Showing papers in "Journal of Labor Economics in 1999"
TL;DR: Using a new variation of the Blinder-Oaxaca decomposition technique, the authors found that racial differences in asset levels and probabilities of having self-employed fathers explain a large part of the gap in the entry rate, but almost none of the difference in the exit rate.
Abstract: Estimates from the Panel Study of Income Dynamics indicate that African‐American men are one‐third as likely to be self‐employed as white men. The large discrepancy is due to a black transition rate into self‐employment that is approximately one‐half the white rate and a black transition rate out of self‐employment that is twice the white rate. Using a new variation of the Blinder‐Oaxaca decomposition technique, I find that racial differences in asset levels and probabilities of having self‐employed fathers explain a large part of the gap in the entry rate, but almost none of the gap in the exit rate.
600 citations
TL;DR: In this paper, the authors add to the empirical literature on tournament theory as a theory of executive compensation and test several propositions of tournament models on a rich data set containing information about 2,600 executives in 210 Danish firms during a 4-year period.
Abstract: This article adds to the empirical literature on tournament theory as a theory of executive compensation. I test several propositions of tournament models on a rich data set containing information about 2,600 executives in 210 Danish firms during a 4‐year period. I ask, Are pay differentials between job levels consistent with relative compensation? Is pay dispersion between levels higher in noisy environments? Is the dispersion affected by the number of tournament participants? Is average pay lower in firms with more compressed pay structures? Does wider pay dispersion enhance firm performance? Most of the predictions gain support in the data.
510 citations
TL;DR: This article investigated if the location choices made by immigrants when they arrive in the United States are influenced by the interstate dispersion in welfare benefits and found that welfare recipients are indeed more heavily clustered in high-benefit states than the immigrants who do not receive welfare, or than natives.
Abstract: This article investigates if the location choices made by immigrants when they arrive in the United States are influenced by the interstate dispersion in welfare benefits. Income‐maximizing behavior implies that foreign‐born welfare recipients, unlike their native‐born counterparts, may be clustered in the states that offer the highest benefits. The empirical analysis indicates that immigrant welfare recipients are indeed more heavily clustered in high‐benefit states than the immigrants who do not receive welfare, or than natives. As a result, the welfare participation rate of immigrants is much more sensitive to changes in welfare benefits than that of natives.
506 citations
TL;DR: This article used a unique new data set that combines data on individual workers and their employers to estimate marginal productivity differentials among different types of workers and compared these to estimated relative wages, leading to new evidence on productivity-based and nonproductivity-based explanations of the determination of wages.
Abstract: We use a unique new data set that combines data on individual workers and their employers to estimate marginal productivity differentials among different types of workers. We then compare these to estimated relative wages, leading to new evidence on productivity‐based and nonproductivity‐based explanations of the determination of wages. Among our findings are (1) the higher pay of prime‐aged workers (aged 35–54) and older workers (aged 55+) is reflected in higher point estimates of their relative marginal products, and (2) for the most part, the lower relative earnings of women are not reflected in lower relative marginal products.
440 citations
TL;DR: In this article, the authors proposed a two-stage search strategy in which workers search over types of work first, and found that those who had previously changed employers while working in their current career were much less likely to change careers during the current job change.
Abstract: The model of job search involves both employer matches and career matches. Workers may change employers without changing careers but cannot search over possible lines of work while working for one employer. The optimal policy implies a two‐stage search strategy in which workers search over types of work first. The patterns of job changes observed in the National Longitudinal Survey of Youth support this two‐stage search policy. Among male workers who are changing jobs, those who have previously changed employers while working in their current career are much less likely to change careers during the current job change.
337 citations
TL;DR: In this paper, the authors present a general theoretical model whereby employers have some degree of monopsony power, which allows minimum wages to have the conventional negative impact on employment but also allows for a neutral or positive impact.
Abstract: Recent work on the economic effects of minimum wages has stressed that the standard economic model, where increases in minimum wages depress employment, is not supported by empirical work in some labor markets. We present a general theoretical model whereby employers have some degree of monopsony power, which allows minimum wages to have the conventional negative impact on employment but which also allows for a neutral or positive impact. Studying the industry‐based British Wages Councils between 1975 and 1992, we find that minimum wages significantly compress the distribution of earnings but do not have a negative impact on employment.
