Welfare to Work,Wages and Wage Growth*

This paper attempts to uncover the effects of a UK welfare‐to‐work programme on individual wage growth by exploiting an expansion to this welfare programme. The conventional wisdom is that such programmes trap recipients into low‐wage, low‐quality work – this comes from the simple argument that the ‘poverty trap’, which a wage subsidy for low‐income workers induces, reduces the benefits to investments, such as on‐the‐job training, and so reduces wage growth. In fact, a wage subsidy will also reduce the costs of, at least, general training because we would normally expect workers to pay for their own general training in the form of lower gross wages. So a wage subsidy is a way of sharing these costs with the taxpayer. Thus, the net effect on wage progression depends on whether it reduces costs by more or less than it reduces the benefits.     

Effects of Temporary In‐Work Benefits for Welfare Recipients: Examination of the Australian Working Credit Programme*

We investigate the impact of ‘Working Credit’, a nationally‐implemented programme which created increased incentives for welfare recipients to undertake temporary work. Highlighting the difficulties in identifying programme effects in the absence of a randomised controlled trial or a natural experiment, we produce estimates of impacts under alternative identifying assumptions and also undertake various robustness checks. Unconditional and regression‐adjusted difference‐in‐difference estimates suggest that the introduction of the Working Credit programme increased employment rates, earnings and exits for those on income support, but matching methods and various robustness checks provide conflicting evidence on the impact on movements from welfare to work for unemployment benefit recipients. Moreover, estimated effects on earnings while on benefits are sensitive to identifying assumptions. Notwithstanding our inability to conclusively identify causal effects of the programme, we note that our findings are broadly consistent with the incentive effects of the programme, with recipients making use of the credits to increase earnings while on benefits, but not increasing movements off welfare.     

The Impact of a Minimum‐Wage Increase on Temporary‐Contract Workers

We study the impact of the 2016 increase in the Irish minimum wage on the hours worked and the probability of job loss of minimum‐wage workers. We pay particular attention to temporary‐contract workers, who may be more susceptible to changes to their working conditions than permanent employees. The results indicate that the increase in the minimum wage had a negative and statistically significant effect on the hours worked of minimum‐wage workers, with an average reduction of approximately 0.6 hours per week. For temporary workers, the effect was greater, with a decline of approximately 3 hours per week. We find no evidence that the increase in the minimum wage led to an increased probability of becoming jobless in the six‐month period following the rate change, nor did it affect employment shares in sectors employing large numbers of minimum‐wage workers.     

Employment Quota System and Labour Market Outcomes of Individuals with Disabilities: Empirical Evidence from South Korea

To date, only a few studies have attempted to evaluate the effectiveness of disability employment quota systems using structural changes in policies. This study exploits the structural changes in South Korea's disability employment quota system that took place in 2004 and 2006 to expand the current disability policy evaluation literature. We separate the effect of these changes in the quota system into their effect on the probability of labour force participation and their effect on the probability of employment (after controlling for selection into the labour market). We also study the extent to which the changes – which included increasing the number of employers covered by the quota system, the number of jobs available to individuals with disabilities and the financial incentives for employing individuals with disabilities – have affected job satisfaction among individuals with disabilities. Our results suggest that the changes in the quota system may have increased labour force participation but have had a limited positive impact on the probability of employment among people with disabilities in South Korea. Further, compulsory hiring and expanded opportunities have not substantially affected the level of job satisfaction observed among employees with disabilities relative to their non‐disabled counterparts.     

Saving and Portfolio Allocation Before and After Job Loss

We investigate the development of household labor income, financial wealth, and asset holdings over a 9‐year period around job loss, using unique administrative panel data from Norway. Consistent with predictions from theory, the data show additional saving and a shift toward safer assets in the years leading up to unemployment, and depletion of savings after job loss. In the years after job loss, the households' after‐tax labor income is reduced by about USD 12,500. Over the same time period, households deplete USD 3,000 of their financial assets, of which one third is accumulated prior to the job loss. This suggests that at least some households can foresee and prepare for the upcoming unemployment, which indicates that private savings can, to some extent, serve as a substitute for publicly provided unemployment insurance.     

The Effect of Making a Voluntary Labour Market Programme Compulsory: Evidence from a UK Experiment

This paper investigates the effects on employment and benefit receipt of making a voluntary active labour market programme compulsory. This policy change, which targeted long‐term unemployed people over the age of 50, was piloted in a number of areas within the UK and evaluated by individual random assignment of the requirement to participate. The results show that mandating participation resulted in a sustained increase in employment and a corresponding reduction in benefit receipt. The results were driven at least in part by a deterrent effect.     

