Early Labor Market Experiences of Youth and Subsequent Wages

A bstract . High youth unemployment continues to be a major concern to policymakers in the United States. In view of the many studies that have documented a perpetuation of the relatively high jobless rates for youth in the postwar period whether disaggregated by age, sex , or race , the debate on the youth employment-unemployment problem has begun to focus more recently on its socioeconomic consequences. One of the overriding concerns is that early labor market unemployment experiences might carry over into later labor force performance. The cumulative effects of prolonged periods of unemployment and intermittent unemployment (i.e. , duration and spells of unemployment) on the subsequent wages of a cohort of young men are examined. Spells of unemployment experienced early in the labor market careers of the cohort tended to have an increasing effect on their later wages , while spells occurring later and the duration of unemployment then serve to lower their subsequent wages.     

The geographic distribution of unemployment rates in the U.S.: A spatial-time series analysis

This paper presents estimates of the time series and spatial pattern of unemployment rate fluctuations in the U.S. over the period 1977.I–1983.IV. Spatial and time series autocorrelations over a regular lattice are estimated using both simultaneous (SAR) and conditional (CAR) autoregressive models of spatial series. The empirical results indicate that a temporary unemployment rate shock has a significant effect on unemployment rates in adjacent areas contemporaneously, but virtually no impact on neighboring unemployment rates after six quarters. A permanent change in an area's unemployment rate has a strong and persistent impact on unemployment rates in labor markets within 250 miles of the initial shock.     

Are shirking and leisure substitutable? An empirical test of efficiency wages based on urban economic theory

Recent theoretical work has examined the spatial distribution of unemployment using the efficiency wage model as the mechanism by which unemployment arises in the urban economy. This paper extends the standard efficiency wage model in order to allow for behavioral substitution between leisure time at home and effort at work. In equilibrium, residing at a location with a long commute affects the time available for leisure at home and therefore affects the trade off between effort at work and risk of unemployment. This model implies an empirical relationship between expected commutes and labor market outcomes, which is tested using the Public Use Microdata sample of the 2000 U.S. Decennial Census. The empirical results suggest that efficiency wages operate primarily for blue collar workers, i.e. workers who tend to be in occupations that face higher levels of supervision. For this subset of workers, longer commutes imply higher levels of unemployment and higher wages, which are both consistent with shirking and leisure being substitutable.     

The long-term labor market consequences of graduating from college in a bad economy

This paper studies the labor market experiences of white-male college graduates as a function of economic conditions at time of college graduation. I use the National Longitudinal Survey of Youth whose respondents graduated from college between 1979 and 1989. I estimate the effects of both national and state economic conditions at time of college graduation on labor market outcomes for the first two decades of a career. Because timing and location of college graduation could potentially be affected by economic conditions, I also instrument for the college unemployment rate using year of birth (state of residence at an early age for the state analysis). I find large, negative wage effects of graduating in a worse economy which persist for the entire period studied. I also find that cohorts who graduate in worse national economies are in lower-level occupations, have slightly higher tenure and higher educational attainment, while labor supply is unaffected. Taken as a whole, the results suggest that the labor market consequences of graduating from college in a bad economy are large, negative and persistent.     

Women of color in the labor market

While the labor force participation rates of women have increased, and women work in a wider range of occupations than they did two decades ago, there remain gaps between the status of women and men, as well as between white women and women of color. Additionally, as the female labor force becomes more diverse, there are also differences among women of color in labor force participation, unemployment, and occupational status. Based on projections regarding the future structure of the labor force, it is likely that even as the status of some women of color improves, many will remain stuck in low-wage service and clerical jobs.     

Sticky prices, fair wages, and the co-movements of unemployment and labor productivity growth

This paper studies the co-movements of unemployment and labor productivity growth for the U.S. economy. Measures of co-movements in the frequency domain indicate that co-movements between variables differ strongly according to the frequency. First, long-term and business cycle co-movements are larger than short-term co-movements. Second, co-movements are negative in the short and long run, but positive over the business cycle. A New Keynesian model that combines nominal rigidity on the goods market (sticky prices) and real rigidity on the labor market (fair wages) is shown to be quantitatively consistent with the observed co-movements both in the long term and over the business cycle. However, the model fails to explain the short-term co-movements.     

Unemployment and compensating wages: an analysis of shift work

Compensating wages have been documented for a number of job attributes including working non-standard hours. Using data that aggregates across occupations, our analysis confirms a wage premium for working night shifts. However, the compensating wage is greater in areas where unemployment is low, suggesting that employers are less pressured to compensate for night shifts when employment opportunities are relatively scarce. If this result holds for other undesirable work characteristics, such as risk of death on the job, then weak labor markets will have lower compensating wages in general.     

