Labor Studies

February 21, 2014
David Card of the University of California, Berkeley, Organizer

Luigi Pistaferri and Giacomo De Giorgi, Stanford University and NBER, Anders Frederiksen, Aarhus University

Consumption Network Effects

Michael Elsby, University of Edinburgh; Donggyun Shin, Kyung Hee University; and Gary Solon, Michigan State University and NBER

Wage Adjustment in the Great Recession (NBER Working Paper 19478)

Using 1979–2011 Current Population Survey data for the United States and 1975–2011 New Earnings Survey data for Great Britain, Elsby, Shin, and Solon 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. U.S. distributions of year-to-year nominal wage change show many workers reporting zero change (suggesting wage stickiness) and many reporting nominal reductions (suggesting wage flexibility), but both findings could be distorted by reporting error. The British data, which are based on employers' payroll records, show much lower prevalence of zero wage change, but still show surprisingly frequent nominal wage cuts. The complex constellation of empirical regularities defies explanation by simple theories.

Henry Farber, Princeton University and NBER

Union Organizing Decisions in a Deteriorating Environment: The Composition of Representation Elections and the Decline in Turnout

It is well known that the organizing environment for labor unions in the United States has deteriorated dramatically over a long period of time, contributing to the sharp decline in the private sector union membership rate and resulting in many fewer representation elections. What is less well known is that since the late 1990s average turnout in the representation elections held has dropped substantially. These facts are related. Farber develops a model of union decision making regarding selection of targets for organizing through the National Labor Relations Board (NLRB) election process with the clear implication that a deteriorating organizing environment will lead to systematic change in the composition of elections held. The model implies that a deteriorating environment will lead unions not only to contest fewer elections but also to focus on larger potential bargaining units and on elections where they have a larger probability of winning. A standard rational-voter model implies that these changes in composition will lead to lower turnout. The author investigates the implications of these models empirically using data on turnout in more than 140,000 NLRB certification elections held between 1973 and 2009. The results are consistent with the model and suggest that changes in composition account for about one-fifth of the decline in turnout between 1999 and 2009.

Peter Arcidiacono, Joseph Hotz, and Arnaud Maurel, Duke University and NBER

Recovering Ex Ante Returns and Preferences for Occupations Using Subjective Expectations Data

Arcidiacono, Hotz, Maurel, and Romano use data on subjective expectations of outcomes from counterfactual choices to recover ex ante treatment effects as well as the non-pecuniary benefits associated with different treatments. The particular treatments they consider are the choice of occupation. By asking individuals about potential earnings associated with counterfactual choices of college majors and occupations, the authors recover the full distribution of the ex ante monetary returns to particular occupations, and how these returns vary across majors. In particular, the elicited choice probabilities allow the authors to quantify the importance of sorting on ex ante monetary benefits when choosing an occupation. By linking subjective expectations to a model of occupational choice, the authors then examine how individuals trade off their preferences for particular occupations with the corresponding monetary rewards. While sorting across occupations is partly driven by the ex ante monetary returns, sizable differences in expected earnings across occupations remain after controlling for selection on monetary returns, which in turn points to the existence of substantial compensating differentials.

Stephen Burks, University of Minnesota; Bo Cowgill, University of California at Berkeley; Mitchell Hoffman, University of Toronto; and Michael Housman, Evolv, Inc

The Facts about Referrals: Toward on Understanding of Employee Referral Networks

Using unique personnel data from nine large firms in three industries, Burks, Cowgill, Hoffman, and Housman document five consistent facts about hiring through employee referral networks. First, referred applicants have skill characteristics that are similar to those of non-referred applicants, both observable-to-the-firm (for example, schooling) and unobservable-to-the-firm (such as cognitive and non-cognitive ability), but are more likely to be hired, more likely to accept job offers, and have higher pre-job assessment scores. Second, referred workers have skill characteristics that are similar to those of non-referred workers. Third, referred workers are less likely to quit and are more productive but only on rare high-impact performance metrics: on most standard non-rare performance metrics, referred and non-referred workers perform similarly. Fourth, referred workers have slightly higher wages but yield substantially higher profits per worker. Fifth, workers who make referrals have higher productivity than others, are less likely to quit after making a referral, and refer those like themselves on particular productivity metrics. Differences between referred and non-referred workers tend to be larger at low-tenure levels: for young, black, and Hispanic workers, and in strong labor markets. No leading class of theories can alone account for all or most of these results, leading the authors to suggest several theoretical extensions.

Robert Valletta, Federal Reserve Bank of San Francisco

Recent Extensions of U. S. Unemployment Benefits: Search Responses under Varying Labor Market States

In response to the 2007–09 Great Recession and elevated unemployment in the United States, the maximum duration of unemployment benefits was increased from the normal level of 26 weeks to an historically unprecedented 99 weeks. Valletta compares the impact of these extensions on job search with the corresponding impact of the more limited extensions that occurred in the aftermath of the relatively mild 2001 recession. The analyses rely on micro data on unemployment exits from matched monthly files from the Current Population Survey, combined with data on variation in maximum available weeks of unemployment benefits measured across U.S. states. The author finds that a ten-week extension of unemployment insurance benefits lengthens unemployment duration by about one and a half weeks, with little variation across the two episodes. This estimate lies in the middle-to-upper end of the range of estimates from past analyses, suggesting a moderate overall labor market impact of the recent benefit extensions.

Ashwini Agrawal and Prasanna Tambe, New York University

Private Equity, Technological Investment, and Labor Outcomes

Agrawal and Tambe use proprietary data on the employment histories of a large fraction of the U.S. labor force to assess how private equity acquisitions impact the long-run labor market outcomes of workers. In contrast to commonly held views, they find that employees working at a target firm at the time of an acquisition subsequently realize longer employment durations over their careers relative to comparable workers at non-acquired firms. The authors provide evidence that the mechanism for these outcomes is employees’ acquisition of human capital facilitated by firm investment in information technologies (IT) and complementary work practices. The effects are especially pronounced for workers who perform tasks that are central to IT-enabled production processes, for workers who are able to quickly acquire new skills, and for workers who remain at an acquired firm for longer durations before exit. The authors also find that employees of acquired firms are more likely to transition eventually to companies that have demand for IT-related human capital. The findings suggest that the recent wave of private equity acquisitions has imparted workers with transferable skills that complement modern technological advances.