288 citations
TL;DR: In this article, the authors examined the effects of minimum wage legislation in Canada over the period 1975-93 and found that a 10% increase in the minimum wage is associated with roughly a 2.5% decrease in employment.
Abstract: We examine the effects of minimum wage legislation in Canada over the period 1975–93. For teenagers we find that a 10% increase in the minimum wage is associated with roughly a 2.5% decrease in employment. We also find that this result is driven by low frequency variation in the data. At high frequencies the elasticity is positive and insignificant. The difference in the elasticity across the bandwidth has implications for the interpretation of employment dynamics as a result of minimum wage policy and experimental design in minimum wage studies. It also provides a simple reconciliation of the “new minimum wage research,” which reports very small negative, or positive, elasticities.
277 citations
TL;DR: In this article, an integrated model of effort and sorting that clarifies the distinction between observable and unobservable ability and the relationship between earnings and productivity is presented. But the model does not take into account the disutility of additional effort expended by workers.
Abstract: Jobs with performance‐related pay (PRP) attract workers of higher ability and induce workers to provide greater effort. We construct an integrated model of effort and sorting that clarifies the distinction between observable and unobservable ability and the relationship between earnings and productivity. Predictions are tested against data from the British Household Panel Survey (BHPS). The PRP raises wages by 9% for men and 6% for women. Theoretical calculations show that these estimated earnings differentials represent average productivity differentials net of monitoring costs at the marginal firm using PRP but not of the disutility of additional effort expended by workers.
236 citations
TL;DR: In this paper, the implications of theories that relate to life cycle incentives, tournaments, piecework incentives, pay compression, peer pressure, and peer pressure on personnel economics are investigated.
Abstract: In 1987, the Journal of Labor Economics published an issue on the economics of personnel. Since then, personnel economics, defined as the application of labor economics principles to business issues, has become a major part of labor economics, now accounting for a substantial proportion of papers in this and other journals. Much of the work in personnel economics has been theoretical, in large part because the data needed to test these theories have not been available. In recent years, a number of firm‐based data sets have surfaced that allow personnel economics to be tested. Using two such data sets, I give support to the implications of theories that relate to life‐cycle incentives, tournaments, piecework incentives, pay compression, and peer pressure. I conclude that personnel economics is real. It is far more than a set of clever theories. It has relevance to the real world. Additionally, firm‐based data make asking and answering new kinds of questions feasible. The value of research in this area is h...
220 citations
TL;DR: This article studied the effect of new technologies (NT) on wages and employment using a unique panel that matches data on individuals and on their firms. But these workers were already better compensated before the introduction of the NTs.
Abstract: We study the effect of new technologies (NT) on wages and employment using a unique panel that matches data on individuals and on their firms. As in the United States, we show that computer users are better paid than nonusers (15%–20% more). But these workers were already better compensated before the introduction of the NTs. Total returns to computer use amount to 2%. Measurement errors do not affect our estimates. Furthermore, computer users are protected from job losses as long as bad business conditions do not last too long. This result holds even after controlling for possible selection biases.
189 citations
TL;DR: In this article, the authors define and analyze job security in the context of implicit contracts designed to overcome incentive problems in the employment relationship, and test these predictions, they estimate binomial and multinomial models of job separations using Panel Study of Income Dynamics (PSID) data for the years 1976•93.
Abstract: This article defines and analyzes job security in the context of implicit contracts designed to overcome incentive problems in the employment relationship. Contracts of this nature generate predictions concerning the relationship between job security parameters—such as worker seniority and sectoral economic conditions—and the probability of separations. To test these predictions, I estimate binomial and multinomial models of job separations using Panel Study of Income Dynamics (PSID) data for the years 1976‐93. The results are consistent with a decline over time in the incentives to maintain existing employment relationships for male workers and for skilled white‐collar women.
