Institute for the Study of Labor

About: Institute for the Study of Labor is a nonprofit organization based out in Bonn, Germany. It is known for research contribution in the topics: Wage & Unemployment. The organization has 2039 authors who have published 13475 publications receiving 439376 citations.

The Intriguing Relation between Adult Minimum Wage and Child Labor

Abstract: Raising adult wages through a minimum wage law can in some circumstances have the paradoxical effect of increasing the amount of child labor. In other words, using minimum wage legislation as a form of international labor standard can exacerbate problems of child labor. According to International Labour Organisation estimates, roughly 250 million children work full or part time, most of them in developing countries. Because most parents send their children to work only when compelled by poverty to do so, one would expect an increase in adult wages to reduce the amount of child labor. But an increase in adult wages achieved through a minimum wage law sometimes has a paradoxical effect. It can, for instance, cause some adults to be unemployed and force them to send their children to work. This in turn displaces more adult labor, with the result that more children are sent to work. Basu analyzes this process with a view to predicting the incidence of child labor. He shows that, for appropriate parametric configurations, child labor may rise or fall as the adult minimum wage is raised. This paper - a product of the Office of the Senior Vice President, Development Economics - is part of a larger effort in the Bank to promote understanding of the causes of child labor. The study was funded by the Bank's Research Support Budget under the research project Literacy and Child Labor (RPO 683-07).

Who Benefits from the Earned Income Tax Credit? Incidence Among Recipients, Coworkers and Firms

Abstract: How are hourly wages affected by the Earned Income Tax Credit? Using variation in state EITC supplements, I find that a 10 percent increase in the generosity of the EITC is associated with a 5 percent fall in the wages of high school dropouts and a 2 percent fall in the wages of those with only a high school diploma, while having no effect on the wages of college graduates. Given the large increase in labor supply induced by the EITC, this is consistent with most reasonable estimates of the elasticity of labor demand. Although workers with children receive a much larger EITC than childless workers, and the effect of the credit on labor force participation is larger for those with children, the hourly wages of both groups are similarly affected by an EITC increase. As a check on this strategy, I also use federal variation in the EITC across gender-age-education groups, and find that those demographic groups that received the largest EITC increases also experienced a drop in their hourly wages, relative to other groups.

Employed 40 Hours or Not Employed 39: Lessons from the 1982 Mandatory Reduction of the Workweek

Abstract: We use longitudinal individual wage, hours, and employment data to investigate the effect of the February 1, 1982 mandatory reduction of weekly working hours in France. Just after Francois Mitterrand's election in May 1981, the government decided to increase the minimum wage by 5%. Then, as promised in its electoral program, the socialist government reduced the workweek from 40 to 39 hours. At the same time, it mandated stable monthly earnings for minimum wage workers and recommended the stabilization of monthly earnings for other workers recommendations followed by 90% of the firms). We show that workers directly affected by these changes - those working 40 hours in March 1981 as well as those working overtime at the same date - were more likely to lose their jobs between 1981 and 1982 than workers not affected by the changes - those working 36 to 39 hours in March 1981. Moreover, because the decree enforcing the new standard was issued faster than earlier promises, some firms had no time to complete negotiations and their workers were still working 40 hours after February 1, 1982. We show that these workers were also strongly affected by the reduction in standard hours. Our estimates of the impact of this one-hour reduction of the workweek on employment losses vary between 2% and 4%, depending on the methodology or the data used. Furthermore, we show that minimum wage workers were most affected by the changes. This result, consistent with our model, is due to the impossibility of adjusting their monthly wage, which results in excess job destruction and creation. These results should help us understand the possible effects of the upcoming mandatory reduction of hours in France, where the maximum weekly working hours declined from 39 to 35 hours beginning in January 2000. Similar programs are envisaged in other European countries, which hope that hours reductions will be an efficient policy for reducing unemployment.

Laws and Norms

Abstract: The lecture was delivered on 16 February 2011. First draft: October 2010. This version: February 2011.

Using the EITC to Help Poor Families: New Evidence and a Comparision with the Minimum Wage

Abstract: This paper evaluates the effects of the earned income tax credit (EITC) on poor families. Exploiting state-level variation in EITCs, we find that the EITC helps families rise above poverty-level earnings. This occurs by inducing labor market entry in families that initially do not have an adult in the workforce. Evidence based on the federal EITC is less supportive of a positive impact of the EITC on poor families. Finally, our results suggest that for the range of policy changes typical of recent history in the U.S., the EITC is more beneficial for poor families than is the minimum wage.