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
State of the Union 2018: Earnings Emmanuel Saez

State of the Union 2018: Earnings

Author: Emmanuel Saez
Publisher: Stanford Center on Poverty and Inequality
Date: 03/2018

Gender wage gaps, as conventionally measured, understate the extent of gender inequality in the labor market. When gender differences in wages are examined in conjunction with gender differences in labor force participation, fringe benefits, and self-employment income, men’s average labor earnings are 75 percent higher than women’s. Under this fuller accounting, women thus earn 57 cents for each dollar earned by men. Although women have come to comprise almost 50 percent of the formal labor market, their representation in top labor income groups has risen very slowly. In the most recent available data, just 16 percent of the top 1 percent of labor income earners are women.

State of the Union 2018: Employment Melissa S. Kearney, Katharine G. Abraham

State of the Union 2018: Employment

Author: Melissa S. Kearney, Katharine G. Abraham
Publisher: Stanford Center on Poverty and Inequality
Date: 03/2018

Since 2000, U.S. women’s overall employment rate has fallen, with the decline concentrated among women without a college degree. This decline largely reflects many of the same secular forces, such as trade pressures and technological advances, that have negatively affected labor demand for male workers who have not completed college. Although supply-side factors—including child care challenges and the “secondary earner penalty” in the U.S. tax code—are not the primary driver of falling female employment rates, supply-side policies that lower child care costs and marginal tax rates could help to increase female employment.

Marriage, Labor Supply and the Dynamics of the Social Safety Net Hamish Low, Costas Meghir, Luigi Pistaferri, Alessandra Voena

Marriage, Labor Supply and the Dynamics of the Social Safety Net

Author: Hamish Low, Costas Meghir, Luigi Pistaferri, Alessandra Voena
Publisher: NBER
Date: 02/2018

The 1996 PRWORA reform introduced time limits on the receipt of welfare in the United States. We use variation by state and across demographic groups to provide reduced form evidence showing that such limits led to a fall in welfare claims (partly due to “banking” benefits for future use), a rise in employment, and a decline in divorce rates. We then specify and estimate a life-cycle model of marriage, labor supply and divorce under limited commitment to better understand the mechanisms behind these behavioral responses, carry out counterfactual analysis with longer run impacts and evaluate the welfare effects of the program. Based on the model, which reproduces the reduced form estimates, we show that among low educated women, instead of relying on TANF, single mothers work more, more mothers remain married, some move to relying only on food stamps and, in ex-ante welfare terms, women are worse off.

Did Welfare Reform Increase Employment and Reduce Poverty? Robert A. Moffitt , Stephanie Garlow

Did Welfare Reform Increase Employment and Reduce Poverty?

Author: Robert A. Moffitt , Stephanie Garlow
Publisher: Stanford Center on Poverty and Inequality
Date: 01/2018

For 60 years, AFDC endured as the country’s best-known cash assistance program for the poor, until Congress replaced it in 1997 with the Temporary Assistance for Needy Families (TANF) program. In a dramatic departure, the new welfare law introduced time limits and work requirements with the goals of encouraging work and discouraging “dependency.” Were those goals realized? There is of course a swirl of opinions on this question. In this article, we review the high-quality research on the law’s effects on work and poverty, with the simple objective of examining whether welfare reform succeeded in reducing dependence on welfare and increasing self-sufficiency.

Custodial Parole Sanctions and Earnings after Release from Prison David J. Harding, Jonah A Siegel, Jeffrey D. Morenoff

Custodial Parole Sanctions and Earnings after Release from Prison

Author: David J. Harding, Jonah A Siegel, Jeffrey D. Morenoff
Publisher: Social Forces
Date: 12/2017

Although the labor market consequences of incarceration in prison have been central to the literature on mass incarceration, punishment, and inequality, other components of the growing criminal justice system have received less attention from sociologists. In particular, the rise of mass incarceration was accompanied by an even larger increase in community supervision. In this paper, we examine the labor market effects of one frequently experienced aspect of post-prison parole, short-term custody for parole violations. Although such sanctions are viewed as an alternative to returning parole violators to prison, they have the potential to affect labor market outcomes in ways similar to imprisonment, including both adverse and positive effects on earnings. We estimate that parolees lost approximately 37 percent of their earnings in quarters during which they were in short-term custody. Although their earnings tended to increase in the quarter immediately following short-term custody—consistent with the stated intentions of such sanctions—parolees experienced further earnings loss over the longer term after such sanctions. In the third quarter following a short-term custody sanction, earnings are lowered by about 13 percent. These associations are larger for those who were employed in the formal labor market before their initial incarceration.

labor markets - CPI Affiliates

Toby L. Parcel's picture Toby L. Parcel Professor of Sociology
North Carolina State University
Vered Kraus's picture Vered Kraus Professor, Department of Sociology and Anthropology
University of Haifa
Adina Sterling Assistant Professor of Organizational Behavior
Stanford University
Arne L. Kalleberg's picture Arne L. Kalleberg Kenan Distinguished Professor of Sociology; Adjunct Professor of Management, Kenan-Flager School of Business; Adjunct Professor of Public Policy and Global Studies, University of North Carolina at Chapel Hill
University of North Carolina
Charles Halaby's picture Charles Halaby Martindale Bascom Professor of Sociology Emeritus, Research Director of General Education Assessment
University of Wisconsin-Madison


Labor Markets - Other Research

Title Author Media
Intergenerational Spillovers in Disability Insurance Gordon B. Dahl, Anne C. Gielen