TL;DR: In this paper, the authors estimate inter-industry wage differentials using new French longitudinal data that allow a tracking of workers and their firms over time, and they find that when measured on a cross-sectional basis, they primarily reflect the interindustry variations in unmeasured labor quality.
Abstract: We estimate interindustry wage differentials using new French longitudinal data that allow a tracking of workers and their firms over time. We find that, when measured on a cross‐sectional basis, they primarily reflect the interindustry variations in unmeasured labor quality. However, interindustry wage differentials are only a minor component of interfirm wage differentials. The average differential in wages paid to the same workers by different firms is about 20%–30%. In a given industry, wage policies are more favorable to workers in large, capital‐intensive firms.
TL;DR: The authors compared immigrant and native-born male occupational distributions in Canada in the 1980s and found that immigrants are more skilled, but this declines across successive cohorts, indicating that immigrants who are not assessed on their skills or are not fluent at arrival are less occupationally mobile.
Abstract: This article compares immigrant and native‐born male occupational distributions in Canada in the 1980s. Three questions are addressed: (1) How do immigrant and native‐born occupational distributions differ? (2) Are immigrants more occupationally mobile? and (3) How do immigrant occupations and mobility relate to characteristics used in immigrant selection? Results indicate that immigrants are more skilled, but this declines across successive cohorts. Immigrants are more occupationally mobile even long after arrival, indicating immigration may contribute to a more flexible labor force. Immigrants who are not assessed on their skills or are not fluent at arrival are less occupationally mobile.
TL;DR: The authors examine the extent to which workers who lose jobs obtain work in alternative employment arrangements, including temporary work and independent contracting, and obtain voluntary or involuntary part-time work, and find that job losers are significantly more likely than non-losers to be in both temporary jobs (including on-call work and contract work) and involuntarily parttime jobs.
Abstract: I examine the extent to which workers who lose jobs obtain work in alternative employment arrangements, including temporary work and independent contracting, and obtain voluntary or involuntary part‐time work. I find that job losers are significantly more likely than nonlosers to be in both temporary jobs (including on‐call work and contract work) and involuntarily part‐time jobs. I also find evidence that temporary and involuntary part‐time jobs are part of a transitional process subsequent to job loss leading to regular full‐time employment.
TL;DR: In this article, the evidence on changes in job stability through the mid-1990s, using recently released Current Population Survey data for 1995 that parallel earlier job tenure supplements, was updated.
Abstract: We update the evidence on changes in job stability through the mid‐1990s, using recently released Current Population Survey data for 1995 that parallel earlier job tenure supplements. In the aggregate, job stability declined modestly in the first half of the 1990s. Moreover, the relatively small aggregate changes mask rather sharp declines in stability for workers with more than a few years of tenure. Nonetheless, the data available to this point do not support the conclusion that the downward shift in job stability for more tenured workers, and the more modest decline in aggregate job stability, reflect long‐term trends.
TL;DR: This paper examined the impact of employer-provided training on the wage profile and on the mobility of young workers using data from the National Longitudinal Survey of Youth (NLSS) and found that training with the current employer has a positive effect on the minimum wage.
Abstract: Using data from the National Longitudinal Survey of Youth, this article examines the impact of employer‐provided training on the wage profile and on the mobility of young workers. The main results are that (i) training with the current employer has a positive effect on the wage; (ii) employers seem to reward skills acquired through training with previous employers as much as skills they provide themselves; and (iii) part of the skills acquired through training programs provided by the current employer seem to be fairly specific as they are shown to reduce mobility, even after controlling for unobserved heterogeneity.
TL;DR: In this article, the authors provide evidence on changes in short-term job instability and insecurity using the Survey of Income and Program Participation (SIPP) and the Panel Study of Income Dynamics (PSI).
Abstract: This article provides evidence on changes in short‐term job instability and insecurity using the Survey of Income and Program Participation. Monthly measures from this data set are contrasted with annual measures from the Survey of Income and Program Participation and the Panel Study of Income Dynamics. Neither data set shows an increase in job turnover during the 1980s and 1990s. We also examine indicators of increased insecurity. These include the probability that a job ends involuntarily, is followed by a spell of nonemployment, or that the subsequent job has lower wages. These indicators of insecurity also show no upward trend.
