Labor Market Conditions Research Articles

The inflation-unemployment trade-off: empirical considerations and a simple US-Euro Area comparison

This paper uses recently developed robust estimation methods to empirically reassess the long-standing inflation-unemployment trade-off debate. Indeed, we study to what extent unemployment-based New Keynesian Phillips Curves are informative about the relationship between inflation dynamics and labour market conditions. In particular, we attempt to quantify the ‘elasticities’ of inflation with respect to unemployment of two economies, the US and the Euro Area, which are known to have markedly distinct labour market characteristics. We find that the relevance of the inflation-unemployment trade-off and its empirical adequacy is greatly enhanced once the informational content of key labour market variables is explored in our estimations.

FAKTOR PENENTU TINGKAT PENGANGGURAN USIA PRODUKTIF AWAL PADA MASA PANDEMI COVID-19 DI KECAMATAN SUKAJADI

The Ministry of Manpower stated that the Covid-19 pandemic had a significant impact on labor market conditions in Indonesia. This is due to the increasing number of companies terminating their employees. With this, the unemployment rate increased by 7.35%. One of the factors that can affect the high unemployment rate is the high number of job seekers of 89% which is not matched by the number of jobs as many as 15 million that must be provided by the government. The purpose of this study was to determine what factors can determine the high rate of early productive age unemployment in Sukajadi District, Bandung City. The sample of this study were residents of early productive age located in Sukajadi District, Bandung City. The sampling technique used is purposive sampling. The method used is an exploratory quantitative method by performing regression analysis. The results of this study indicate that the variable level of education of early productive age and health level of early productive age have a significant effect on the unemployment rate of early productive age, while the variable of labor force participation rate of early productive age has no effect on unemployment rate of early productive age.

Propelling steady growth and high‐quality development through deeper reform and more comprehensive opening up: Outlook, policy simulations, and reform implementation—A summary of the Annual SUFE Macroeconomic Report (2021–2022)

AbstractChina's economy underwent a steady recovery in 2021. Investment grew steadily with structural improvement. Exports and imports surged while trade surplus expanded. On the other hand, although labor market conditions improved, income distribution worsened, contributing to sluggish growth in consumption, whereas the gap between consumer price index and producer price index widened, and the profits of enterprises of different sizes diverged, which may go beyond how they are correlated with the locations of the enterprises in the chain of production and trade. While proper liquidity was maintained with prudent monetary policy, risk spillover rose in the financial system, particularly for small and medium‐sized banks. Household and local government debts remained at relatively high levels, further dragging down growth in consumption and infrastructure investment. The “dual carbon” goals exerted downward pressure on near‐term growth in trading off their long‐term benefits. The economy also faced challenges in its external environment in the midst of the prolonged COVID‐19 pandemic aboard, trade protectionism, and the readjustment of the global value chain. Moreover, excessive supervision and inadequate implementation disturbed China's economy, resulting in declined market vitality and confidence of market participants. Based on the Institute for Advanced Research‐China Macroeconomic Model, the baseline real gross domestic product growth rate is projected to be 5.5% in 2022. Alternative scenario analyses and policy simulations are conducted, in addition to the benchmark forecast, to reflect the influences of various risks and possible favorable situations. The findings suggest that China should deepen reform and open up more comprehensively and initiatively, while special effort should be placed on providing accommodative policy and friendly public opinion environment, to facilitate steady growth and propel high‐quality development. A comprehensive macroeconomic governance framework with Chinese characteristics must be developed from systems thinking, to resolve the various issues, internal and external, cyclical and secular, structural and institutional, in an all‐inclusive and coherent manner.

