

Labor Markets - Other Research

Title Author Media
Gender Pay Gaps in U.S. Federal Science Agencies: An Organizational Approach Laurel Smith-Doerr, Sharla Alegria, Kaye Fealing, Debra Fitzpatrick, Donald Tomaskovic-Devey

Gender Pay Gaps in U.S. Federal Science Agencies: An Organizational Approach

Author: Laurel Smith-Doerr, Sharla Alegria, Kaye Fealing, Debra Fitzpatrick, Donald Tomaskovic-Devey
Publisher: American Journal of Sociology
Date: 09/2019

This study advances understanding of gender pay gaps by examining organizational variation. The gender pay gap literature supplies mechanisms but does not attend to organizational variation; the gender and science literature provides insights on the role of masculinist culture in disciplines but misses pay gap mechanisms. A data set of federal workers allows comparison of men and women in the same jobs and workplaces. Agencies associated with traditionally masculine (engineering, physical sciences) and gender-neutral (biological, interdisciplinary sciences) fields differ. Pay-gap mechanisms vary: human capital differences explain a larger share in gender-neutral agencies, while at male-typed agencies men are frequently paid more than women within the same job. Although beyond the federal workers’ standardized pay scale, some interdisciplinary agencies more often pay men off grade, leading to higher earnings for men. Our theory of organizational variation helps explain local agency variation and how pay practices matter in specific organizational contexts.

On Her Own Account: How Strengthening Women's Financial Control Affects Labor Supply and Gender Norms Erica M. Field, Rohini Pande, Natalia Rigol, Simone G. Schaner, Charity Troyer Moore

On Her Own Account: How Strengthening Women's Financial Control Affects Labor Supply and Gender Norms

Author: Erica M. Field, Rohini Pande, Natalia Rigol, Simone G. Schaner, Charity Troyer Moore
Publisher: National Bureau of Economic Research
Date: 09/2019

Can greater control over earned income incentivize women to work and influence gender norms? In collaboration with Indian government partners, we provided rural women with individual bank accounts and randomly varied whether their wages from a public workfare program were directly deposited into these accounts or into the male household head’s account (the status quo). Women in a random subset of villages were also trained on account use. In the short run, relative to women just offered bank accounts, those who also received direct deposit and training increased their labor supply in the public and private sectors. In the long run, gender norms liberalized: women who received direct deposit and training became more accepting of female work, and their husbands perceived fewer social costs to having a wife who works. These effects were concentrated in households with otherwise lower levels of, and stronger norms against, female work. Women in these households also worked more in the long run and became more empowered. These patterns are consistent with models of household decision-making in which increases in bargaining power from greater control over income interact with, and influence, gender norms.

Racialized Re-Entry: Labor Market Inequality After Incarceration Western, Bruce, Sirois, Catherine

Racialized Re-Entry: Labor Market Inequality After Incarceration

Author: Western, Bruce, Sirois, Catherine
Publisher: Social Forces
Date: 10/2018

Why do some people succeed in the labor market after incarceration but others do not? We study the transition from prison to work with data on monthly employment and earnings for a sample of men and women observed for a year after incarceration. More than in earlier research, the data provide detailed measurement of temporary and informal employment and richly describe the labor market disadvantages of formerly incarcerated men and women. We find that half the sample is jobless in any given month and average earnings are well below the poverty level. By jointly modeling employment and earnings, we show that blacks and Hispanics have lower total earnings than whites even after accounting for health, human capital, social background, crime and criminal justice involvement, and job readiness. A decomposition attributes most of the earnings gaps to racial and ethnic inequalities in employment. Qualitative interviews suggest that whites more than blacks and Hispanics find stable, high-paying jobs through social networks. These findings support a hypothesis of racialized re-entry that helps explain the unusual disadvantage of African Americans at the nexus of the penal system and the labor market.

A Relational Inequality Approach to First- and Second-Generation Immigrant Earnings in German Workplaces Silvia Maja Melzer, Donald Tomaskovic-Devey, Reinhard Schunck, Peter Jacobebbinghaus

A Relational Inequality Approach to First- and Second-Generation Immigrant Earnings in German Workplaces

Author: Silvia Maja Melzer, Donald Tomaskovic-Devey, Reinhard Schunck, Peter Jacobebbinghaus
Publisher: Social Forces
Date: 09/2018

We conceptualize immigrant incorporation as a categorically driven process and contrast the bright distinctions between first-generation immigrants and natives, with more blurry second-generation contrasts. We analyze linked employer-employee data of a sample of 5,097 employees in 97 large German organizations and focus on first- and second-generation immigrants. We explore how generational status in the labor market and workplace contexts expands and contracts native-immigrant wage inequalities. We find a substantial average first-generation immigrant-native wage gap, which is not explained by individual human capital differences or most aspects of organizational context. In contrast, there is, on average, no second-generation wage gap, but there are substantial variations across workplaces. A series of results confirm predictions from relational inequality theory. For both first- and second-generation immigrants, working in a high-inequality workplace is associated with larger wage gaps. Second-generation immigrants perform better in workplaces where they have intersectional advantages over natives, and for first-generation immigrants collective bargaining protection narrows wage gaps with natives. Consistent with ethnic competition theory, in workplaces with very high shares of immigrant workers, the first-generation–native wage gap is larger. In contrast, increased contact between native Germans and second-generation immigrant coworkers reduces earnings gaps, but only up to a tipping point, after which competition processes reappear and earning gaps widen.

Is Automation Labor-Displacing? Productivity Growth, Employment, and the Labor Share David Autor, Anna Salomons

Is Automation Labor-Displacing? Productivity Growth, Employment, and the Labor Share

Author: David Autor, Anna Salomons
Publisher: NBER
Date: 07/2018

Many technological innovations replace workers with machines, but this capital-labor substitution need not reduce aggregate labor demand because it simultaneously induces four countervailing responses: own-industry output effects; cross-industry input–output effects; between-industry shifts; and final demand effects. We quantify these channels using four decades of harmonized cross-country and industry data, where we measure automation as industry-level movements in total factor productivity (TFP) that are common across countries. We find that automation displaces employment and reduces labor's share of value-added in the industries in which it originates (a direct effect). In the case of employment, these own-industry losses are reversed by indirect gains in customer industries and induced increases in aggregate demand. By contrast, own-industry labor share losses are not recouped elsewhere. Our framework can account for a substantial fraction of the reallocation of employment across industries and the aggregate fall in the labor share over the last three decades. It does not, however, explain why the labor share fell more rapidly during the 2000s.