Job Destruction Rates Research Articles

Job flows, jobless recoveries, and the Great Moderation

This paper explores a link between the decline in employment volatility and the onset of jobless recoveries observed since the mid-1980s using a time series of job flow estimates for manufacturing that covers the entire postwar period. I show that job creation and job destruction rates have fallen and become less cyclical. This has increased the importance of reallocative shocks relative to aggregate shocks in explaining their time-series fluctuations. Despite the increased importance of reallocation, it is a change in the responses of job flows to aggregate shocks, which are now larger and more persistent, that lead to the onset of jobless recoveries. The decline in the cyclicality of temporary layoffs and the rise in the use of employment services cannot account for these altered responses.

Firm size and job creation: evidence from Turkey

This study examines the relationship between firm size and job creation by using an extensive data set covering all non-farm Turkish businesses with 20 or more employees from 2003 to 2010. We find that small firms (firms with employees between 20 and 100 employees) have higher mean job flow rates (job creation, job destruction and net job creation rates) than large firms. Firm size and job flow rates are inversely related, and this relationship is especially prominent for firms with 50 employees or more. Although the overall pattern observed is also observed in both sectors, job creation rates in services are higher than the ones in manufacturing. The magnitudes of job destruction rates are comparable across sectors. Higher job creation rate in services but comparable job destruction rate results in higher net job creation rate in services. As for shares, only for smaller firms (20–49 and 50–99 size categories), job creation shares are greater than their shares in employment. But these firms have disproportionate job destruction shares as well. We also find that only the 20–49 category firms contribute to net job creation more than their share in employment. The smaller firms have high disproportionate shares in job creation and destruction in manufacturing and services as well.

Effect of labor market policies on unemployment when firms adapt their recruitment strategy

Firms conduct interviews to select who to hire. Their recruitment strategies affect not only the hiring rate but also job destruction rate as more interviews increase the chances of finding the right worker for the job; a link mostly overlooked in the literature. I model this recruitment behavior and investigate the effects of labor market policies on unemployment. These policies change the value of hiring the right worker, altering firms' incentives to conduct interviews. Policies further affect job creation and destruction when firms adapt their recruitment strategies. Net effect of a policy on unemployment depends on the magnitude of change in job creation versus destruction. Qualitative analysis reveals that the effect of a policy on unemployment is mostly weakened with the introduction of firms' recruitment behavior to the model. Firing taxes still increase unemployment, albeit at a lower rate. The effect of hiring subsidies on unemployment is even reversed: Unemployment increases with hiring subsidies if firms adapt. Minimum wage and unemployment insurance policies are also analyzed.

Explaining the Gender Wage Gap: Estimates from a Dynamic Model of Job Changes and Hours Changes

I address the causes of the gender wage gap with a new dynamic model of wage, hours, and job changes that permits me to decompose the gap into a portion due to gender differences in preferences for hours of work and in constraints. The dynamic model allows the differences in constraints to reflect possible gender differences in job arrival rates, job destruction rates, the mean and variance of the wage offer distribution, and the wage cost of part-time work. The model is estimated using the 1996 panel of the Survey of Income and Program Participation. I find that the preference for part-time work increases with marriage and number of children among women but not among men. These demographic factors explain a sizable fraction of the gender gap in employment, but they explain no more than 6 percent of the gender wage gap. Differences in constraints, mainly in the form of the mean offered wages and rates of job arrival and destruction, explain most of the gender wage gap. Policy simulation results suggest that, relative to reducing the wage cost of part-time work, providing additional employment protection to part-time jobs is more effective in reducing the gender wage gap.

Explaining the gender wage gap: Estimates from a dynamic model of job changes and hours changes

I address the causes of the gender wage gap with a new dynamic model of wage, hours, and job changes that permits me to decompose the gap into a portion due to gender differences in preferences for hours of work and in constraints. The dynamic model allows the differences in constraints to reflect possible gender differences in job arrival rates, job destruction rates, the mean and variance of the wage offer distribution, and the wage cost of part-time work. The model is estimated using the 1996 panel of the Survey of Income and Program Participation. I find that the preference for part-time work increases with marriage and number of children among women but not among men. These demographic factors explain a sizable fraction of the gender gap in employment, but they explain no more than 6 percent of the gender wage gap. Differences in constraints, mainly in the form of the mean offered wages and rates of job arrival and destruction, explain most of the gender wage gap. Policy simulation results suggest that, relative to reducing the wage cost of part-time work, providing additional employment protection to part-time jobs is more effective in reducing the gender wage gap.

Worker flows and job flows: A quantitative investigation

This paper studies quantitative properties of a multiple-worker firm search/matching model and investigates how worker transition rates and job flow rates are interrelated. We show that allowing for job-to-job transitions in the model is essential to simultaneously account for the cyclical features of worker transition rates and job flow rates. Important to this result are the distinctions between the job creation rate and the hiring rate and between the job destruction rate and the layoff rate. In the model without job-to-job transitions, these distinctions essentially disappear, thus making it impossible to simultaneously replicate the cyclical features of both labor market flows.