Opening a door to politics? Labour market entrance and political candidacy among refugees

ABSTRACT In this study, we explore whether the economic integration of immigrants may function as a stepping stone to their political integration. We show that there are strong theoretical reasons to expect entrance into the labour market to be pivotal for the political socialisation of immigrants in the new host country and in extension for their opportunities to stand for office. Empirically, we make use of Swedish register data and study whether labour market entrance among refugees affects their chances of being nominated for political office in Swedish municipal councils. We focus on refugees that arrived in Sweden between 1985 and 1994 and explore whether they became political nominees in seven consecutive elections between 1994 and 2014. Our results indicate that getting an early foothold in the labour market has a significant positive effect on the likelihood of running for office. These results hold even when we make use of more exogenous variation in the labour market conditions that refugees encountered when they arrived in Sweden, which provides some support that labour market entrance may have a causal effect on political candidacy among refugees.

Changes in regional knowledge bases and its effect on local labour markets in the midst of transition: Evidence from France over 1985-2015.

In the 2000s, the European labour market experienced a number of significant changes including the transition to a more knowledge-intensive economy as well as the introduction of various economic policies (e.g. Eurozone, subsidized jobs, and social tax cuts). In times like these, the role of knowledge, which is essentially the driving force of innovation and thus promoting technological change and economic growth, is shifting due to new labour market conditions. The present study aims to explore how processes of local knowledge bases have been altered in this transformative environment and how these have impacted on local employment growth. The investigation considers three different knowledge bases in conjunction, incl. knowledge size, knowledge creation, and knowledge application. The study is based on an econometric analysis of a panel of 94 France NUTS-3 regions covering the period 1985–2015, utilizing patent data from European Patent Office (EPO) Statistical Patent Database (PATSTAT), and regional data from European Regional Database (ERD). The result shows that the role of knowledge for employment growth has indeed changed towards more specialized inputs in applications while the importance of greater knowledge size remains still important.

Who can become a full member of the club?—Results from a conjoint survey experiment on public attitudes about the naturalisation of non‐EU migrants in Germany, the Netherlands, Sweden and Denmark

AbstractIn this article, we study attitudes towards the naturalisation of non‐European (EU) migrants in Germany, the Netherlands, Sweden and Denmark. This is done using a conjoint experiment. Respondents are presented with profiles of non‐EU‐migrants, whose attributes are varied over labour market status, education, language skills, time lived in the destination country, family relations, religious background and gender. We find a preference for granting citizenship to non‐EU migrants with education and labour market experience, thus supporting theories of economic reasoning. We also find a preference for granting citizenship to non‐EU migrants with non‐Muslim backgrounds, family attachment to natives and language skills, thus supporting theories of preferences for cultural similarity. We find these patterns to be stable across the four countries despite differences in citizenship rules and discourses. The patterns are even stable when comparing the respondents' age, gender, education, migrant status, voting patterns and general views about migration. The natives' selection of new citizens is explained by a novel theoretical argument of citizenship being a club‐good.

Early Labor Market Prospects and Family Formation

We use quasi-random variation in graduation years during the onset of a very deep national recession to study the relationship between early labor market conditions and young females' family formation outcomes. A policy-pilot affecting the length of upper-secondary vocational tracks allows us to compare females who graduated into the onset of the Swedish financial crisis of the 1990s to those graduating during the final phase of the preceding economic boom while netting out the main effect of the policy. We find pronounced, but short-lived, negative labor market effects from early exposure to the recession for low-grade students in particular. In contrast, we document very long-lasting effects on family formation outcomes, again concentrated among low-grade students. Young women who graduated into the recession because of the policy-pilot formed their first stable partnerships earlier and had their first children earlier. Their partners had lower grades, which we show to be a strong predictor of divorce, and worse labor market performance. Divorces were more prevalent and the ensuing increase in single motherhood was long-lasting. These negative effects on marital stability generated persistent increases in the use of welfare benefits despite the short-lived impact on labor market outcomes. The results suggest that young women respond to early labor market prospects by changing the quality threshold for entering into family formation, a process which affects the frequency of welfare-dependent single mothers during more than a decade thereafter.