TL;DR: The authors found that during the 1990s, workers were more pessimistic about losing their jobs in the next 12 months than workers were during the 1980s and were more concerned about suffering future job loss that would have resulted in a decline in earnings or a spell of unemployment.
Abstract: In recent years, Federal Reserve Chairman Alan Greenspan, former U.S. Secretary of Labor Robert Reich, and many journalists have argued that workers are more anxious about losing their jobs than they were in the past. I use the 1977‐96 General Social Survey to document trends in workers' beliefs about their own job security. During the 1990s, workers have been more pessimistic about losing their jobs in the next 12 months than workers were during the 1980s. Workers have also been more concerned about suffering future job loss that would have resulted in a decline in earnings or a spell of unemployment.
TL;DR: In this article, the authors show that negative substitution effects on work hours result from substituting on-and off-the-job leisure for piecerate workers, and they test their model using controlled experimentation on human subjects.
Abstract: Estimated negative substitution effects on work hours question the empirical validity of the classical labor supply model. Estimates are reconciled by allowing a dual choice of hours and effort for piecerate workers. In such a model, these negative substitution effects result from substituting on- and off-the-job leisure. We test our model using controlled experimentation on human subjects. These experiments, while not naturally occurring environments, represent real economic choices and can generate data unavailable elsewhere (e.g., effort data). The results support our model, and they have implications both for labor management and for empirical research focusing only on the hours choice. The classical static model of the labor-leisure choice offers positive compensated wage effects on hours of work as its main testable implication. Previous attempts to test this hypothesis with field data have cast doubt on the empirical validity of the static labor supply model due to the frequency of negative estimated compensated wage elasticities. A limitation of the model is that it views the choice of hours of work as the only
TL;DR: In this paper, the authors attempt to determine whether wage records reported by employers to state unemployment insurance agencies provide a valid alternative to more costly retrospective sample surveys of workers' compensation data.
Abstract: This article attempts to determine whether wage records reported by employers to state unemployment insurance (UI) agencies provide a valid alternative to more costly retrospective sample surveys o...
TL;DR: In this article, the authors study workers' incentives to invest in general human capital (education) in the presence of search-induced unemployment, and they find that identical workers may have incentives to diversify in terms of education, and the investments in education may exceed the socially optimal level.
Abstract: I study workers' incentives to invest in general human capital (education) in the presence of search‐induced unemployment. Workers queue for jobs, and firms prefer to hire the most productive applicants because of rent sharing. As a result, an unemployed worker's ranking relative to other job seekers will influence his job‐finding rate. This creates a “rat race,” where workers invest in education partly in order to achieve a better ranking. In equilibrium, identical workers may have incentives to diversify in terms of education, and the investments in education may exceed the socially optimal level.
TL;DR: This paper used micro-level data on employers and employees from a sample of establishments in four major metropolitan areas in the United States to investigate whether Affirmative Action leads to the hiring of minority or female employees who are less qualified.
Abstract: We use microlevel data on employers and employees from a sample of establishments in four major metropolitan areas in the United States to investigate whether Affirmative Action leads to the hiring of minority or female employees who are less qualified. Our measures of qualifications include the educational attainment of the workers hired and a variety of outcome measures related to worker performance on the job. We find evidence of lower educational qualifications among women and minorities hired under Affirmative Action. However, we do not find evidence of weaker job performance among most groups of minority and female Affirmative Action hires.
TL;DR: In this article, the authors consider whether two commonly used sources of information on employer tenure, the Panel Study of Income Dynamics and the Current Population Survey, yield systematically different trends in employer tenure.
Abstract: This article considers whether two commonly used sources of information on employer tenure, the Panel Study of Income Dynamics and the Current Population Survey, yield systematically different trends in employer tenure. Little evidence of a discrepancy between the data sets in the 1980s or 1990s is found when comparable samples, variable definitions, and time frames are used. Neither data set shows a significant trend in the share of workers with 1 year or less of tenure, while both data sets show an increase in the fraction of men with less than 10 years of tenure starting in the late 1980s.