Long-term Unemployment and the Labour Market: some further results

In a previous Briefing Paper we discussed the current high rate of long-term unemployment. We described the process by which the ratio of long-term unemployment to total unemployment was determined and suggested some explanations for the rapid rise in long-term unemployment since 1980. We also investigated the role of long-term unemployment in shifting the relationship between unemployment and vacancies. In this Briefing Paper we extend our study to consider the relationship between unemployment and inflation. In particular we discuss the apparent failure of high unemployment to affect the growth of real wages. Finally we compare some policies for reducing unemployment.     

Does early intervention help the unemployed youth?

This paper evaluates a measure targeted at unemployed individuals aged 20–24. The main purpose of the measure is to prevent long-term unemployment by guaranteeing an assignment to some labor market program within 100 days of unemployment. Municipalities voluntarily agree to offer the guarantee. To identify the effect of the measure, we use three conditions: The guarantee covers individuals aged 24 but not 25, one fifth of the municipalities does not provide the guarantee, and the guarantee existed in 1998 but not in 1997. We find no evidence that the measure did significantly improve the future labor market situation of the youth, which suggests that early intervention in the unemployment spell is not important.     

Nonlinearity in the effects of financial development and financial structure on unemployment

The positive role of the financial sector in promoting economic growth has been well established among academics and practitioners since the early 1990s. However, more recently, there has been increasing evidence pointing to a vanishing, and even negative, effect of financial sectors at high levels of financial depth, particularly since the global financial crisis of 2007?2009. Too much finance could hurt growth. The paper shifts the focus towards labor market outcomes by examining whether too much finance also hurts unemployment. Using a dynamic simultaneous model via system GMM estimation and a panel of 97 OECD and non-OECD countries for the period 1991–2015, we find that the answer depends on the type of finance and the extent of a country’s labor market flexibility. Specifically, (i) too much financial development hurts unemployment for countries with more rigid labor markets; (ii) too bank-centered or too little market-oriented financial systems worsen unemployment, particularly for countries with more flexible labor markets; and (iii) too much credit to private enterprises deteriorates unemployment in countries with more rigid labor markets, whereas too little credit to households worsens unemployment in countries with more flexible labor markets. Evidence also shows that these unemployment consequences possibly run through investment and entrepreneurship channels.     

Transfer payments and the Phillips Curve

Policy makers are today confronted with a worsening relationship between inflation and unemployment. Voluminous economic literature on the “Phillips Curve” has long attempted to show why inflation and unemployment are normally inversely correlated. More recent literature has sought to identify factors that could worsen the apparent tradeoff. This paper uses the labor sector of the System Dynamics National Model to analyze the potential impacts of increased transfer payments on inflation and unemployment. The results suggest that in the short run, higher transfer payments can prolong job search, thereby boosting unemployment, while simultaneously driving up wages due to reduced labor availability. But over the longer term, rising wages raise the attrractiveness of working, thereby compensating for higher transfer payments. Therefore, higher transfer payments are not permanently inflationary. Key long-run impacts of transfer payments may be to raise relative costs of labor, thereby lowering employment through factor substitution, and to discourage dropout from the labor force so as to maintain eligibility for payments.     

State dependence in youth labor market experiences, and the evaluation of policy interventions

We investigate the extent and type of state dependence in labor market outcomes for young low-skilled Australians. Our model allows for three labor force states, employment, unemployment and out of the labor force, and for observed and unobserved heterogeneity. We find evidence of occurrence dependence, but no lagged duration dependence. A past employment spell increases the probability of employment in the future, but the length of the spell does not matter. A past spell of unemployment undoes the positive benefits from a spell in employment. Interpretations of these effects and implications for labor market policies are discussed.     

The impact of territorially concentrated FDI on local labor markets: Evidence from the Czech Republic

This paper investigates the impact of a large and territorially concentrated foreign direct investment (FDI) inflow on local labor market outcomes in the Czech Republic. A conditional difference-in-differences technique is employed for an estimation of the impact and block bootstrapping is used for computing consistent standard errors. The results indicate a positive and statistically as well as economically significant effect of a large investment project on the local unemployment outflow rate, which is driven mainly by increases in the aggregate unemployment exit hazard rates for unemployment durations smaller than nine months. Subsequent to the investment, the unemployment rate decreased by 1.7 percentage points and the employment rate increased by 3.7 percentage points in the host district. However, the impact on long-term unemployed was negligible as the exit hazard rates for durations longer than nine months remain unchanged. Moreover, a simple cost–benefit analysis suggests that investment incentives paid from a state budget would pay off only in a horizon of twelve years.     