Zombie Board: Board Tenure and Firm Performance

We show that board tenure exhibits an inverted U‐shaped relation with firm value and accounting performance. The quality of corporate decisions, such as M&A, financial reporting quality, and CEO compensation, also has a quadratic relation with board tenure. Our results are consistent with the interpretation that directors’ on‐the‐job learning improves firm value up to a threshold, at which point entrenchment dominates and firm performance suffers. To address endogeneity concerns, we use a sample of firms in which an outside director suffered a sudden death, and find that sudden deaths that move board tenure away from (toward) the empirically observed optimum level in the cross‐section are associated with negative (positive) announcement returns. The quality of corporate decisions also follows an inverted U‐shaped pattern in a sample of firms affected by the death of a director.     

Moral Hazard in Lending and Labor Market Volatility

When the economy experiences a sharp economic downturn, credit spreads widen and project financing costs for firms rise as funding sources begin to dry up. The economy experiences a lengthy recovery, with unemployment rates slow to return to “full employment” levels. We develop a model that displays these features. It relies on an interaction between labor search frictions and firm‐level moral hazard that is accentuated during recessions. The model is capable of addressing the “Shimer puzzle,” with labor market variables exhibiting significantly more volatility on average as a result of the heightened moral hazard concerns during these episodes that significantly deepen and prolong periods of high unemployment, as vacancy postings fall dramatically and the job‐finding rate declines. Our mechanism is also found to induce internal shock propagation causing the peak response of output, unemployment, and wages to occur with a several quarter delay relative to a model without such frictions. Many other labor market variables also show slower recovery—their return to preshock level occurs at a slower pace for a number of periods after the peak response.     

Screening and Labor Market Flows in a Model with Heterogeneous Workers

We construct a model in which screening of heterogeneous workers by employers plays a central role in determining both the flows into and out of unemployment. Following a negative productivity shock, the share of low‐efficiency workers in the pool of unemployed rises, and this composition effect reduces the incentive of firms to post vacancies, lowering job opportunities for all workers. Heterogeneity in workers’ efficiency amplifies unemployment fluctuations in economies with small gross labor flows and leads to persistent buildups of unemployment and slow recoveries. The composition effect worsens the unemployment–inflation trade‐off faced by the monetary authority, leading to very large sacrifice ratios when a fall in productivity primarily affects low‐efficiency workers.     

Learning from cost analyses: an illustration from the UK's New Deal for Disabled People (NDDP)

This article describes a cost analysis of an employment programme available to people claiming incapacity benefits in the UK. The NDDP was delivered locally by contracted providers called ‘job brokers’. The cost analysis found great variation among job brokers' costs and profitability, much of which seems attributable to differences in job broker size. The methods described here will be useful in evaluations wherever multiple institutions are contracted by governments to deliver services, especially when these institutions are involved in several different programmes.     

Job Duration over the Business Cycle

Evidence from the National Longitudinal Survey of Youth (NLSY) suggests that the cyclicality of job duration depends on the worker's prior and future employment status. For example, among matches formed with previously nonemployed workers, those that end with the worker returning to nonemployment display procyclical duration. In contrast, matches that end because the worker switches to another job have countercyclical duration. Moreover, differences in starting wages do not account for these patterns.     

Effects of an Information Sharing System on Employee Creativity,Engagement, and Performance

Many service organizations rely on information sharing systems to boost employee creativity to meet customer needs. We conducted a field experiment in a retail chain, based on a registered report accepted by JAR, to test whether an information sharing system recording employees’ creative work affected the quality of creative work, job engagement, and financial performance. We found that, on average, this system did not have a significant effect on any of these outcomes. However, it significantly improved the quality of creative work in stores that had accessed the system more frequently and in stores with fewer same‐company nearby stores. It also improved creative work and job engagement in stores in divergent markets, where customers needed more customization. We found weak evidence of better financial results where salespeople had lower creative talent before the system was introduced. Our findings shed light on those conditions in which information sharing systems affect employees’ creative work.     

The Impact of Children on Women's Paid Work*

This paper investigates how and when differences in work behaviour between men and women develop, focusing on the evolution of the gender gaps over the period of family development. The findings support the theory that gender differences in the formal labour market stem from the presence of children in the home and that childbirth and children entering school are critical times in women's employment. Births mark a dramatic decline in participation in work for women, while school entry is a time of considerable turnover in participation. The length of absence from work following a subsequent birth is closely related to whether the mother was in work between births, while maternity pay and leave entitlements appear to influence the precise timing of the return to work. In addition, a return to work following birth is often only temporary. The gradual decline in women's relative wages following the first birth appears to stem from the accumulation of several shorter periods of unusually low wage growth for women around the times of birth and school entry. There is also a sharp movement into part‐time work for women following childbirth and a transition towards non‐permanent positions and non‐supervisory roles at both critical points.     