TL;DR: The authors examined the effect of early retirement provisions to Canada's two public pension plans, and found that the reforms led to an increase in pension receipt but had little immediate effect on labor market behavior.
Abstract: We examine the (sequential) introduction of early retirement provisions to Canada's two public pension plans. These reforms provide a unique opportunity to assess the effect of public pension plan parameters on labor supply behavior, free of the biases that potentially affect the simple time‐series or cross‐section inference presented in many previous studies. We find that the reforms led to an increase in pension receipt but had little immediate effect on labor market behavior. This is due to the fact that men who initially took advantage of the early retirement provisions would otherwise have had limited labor market participation.
TL;DR: In this paper, the effects of changes in pension plans and social security in the 1970s and 1980s on the steady state retirement of men were investigated and the long run effects of these changes were found to account for about a quarter of the reduction in full-time work by men in their early sixties but cannot explain the reduction by those age 65.
Abstract: This article estimates the effects of changes in pension plans and social security in the 1970s and 1980s on the steady state retirement of men. Work incentives associated with pension coverage and plan characteristics are calculated primarily from the 1969–79 Retirement History Study and the 1983 and 1989 Surveys of Consumer Finances. Simulations with a structural retirement model suggest that the long‐run effects of changes in pension plans and social security account for about a quarter of the reduction in full‐time work by men in their early sixties but cannot explain the reduction by those age 65.
TL;DR: The authors compare two cohorts of young white men from the National Longitudinal Surveys (NLS), construct a rigorous measure of job change, and confirm earlier findings of a significant increase in job instability.
Abstract: Data and measurement problems have complicated the debate over trends in job instability in the United States. We compare two cohorts of young white men from the National Longitudinal Surveys (NLS), construct a rigorous measure of job change, and confirm earlier findings of a significant increase in job instability. We then benchmark the NLS against other main data sets in the field and conduct a thorough attrition analysis. Extending the analysis to wages, we find that the wage returns to job changing have both declined and become more unequal for young adults, mirroring trends in their long‐term wage growth.
TL;DR: In this paper, the pattern of effort and wages in a multisector efficiency wage model is derived in a multi-employer setting. But the model is not suitable for large scale industrial settings.
Abstract: The pattern of effort and wages is derived in a multisector efficiency wage model. Firms choose effort endogenously. Easily monitored or low‐turnover jobs have high effort and may have low wages in equilibrium. Empirical wage differentials from a measure of supervision are smaller than observed industry differentials that have been attributed to efficiency wage models and are closer to those predicted by the model. Workers can search for and avail of on‐the‐job offers. If sectors grow at different rates or the unemployment rate changes, the pattern of wage differentials is unaffected.
TL;DR: This article examined whether increases in female labor supply contributed to rising wage inequality and declining real wages of less skilled males during the 1980s and found little evidence that women substitute for men or that they contributed to the rapid inequality growth in 1980s.
Abstract: This article examines whether increases in female labor supply contributed to rising wage inequality and declining real wages of less skilled males during the 1980s. While male wage declines are concentrated in the 1980s, female labor supply growth slowed in the 1980s relative to the 1970s. Women also increased the relative supply of skill in the economy in the 1980s. Using state‐level data we estimate cross‐substitution effects between men and women. Once we account for demand changes we find little evidence that women substitute for men or that they contributed to the rapid inequality growth in the 1980s.
TL;DR: In this article, the impact of Social Security Disability Insurance on male labor force participation decisions based on estimates from a structural model of applications, awards, and state-contingent lifetime income flows is investigated.
Abstract: This article provides new evidence about the impact of Social Security Disability Insurance on male labor force participation decisions based on estimates from a structural model of applications, awards, and state‐contingent lifetime income flows. The lifetime framework makes it possible to consider long‐term opportunity costs associated with early labor force withdrawal and the disincentive to applications resulting from the statutory waiting period before benefits may be received. Estimation techniques account for the self‐selected nature of the pool of applicants when predicting the individual‐specific probability of acceptance and the opportunity costs of applying.