Intergenerational Spillovers in Disability Insurance

Author: Gordon B. Dahl, Anne C. Gielen
Publisher: NBER
Date: 02/2018

Does participation in a social assistance program by parents have spillovers on their children's own participation, future labor market attachment, and human capital investments? While intergenerational concerns have figured prominently in policy debates for decades, causal evidence is scarce due to nonrandom participation and data limitations. In this paper we exploit a 1993 policy reform in the Netherlands which tightened disability insurance (DI) criteria for existing claimants, and use rich panel data to link parents to children's long-run outcomes. The key to our regression discontinuity design is that the reform applied to younger cohorts, while older cohorts were exempted from the new rules. We find that children of parents who were pushed out of DI or had their benefits reduced are 11% less likely to participate in DI themselves, do not alter their use of other government safety net programs, and earn 2% more in the labor market as adults. The combination of reduced government transfers and increased tax revenue results in a fiscal gain of 5,900 euros per treated parent due to child spillovers by 2014. Moreover, children of treated parents complete an extra 0.12 years of schooling on average, an investment consistent with an anticipated future with less reliance on DI. Our findings have important implications for the evaluation of this and other policy reforms: ignoring parent-to-child spillovers understates the long-run cost savings of the Dutch reform by between 21 and 40% in present discounted value terms.

Dinner Table Human Capital and Entrepreneurship Hans K. Hvide, Paul Oyer

Dinner Table Human Capital and Entrepreneurship

Author: Hans K. Hvide, Paul Oyer
Publisher: NBER
Date: 01/2018

We document three new facts about entrepreneurship. First, a majority of male entrepreneurs start a firm in the same or a closely related industry as their fathers’ industry of employment. Second, this tendency is correlated with intelligence: higher-IQ entrepreneurs are less likely to follow their fathers. Third, an entrepreneur that starts a firm in the same 5-digit industry as where his father was employed tends to outperform entrepreneurs in the same industry whose fathers did not work in that industry. We consider various explanations for these facts and conclude that “dinner table human capital”, where children obtain industry knowledge through their parents, is an important factor behind what type of firm is started and how well it performs.

Artificial Intelligence, Automation and Work Daron Acemoglu, Pascual Restrepo

Artificial Intelligence, Automation and Work

Author: Daron Acemoglu, Pascual Restrepo
Publisher: NBER
Date: 01/2018

We summarize a framework for the study of the implications of automation and AI on the demand for labor, wages, and employment. Our task-based framework emphasizes the displacement effect that automation creates as machines and AI replace labor in tasks that it used to perform. This displacement effect tends to reduce the demand for labor and wages. But it is counteracted by a productivity effect, resulting from the cost savings generated by automation, which increase the demand for labor in non-automated tasks. The productivity effect is complemented by additional capital accumulation and the deepening of automation (improvements of existing machinery), both of which further increase the demand for labor. These countervailing effects are incomplete. Even when they are strong, automation in- creases output per worker more than wages and reduce the share of labor in national income. The more powerful countervailing force against automation is the creation of new labor-intensive tasks, which reinstates labor in new activities and tends to increase the labor share to counterbalance the impact of automation. Our framework also highlights the constraints and imperfections that slow down the adjustment of the economy and the labor market to automation and weaken the resulting productivity gains from this transformation: a mismatch between the skill requirements of new technologies, and the possibility that automation is being introduced at an excessive rate, possibly at the expense of other productivity-enhancing technologies.

The Long-Run Effects of the Earned Income Tax Credit on Women’s Earnings David Neumark, Peter Shirley

The Long-Run Effects of the Earned Income Tax Credit on Women’s Earnings

Author: David Neumark, Peter Shirley
Publisher: NBER
Date: 12/2017

We use longitudinal data on marriage and children from the Panel Study of Income Dynamics to characterize women’s exposure to the federal and state Earned Income Tax Credit (EITC) during their first two decades of adulthood. We then use measures of this exposure to estimate the long-run effects of the EITC on women’s earnings as mature adults. We find some evidence indicating that exposure to a more generous EITC when women were unmarried and had young (pre-school) children leads to higher earnings and hours, and perhaps wages, in the longer run. We also find some evidence that exposure to a more generous EITC when women had young children but were married leads to lower earnings and hours in the longer run. These longer-run effects are to some extent consistent with what we would expect if the short-run effects of the EITC on employment that are documented in other work, and predicted by theory, are reflected in effects of the EITC on cumulative labor market experience (and other consequences of labor market attachment) that influence earnings.


Wages and Employment: The Canonical Model Revisited Audra Bowlus, Eda Bozkurt, Lance Lochner, Chris Robinson

Wages and Employment: The Canonical Model Revisited

Author: Audra Bowlus, Eda Bozkurt, Lance Lochner, Chris Robinson
Publisher: NBER
Date: 11/2017

The basic canonical model fails to predict the aggregate college premium outside of the original sample period (1963-1987) or to account for the observed deviations in college premia for younger vs. older workers. This paper documents that these failings are due to mis-measurement of the relevant prices and quantities when using composition adjustment methods to construct relative skill prices and supplies, which ignore cohort effects that are particularly important in the 1980s and 1990s. Re-estimating the model with prices and quantities that incorporate cohort effects produces a good fit for the out of sample prediction and explains the observed deviation in the college premium for younger vs. older workers even with perfect substitutability across age. Moreover, the estimated elasticity of substitution between high and low skill is higher and there is a much smaller role for skill-biased technical change in explaining the path of the college wage premium. The elasticity of substitution is also an important parameter for the broader literature on education and wages, especially in assessing general equilibrium responses to government policies. In the case of a tuition subsidy, price responses can undo most of the direct (partial equilibrium) effect of the subsidy on enrolment, so that general equilibrium enrolment responses are substantially weaker. The higher elasticity estimated in this paper, produces much weaker general equilibrium relative price changes and stronger enrolment effects.