Technology Choice:

ABSTRACT Suppose, unlike the endogenous growth literature, that technological innovation may actually create structural problems. If capital and labor inputs of specific skill levels are complementary, and new technology changes the skill mix needs, then this mismatch may create underemployment or unemployment. High-tech investment maximizes output but at the expense of unemployment of unskilled workers; lower-tech investment results in smaller unskilled labor unemployment, but a smaller increase in output (or underemployment of skilled labor). A policy solution for this tradeoff is to allocate investment between physical capital and human capital in the right proportions to ensure both maximum output and full employment.     

Sign reversal in LIVE treatment effect estimates: The effect of vocational training on unemployment duration

We use administrative records in Israel to identify the treatment effect of vocational training for the unemployed on the duration of unemployment. We randomize training using data on the availability of courses in and around the time of becoming unemployed. This assumes that the timing of entry into unemployment is random, and course availability around the time of entry is independent of current labor market conditions. According to naïve estimators, which ignore self-selectivity, training reduces unemployment durations. The same applies to linear (IV) estimators, which control for self-selectivity. However, the opposite is found when non-linear IV estimators are used, i.e. training prolongs unemployment durations. Sign reversal depends on how the first stage is specified. A non-nested test indicates that the nonlinear estimate of the treatment effect is preferable to its linear counterpart, in which case training prolongs unemployment spells.     

Regional unemployment disparities in China

China has larger regional unemployment disparities than any other economy of comparable size. The persistence of the unemployment disparity in China has prevented the aggregate unemployment rate from decreasing even when the country’s GDP was growing at 10 percent per year. Unemployment rates rose and unemployment disparities widened in other transition economies too, but what made China’s disparities wider than those in other transition economies is the existence of a large subsistence sector, where unemployment exists only in a disguised form. This study explains the wide unemployment disparity in China with the geographically uneven distribution of the three sectors: the state sector, which suffers from a steep rise of unemployment during transition; the capitalist sector, which absorbs labor from the subsistence sector and grows rapidly; and the subsistence sector, which supplies its redundant labor to the capitalist sector. The study also presents a case study of Fuxin City, which has experienced an extremely high unemployment rate due to the reform of its main industry. Fuxin’s case is presented as a microcosm of the problems that give rise to unemployment disparities, such as massive layoffs in the state sector, lack of labor mobility in the unemployment-stricken regions, and inadequate development of the capitalist sector.     

Distribution and determinants of lifetime unemployment

The empirical literature on unemployment almost exclusively focuses on the duration of distinct unemployment spells. In contrast, we use a unique administrative micro data set for the time span 1975-2004 to investigate individual lifetime unemployment — defined as the cumulative length of all unemployment spells over a 25-year period. This new perspective enables us to answer questions regarding the long-term distribution and determinants of unemployment for birth cohorts 1950-1954. We show that lifetime unemployment is highly concentrated on a small part of the population. With censored quantile regressions we investigate the long-lasting influence of bad luck early in the professional career: Controlling for individual and firm characteristics we find that choosing at a young age what turns out to be an unfavorable occupation significantly increases the predicted amount of lifetime unemployment.     

Examining policy configurations as conditions for long-term unemployment and non-standard employment in OECD countries using fuzzy-set analysis

This paper investigates how particular configurations of institutional conditions cause high rate of long-term unemployment and non-standard employment rate for 18 OECD countries during the period of 2001–2008. The paper aims to investigate how employment protection legislation (EPL), unemployment benefit and statutory minimum wages are associated with long-term unemployment and non-standard employment. Using the fuzzy-set analysis, the paper examines how the combination of policies matters in causing long-term unemployment and/or non-standard employment. The result suggests that a low level of statutory minimum wage can lead to high levels of non-standard employment in combination with either strict EPL for permanent workers or weak EPLs for temporary workers. The long-term unemployment rate is suggested to be high when there is strict EPL for temporary workers in combination with high levels of statutory minimum wage. This paper highlights the importance of examining multiple policies as configuration.     

Estimating the probability of leaving unemployment using uncompleted spells from repeated cross-section data

We propose a new econometric estimation method for analyzing the probability of leaving unemployment using uncompleted spells from repeated cross-section data, which can be especially useful when panel data are not available. The proposed method-of-moments-based estimator has two important features: (1) it estimates the exit probability at the individual level and (2) it does not rely on the stationarity assumption of the inflow composition. We illustrate and gauge the performance of the proposed estimator using Spanish Labor Force Survey data, and analyze the changes in distribution of unemployment between the 1980s and 1990s during a period of labor market reform. We find that the relative probability of leaving unemployment for the short-term unemployed compared to the long-term unemployed becomes significantly higher in the 1990s.     

我国劳动力流动与城市失业关系研究

本文通过2005年1%人口抽样调查数据对我国劳动力流动与城市失业之间的关系进行了经验研究。总体来看,劳动力流动并未对城市失业产生显著的影响,政策制定者不必担心因为流动劳动力的不断增加而导致城市失业的恶化。