Interplay between family background and labour-market conditions in shaping students’ occupational status expectations

ABSTRACT This study examines the relevance of labour-market conditions for individual occupational status expectations. We are particularly interested in students’ status expectations in the final stages of their school careers. Occupational expectations are an important basis for adolescents’ biographical decisions and corresponding transitions to vocational training and employment. By anticipating their likely labour-market situation, adolescents adjust their occupational choices; however, this anticipation is strongly moderated by their family background. We demonstrate this interaction using the example of school students in Germany’s secondary education’s tracked system. We link survey data from the German National Educational Panel Study to regionalised administrative data on unemployment. We find expectations for higher-status occupations in poor regional labour markets among students in non-academic school tracks. In contrast, students in the academic track aspire to lower status occupations in poor regional labour markets. In both cases, higher parental occupational status mitigates the impact of labour-market conditions on individual occupational status expectations. Our results indicate a greater awareness of structural conditions in the region among adolescents who are equipped with fewer familial resources.

Optimal Turnover Rates and Performance in Public Organizations: Theoretical Expectations

This paper advances the theory of turnover and performance in public organizations, incorporating labor market conditions and quality of labor. In doing so, we first present theories on optimal turnover rates, based on a cost-benefit theoretical framework. We then discuss how optimal turnover rates in public organizations change according to labor supply and demand. After that, we illustrate how public labor market conditions and quality of labor affect turnover-performance relationship. Throughout the paper, we propose a set of testable propositions for future scholars, which posit the turnover-performance relationships being conditioned on various organizational and environmental contextual factors.

It ain’t where you’re from, it’s where you’re at: Hiring origins, firm heterogeneity, and wages

Sequential auction models of labor market competition predict that the wages required to successfully poach a worker from a rival employer will depend on the productivities of both the poached and poaching firms. We develop a theoretically grounded extension of the two-way fixed effects model of Abowd et al. (1999) in which log hiring wages are comprised of a worker fixed effect, a fixed effect for the “destination” firm hiring the worker, and a fixed effect for the “origin” firm, or labor market state, from which the worker was hired. This specification is shown to nest the reduced form for hiring wages delivered by semi-parametric formulations of the canonical sequential auction model of Postel-Vinay and Robin (2002b) and its generalization in Bagger et al. (2014). Fitting the model to Italian social security records, origin effects are found to explain only 0.7% of the variance of hiring wages among job movers, while destination effects explain more than 23% of the variance. Across firms, destination effects are more than 13 times as variable as origin effects. Interpreted through the lens of Bagger et al. (2014)’s model, this finding requires that workers possess implausibly strong bargaining strength. Studying a cohort of workers entering the Italian labor market in 2005, we find that differences in origin effects yield essentially no contribution to the evolution of the gender gap in hiring wages, while differences in destination effects explain the majority of the gap at the time of labor market entry. These results suggest that where a worker is hired from tends to be relatively inconsequential for their wages in comparison to where they are currently employed.

Immigration and Labor Market (Mis)Perceptions

Exposure to immigrants often triggers sentiments of hostility and backlash among native-born populations. Among the main concerns identified by surveys, labor market conditions typically rank at the top. We combine a two-way fixed effects model with a Bartik-type 2SLS model to causally estimate the effects of immigration on labor outcomes in Chile, where the foreign-born population almost tripled in five years. While immigration did not systematically affect employment levels, it did cause an increase in unemployment-related concerns. Our results provide a plausible hypothesis to explain the backlash against immigrants: misperception regarding the effect of immigrants on labor market conditions.

Persistent Monetary Policy in a Model with Labor Market Frictions

In a basic New Keynesian DSGE model with involuntary unemployment and inflation target shocks, we study the role of labor markets in the transmission of persistent monetary policy shocks that increase households' inflation expectations. The model predicts that labor market conditions can play an important role in the transmission channel of the persistent inflation target shock: quantitatively realistic labor market frictions increase the expansionary effect of inflation target shock on output by around a half compared to that under the model without labor market frictions. Using VAR analysis, we further provide empirical evidence consistent with the predictions of our theoretical model.