Labor market dynamics under long-term wage contracting

Recent research seeking to explain the strong cyclicality of US unemployment emphasizes the role of wage rigidity. This paper proposes a micro-founded model of wage rigidity—an equilibrium business cycle model of job search, where risk neutral firms post optimal long-term contracts to attract risk averse workers. Equilibrium contracts feature wage smoothing, limited by the inability of parties to commit to contracts. The model is consistent with aggregate wage data if neither worker nor firm can commit, producing too rigid wages otherwise. Wage rigidity does not lead to a substantial increase in the cyclical volatility of unemployment.     

The impact of the antecedents and consequences of job burnout on junior accountants' turnover intentions: a structural equation modelling approach

This paper examines the impact of the antecedents and consequences of job burnout on junior accountants' turnover intentions. A questionnaire was completed by 368 junior accountants working in public accounting firms. Our results suggest that role ambiguity, role conflict and job‐related tension are important antecedents for job burnout. Role ambiguity and role conflict initially influence employees' perceived levels of job‐related tension, and job‐related tension is associated to job burnout, which, in turn, decreases employees' levels of job satisfaction and organisational commitment. Dissatisfied and uncommitted employees are more likely to seek alternative employment.     

Welfare Cost of Fluctuations When Labor Market Search Interacts with Financial Frictions

We study the welfare costs of business cycles in a search and matching model with financial frictions. The model replicates the volatility on labor and financial markets. Business cycle costs are sizable. Indeed, the interactions between labor market and financial frictions magnify the impact of shocks via (i) a credit multiplier effect and (ii) an endogenous wage rigidity inherent to financial frictions. In addition, in a nonlinear framework, large welfare costs of fluctuations are explained by the high average unemployment and the low job finding rates with respect to their deterministic steady‐state values.     

Targeted Interventions in Healthcare: The Role of Facility Placement*

Adequate targeting is a primary concern in the design of any social programme that attempts to reach a specific group in society. This paper studies the targeting of a healthcare‐centre programme aimed at the poor that relies on household self‐selection into the programme at the local level. We find that a key variable in determining utilisation of the health centres is location. Households living near a centre are substantially more likely to use it than households living further away. This points to the importance of facility placement in targeting self‐selected health programmes to the poor.     

The Impact of a Conditional Cash Transfer Programme on Consumption in Colombia*

This paper studies the impact of a conditional cash transfer programme in Colombia on the total consumption of very poor households and on its components. Our evaluation methodology involves comparing household expenditures in areas in which the programme was not implemented (control) and those in which it was (treated). We use a quasi‐experimental approach, as the Familias en Acción programme was not randomly assigned across localities, for political reasons. We condition on a large range of household‐ and municipality‐level characteristics, and also control for pre‐programme differences in the outcomes of interest using a differences‐indifferences methodology. We find that the programme has been effective at greatly increasing total consumption and its main component, food consumption, in both rural and urban areas. The programme has also contributed to improvements in the quality of food consumed, in particular of items rich in proteins (milk, meat and eggs) and of cereals. Furthermore, the programme has created redistributive effects in favour of children through expenditure on education and children's clothing, while it has not significantly affected consumption of adult goods such as alcohol and tobacco or adults’clothing.     

Equilibrium Unemployment, Job Flows, and Inflation Dynamics

In order to explain the joint fluctuations of output, inflation and the labor market, this paper develops and estimates a general equilibrium model that integrates a theory of equilibrium unemployment into a monetary model with nominal price rigidities. The estimated model accounts for the responses of employment, hours per worker, job creation, and job destruction to a monetary policy shock. Moreover, search frictions in the labor market generate a lower elasticity of marginal costs with respect to output. This helps to explain the sluggishness of inflation and the persistence of output that are observed in the data.     

Optimal job design in the presence of implicit contracts

We characterize the optimal job design in a multitasking environment when the firms use implicit contracts (i.e., bonus payments). Two natural forms of job design are compared: (i) individual assignment, where each agent is assigned to a particular job and (ii) team assignment, where a group of agents share responsibility for a job and are jointly accountable for its outcome. Team assignment mitigates the multitasking problem but may weaken the implicit contracts. The optimal job design follows a cutoff rule where only the firms with high reputation concerns opt for team assignment. However, the cutoff rule need not hold if the firm can combine implicit incentives with explicit pay‐per‐performance contracts.