Labor Studies

Labor Studies

Members of the NBER's Labor Studies Program met in Federal Reserve Bank of San Francisco on February 15-16. Program Co-Directors David Autor of MIT and Alexandre Mas of Princeton University organized the meeting, sponsored by Federal Reserve Bank of San Francisco. These researchers' papers were presented and discussed:

Richard Hornbeck, University of Chicago and NBER, and Enrico Moretti, University of California, Berkeley and NBER

Who Benefits From Productivity Growth? The Direct and Indirect Effects of Local TFP Shocks

Hornbeck and Moretti examine who benefits from local productivity growth, including direct effects in that city and indirect effects on other cities. They use confidential plant-level data to calculate changes in manufacturing productivity by United States metropolitan areas (MSAs), and instrument for MSA-level productivity growth using nationwide industry-level productivity growth and MSAs' initial industry shares. The researchers estimate that workers benefit from local productivity growth, after subtracting increases in housing costs from increases in nominal earnings, but that homeowners benefit substantially more than renters. Local productivity growth reduces local inequality, however, as greater in-migration of more-educated workers mutes local wage increases for higher-skilled workers. This geographic mobility generates indirect effects on workers in other cities, raising wages and lowering housing costs, which particularly benefit higher-skill workers and renters. These indirect effects of local productivity growth, in aggregate, drive a substantial portion of the overall benefits from local productivity growth.

Simon Jäger, MIT and NBER; Benjamin Schoefer, University of California, Berkeley; and Josef Zweimüller, University of Zurich

Marginal Jobs and Job Surplus: Evidence from Separations and Unemployment Insurance

Jäger, Schoefer and Zweimüller study the role of marginal jobs in employment adjustment, in three steps. First, they provide evidence on job destruction in response to reductions in job surplus from improved worker outside options. Their design exploits a sharp quasi-experimental increase in unemployment benefits for older workers in Austria. Second, they isolate and characterize the marginal matches driving this separation response, extending complier analysis to difference-in-difference settings. They find that marginal jobs originate from blue-collar occupations in industries with a high incidence of sickness and disability among older workers. Compared to surviving jobs, marginal jobs were more prevalent in shrinking industries and firms. Taken together, the findings indicate that increasing workers' outside options destroys low-surplus jobs. Third, a direct implication is that outside options shift the composition of survivign jobs towards higher-surplus jobs. To test this prediction, the researchers exploit the abolition of benefit extensions to show that the formerly-treated cohorts indeed exhibit lower extensive-margin aggregate elasticities to subsequent labor demand shocks -- due to the missing mass of marginal matches the reform had previously destroyed.

Cody Cook, UBER; Rebecca Diamond, Stanford University and NBER; John A. List, University of Chicago and NBER; Jonathan Hall, Uber Technologies; and Paul Oyer, Stanford University and NBER

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

The growth of the "gig" economy generates worker flexibility that, some have speculated, will favor women. Cook, Diamond, List, Hall, and Oyer explore gender differences in labor supply choices and earnings in a large gig economy setting: Uber drivers. The researchers first show that this setting is non-discriminatory in that dispatch and pricing decisions are made without conditioning on gender, customer and driver choices (through cancellations of rides) do not affect matches in a gender-biased manner, men and women are equally able when they start driving for Uber, and they learn at an equal rate. Nonetheless, the researchers document a driver hourly earnings gender gap of seven percent which is similar to gaps estimated in other narrowly defined jobs and occupations. The researchers are able to fully explain the gender hourly earnings gap with three factors under the control of each driver: speed, experience, and choice of time and location of work. This suggests that, as the gig economy grows and even in the absence of discrimination, women and men may exercise different choices about the trade-off between earnings and flexibility due to women's relatively high opportunity cost of non-paid-work time and gender-based preference differences.

Jose Azar, Charles River Associates; Ioana Marinescu, University of Pennsylvania and NBER; and Marshall I. Steinbaum

Labor Market Concentration (NBER Working Paper No. 24147)

A product market is concentrated when a few firms dominate the market. Similarly, a labor market is concentrated when a few firms dominate hiring in the market. Using data from the leading employment website, Azar, Marinescu, and Steinbaum calculate labor market concentration for over 8,000 geographic-occupational labor markets in the US. Based on the DOJ-FTC horizontal merger guidelines, the average market is highly concentrated. Using a panel IV regression, the researchers show that going from the 25th percentile to the 75th percentile in concentration is associated with a 15-25% decline in posted wages, suggesting that concentration increases labor market power.

David Card, University of California, Berkeley and NBER; Lowell Taylor, Carnegie Mellon University and NBER; and Ciprian Domnisoru, Carnegie Mellon University

The Intergenerational Transmission of Human Capital: Evidence from the Golden Era of Upward Mobility

The first half of the American 20th century was characterized by an extraordinary expansion of educational opportunity and a corresponding rise in educational attainment. Card, Taylor, and Domnisoru explore the intergenerational transmission of human capital during this golden age of upward mobility, using household level data from the 1940 census merged with administrative data on local school quality. A simple model of optimal schooling shows that parents choose more education for their children when the quality of local public schools is higher, with larger effects among poorer and less educated parents. Consistent with this model, the researchers find evidence linking the average quality of public schools to upward mobility in education, particularly among children with low socioeconomic status.

Johannes F. Schmieder, Boston University and NBER; Till M. von Wachter, University of California, Los Angeles and NBER; and Jörg Heining, Institut fur Abreitsmarkt und Berufsforschung

The Costs of Job Displacement over the Business Cycle and Its Sources: Evidence from Germany

Schmieder, von Wachter, and Heining document the sources behind costs of job loss over the business cycle using administrative data from Germany. Losses in annual earnings in Germany after displacement are large, persistent, and highly cyclical, nearly doubling in size during economic downturns. The researchers show that part of these losses and their cyclicality is driven by unemployment. However, the longer-term earnings losses the researchers find and their cyclicality are mainly driven by declines in wages. An important factor behind the long-lasting declines in wages and their cyclicality are changes in employer characteristics, as workers switch to smaller and lower-paying firms after job displacement, in particular in recessions. The findings point to important and persistent effects of luck in the labor market that employment-based programs such as unemployment insurance can only partly offset.

Amanda Agan, Rutgers University, and Michael D. Makowsky, Clemson University

The Minimum Wage, EITC, and Criminal Recidivism

For recently released prisoners, the minimum wage and the availability of state Earned Income Tax Credits (EITCs) can influence both their ability to find employment and their potential legal wages relative to illegal sources of income, in turn affecting the probability they return to prison. Using administrative prison release records from nearly six million offenders released between 2000 and 2014, Agan and Makowsky use a difference-in-differences strategy to identify the effect of over two hundred state and federal minimum wage increases, as well as 21 state EITC programs, on recidivism. The researchers find that the average minimum wage increase of 8% reduces the probability that men and women return to prison within 1 year by 2%. This implies that on average the wage effect, drawing at least some ex-offenders into the legal labor market, dominates any reduced employment in this population due to the minimum wage. These reductions in re-convictions are observed for the potentially revenue generating crime categories of property and drug crimes -- prison reentry for violent crimes are unchanged, supporting the researchers framing that minimum wages affect crime that serves as a source of income. The availability of state EITCs also reduces recidivism, but only for women. Given that state EITCs are predominantly available to custodial parents of minor children, this asymmetry is not surprising. Framed within a simple model where earnings from criminal endeavors serve as a reservation wage for ex-offenders, the researchers' results suggest that the wages of crime are on average higher than comparable opportunities for low-skilled labor in the legal labor market.