Do active labor market policies for welfare recipients in Germany raise their regional outflow into work?

While many studies estimate the effects of active labor market programs (ALMPs) on the participants’ labor market outcomes, far fewer studies are concerned with the effects of these policies on the regional job-matching process. We analyze which ALMPs are particularly effective at the regional level, as well as the role local labor market conditions play for their effectiveness. We find positive effects for a number of ALMPs, but for some of these the effects differ considerably between regions with high and low unemployment. This has important policy implications.

Measuring Pandemic and Lockdown Impacts on Wellbeing.

With the onset of the COVID‐19 pandemic, New Zealand's official statistical agency (Stats NZ) moved quickly to supplement the quarterly Household Labour Force Survey with wellbeing measures from the General Social Survey. The first supplement (June 2020) began toward the end of a restrictive national lockdown. Subsequent quarterly surveys continued through a second lockdown for the Auckland region, enabling tests of regional lockdown impacts. Survey measures include questions on life satisfaction, health, income adequacy, social capital (trust), and loneliness. Published aggregated data indicate that life satisfaction, social capital, health, and financial wellbeing were each higher through the pandemic (in 2020) than prior to it, including for disadvantaged groups, but loneliness rose. Analysis of the individual‐level data, confined to the within‐pandemic period, however indicates that more restrictive lockdowns were associated both with reduced life satisfaction and greater loneliness, with differing impacts according to labor market and household status.

Criminal Justice Students’ Perceptions of Their Future Careers

This study examines how criminal justice majors taking courses during the COVID-19 pandemic perceive their future careers. These expectations are compared to those of students majoring in lab sciences and non-lab fields. Variation by race and ethnicity are also assessed. Data were obtained from 188 undergraduate students at a single institution in Spring 2021 and Fall 2021 using an online survey. Results indicated that students’ estimates of their future salaries and job availability were accurate to current labor market conditions. Hispanics anticipated higher salaries and more salary growth than non-Hispanics. Criminal justice majors were attracted to jobs based on potential to help others, challenge, job tasks, salary, and the fun, thrill, or excitement of the job. Health majors were more drawn to features like salary and job availability. Criminal justice students were more likely than others to note power as well as prestige, recognition, or status as appealing job features.

Scars of Youth Non-employment and Labour Market Conditions

In this paper I analyse whether non-employment periods at the initial stage of the work career may increase the propensity to experience non-employment in subsequent years too, using data on young individuals in Italy. The role of labour market conditions in moderating these scarring effects is investigated, exploiting the regional differences across the country. The results provide evidence of negative effects induced by early non-employment. Moreover, the negative repercussions of early non-employment are smaller (higher) in regions with higher (lower) unemployment rates. This evidence can be interpreted using the signaling theory.

How innovating firms manage knowledge leakage: A natural experiment on the threat of worker departure

AbstractResearch SummaryKnowledge protection strategies are crucial to innovating firms facing the risk of knowledge leakage. We examine the threat of worker departure as a key mechanism through which firms choose between patents and secrecy. We exploit a 1998 California court decision that ruled out‐of‐state noncompetes were not enforceable in California, thereby creating a loophole limiting non‐California firms in their enforcement of noncompetes against their workers. When facing a higher threat of worker departure, firms strategically increased patent filings, exchanging legal protection for public disclosure of the invention. These effects were magnified for large‐sized firms and for those in complex and fast‐growing industries. Further mechanism tests on the possession of trade secrets, inventor migration, saliency of the decision, and independent inventors support our theoretical account.Managerial SummaryInnovating firms may use patents or secrecy, among other mechanisms, to protect their knowledge from leakage. How do firms make this important strategic choice? By using a natural experiment arising from a 1998 California court decision, we show the risk of worker departure can be a key driver. The decision significantly increased the risk of workers departing non‐California firms. Our findings show that, in response to the heightened risk, affected firms increasingly relied on patents, seeking legal protection although it meant public disclosure of the invention. The effects were greater for large‐sized firms and for those in complex and fast‐growing industries. We encourage managers to consider worker mobility and, more broadly, legal environments that govern labor market conditions when formulating knowledge protection strategies.

Wage effects of global value chains participation and position: An industry-level analysis1

We examine how participation and positioning in global value chains (GVC) affect wages. We also examine whether this relationship is conditioned by a country’s development level and labor market regulation. The results show that participation and upstream specialization in GVCs are associated with higher wages but only in developed countries. In developing countries, while GVC participation is associated with higher wages, upstream specialization exerts downward pressure on wages. For analysis focusing on the role of labor market regulation, we find that GVC participation only exerts a positive effect on wages under stringent labor market regulation. Under flexible labor market conditions, it exerts downward pressure on wages but allows for the effective reallocation of GVC workers into knowledge-intensive and high value added upstream activities in the value chain that are more productive and wage rewarding. Additional analysis on the effects of GVCs along the wage distribution show that participation and upstream specialization in GVCs are associated with higher wages across all wage segments in developed countries. In developing countries, GVC participation only benefits higher wage earners and make low-wage earners worse-off. Even when upstream specialization is associated with lower wages across all wage segments, low wage earners are disproportionately affected.

Unemployment Insurance and Opioid Overdose Mortality in the United States.

Over the past two decades, opioid overdose deaths contributed to the dramatic rise in all-cause mortality among non-Hispanic Whites. To date, efforts among scholars to understand the role of local area labor market conditions on opioid overdose mortality have led to mixed results. We argue the reason for these disparate findings is scholars have not considered the moderating effects of income support policies such as unemployment insurance. The present study leverages two sources of variation-county mass layoffs and changes in the generosity of state unemployment insurance benefits-to investigate if unemployment benefits moderate the relationship between job loss and county opioid overdose death rates. Our difference-in-differences estimation strategy reveals that the harmful effects of job loss on opioid overdose mortality decline with increasing state unemployment insurance benefit levels. These findings suggest that social policy in the form of income transfers played a crucial role in disrupting the link between job loss and opioid overdose mortality.

Exchange rate fluctuations, labour laws, and gender differences in job flows: Analysis of manufacturing industries across Indian states

India’s disappointing performance in creating productive employment for women, in spite of its increased integration with the world markets, contrasts with the experience of several countries in Asia. A number of studies have analysed the supply and demand side factors responsible for this situation. However, no study has examined the gender differences in job flows – job creation, destruction and reallocation. Net employment changes may conceal large changes in gross job flows and the associated adjustment costs. Using plant level panel data from India’s formal manufacturing sector for the period 1998–2014, this paper estimates the magnitude of job flows and analyses the impact of industry-level changes in exchange rates on job flow dynamics of men and women across state-industries. Even as net employment grew sluggishly for women, we find that, the labour market was characterised by a simultaneous process of job destruction and creation. Our analysis provides evidence for an asymmetric impact of exchange rates on job flows, with depreciation (appreciation) resulting in higher (lower) gross job creation rates with no effect on job destruction rates. Exchange rate depreciation results in higher gross and net job creation rates for both men and women in states with flexible labour laws. In states with inflexible labour laws, however, depreciation causes an increase in gross job creation for women (but not for men) with no effect on net job creation. Exchange rate depreciation also causes women to face higher job reallocation than men, particularly in states with inflexible labour laws. Participation in global value chains and output tariff reductions are found to exacerbate the effects of exchange rate changes on women’s job flows. Firms operating under rigid labour market conditions tend to employ female workers as a ‘buffer’ to adjust the workforce in response to short term fluctuations in export competitiveness.