Are engineers designing their robotic replacements? [Reflections

ROBOTS ARE COMING FOR YOUR JOBS! THAT WAS THE gist of numerous news reports following the release of the 2016 U.S. Economic Report of the President. My first thought on reading this was that anyone who saw the videos of clumsy robots falling helplessly during the recent DARPA Robotics Challenge must have been incredulous: That's what's coming after my job!? · My second thought was more sobering. Robots are, after all, only a subset of the computerization leading to the automation of traditional jobs. As engineers we can see steady progress in machine learning, artificial intelligence, and big data. Contemplating this, it suddenly occurred to me to worry about engineering jobs. Are they threatened as well? · History has shown that while automation increases productivity and creates new jobs, it also displaces jobs. However, the president's economic report notes that in recent decades the rate of job destruction has outpaced the rate of job creation, resulting in less overall participation in the workforce. Regardless, stopping or slowing the pace of technological development has always been a fruitless exercise. While we engineers may be responsible for implementing tech's advance, we also seem powerless before its inevitable progression. As technology's handmaidens, we will undoubtedly provide at least complicit support, even as our own engineering jobs are displaced. · An earlier report, by Carl B. Frey and Michael A. Osborne, of the University of Oxford, examined the potential for technological disruption in 702 different occupations. Their study concluded that 47 percent of current U.S. jobs are at risk of displacement. In considering the risk for each occupation, they evaluated the technological bottleneck that would be most likely to occur in automation efforts. The bottleneck could arise in any of three different aspects of work–the need for perception and manipulation, the need for creative intelligence, and the need for social intelligence.

Can the stochastic equilibrium job search models fit transition economies?

The aim of this study is to apply the stochastic job search framework to the analysis of three transition economies (Poland, Hungary, and the Czech Republic). Two versions of equilibrium unemployment models have been developed resembling Mortensen and Pissarides’ models, namely the dynamic and stochastic models. The dynamic model’s properties were briefly examined by evaluating the Jacobian matrix and plotting the phase plane of the economy. In the primary analysis of the stochastic model, job destruction decisions are endogenous as a response to random productivity changes. A martingale, i.e. a discrete-space version of the geometric Brownian motion with the drift and volatility parameter, was used to enable fluctuation of endogenous variables and to perform numerical simulations. The results are promising, although ambiguous in some points, e.g. the main model-generated time-series are close to the empirical time-series, including reasonable fluctuations, correlation signs, and autocorrelations. However, the model was unable to capture some subtle differences in productivity and job destruction rate series across the countries, which is its main limitation.

Job creation and job destruction in China during 1998–2007

This paper examines the patterns of job flows in China between 1998 and 2007, when restructuring and reform of state-owned enterprises (SOEs), China's acceptance into the World Trade Organization (WTO), and rapid economic growth all took place. Using the firm-level employment data reported in the Annual Survey of Industrial Enterprises, we find that net employment in the Chinese manufacturing sector has been expanding since 2002 at an average rate of 5.4%. The underlying forces of this are the simultaneous job creation and job destruction affected by not only the reforms on SOEs, but also the changes in the foreign trade environment. Increasing China's openness to international trade and engagement in the global economy has affected the rate of job reallocation significantly and extensively. It is clear from parametric analyses at the industry level that trade liberalization has encouraged job creation and generated net job growth and that the depreciation of industry-specific real exchange rates has led to a significant increase in net employment by reducing the rate of job destruction.

The Evolution of National Retail Chains: How We Got Here

The growth and dominance of large, national chains is a ubiquitous feature of the US retail sector. The recent literature has documented the rise of these chains and the contribution of this structural change to productivity growth in the retail trade sector. Recent studies have also shown that the establishments of large, national chains are both more productive and more stable than the establishments of single-unit firms they are displacing. We build on this literature by following the paths of retail firms and establishments from 1977 to 2007 using establishment- and firm-level data from the Census of Retail Trade and the Longitudinal Business Database. We dissect the shift towards large, national chains on several margins. We explore the differences in entry and exit as well as job creation and destruction patterns at the establishment and firm level. We find that over this period there are consistently high rates of entry and job creation by the establishments of single-unit firms and large, national firms, but net growth is much higher for the large, national firms. Underlying this difference is far lower exit and job destruction rates of establishments from national chains. Thus, the story of the increased dominance of national chains is not so much due to a declining entry rate of new single-unit firms but rather the much greater stability of the new establishments belonging to national chains relative to their single-unit counterparts. Given the increasing dominant role of these chains, we dissect the paths to success of national chains, including an analysis of four key industries in retail trade. We find dramatically different patterns across industries. In General Merchandise, the rise in national chains is dominated by slow but gradual growth of firms into national chain status. In contrast, in Apparel, which has become much more dominated by national chains in recent years, firms that quickly became national chains play a much greater role.

The importance of firing costs and the Hosios condition in search models with endogenous job destruction

We construct a DSGE search model with endogenous job destruction, incorporating wage rigidities, firing costs and unemployment benefit. We investigate the most important factors in matching the model’s cyclical properties with empirical data, particularly those of job creation rates (JCR) and job destruction rates (JDR). Firing costs assist significantly in explaining the procyclicality of JCR, the negative correlation of JCR and JDR, and the persistence of vacancies. They also decrease the counter-cyclicality of job turnover. We also postulate that the Hosios condition helps explain the negative correlation of JCR and JDR and vacancies’ persistence. Varying wage rigidities and unemployment income, however, do not improve the results.

Can institutional reform reduce job destruction and unemployment duration? Yes it can

We read search theory’s equilibrium conditions for unemployment as an iso-unemployment curve. A country’s position along the curve reveals its preferences over the destruction–duration mix. Using a panel of 20 OECD countries over 1985–2009, we find that the employment protection legislation and collective bargaining coverage have opposing effects on the job destructions and unemployment durations, while the remaining key institutional factors affect one or another. Implementing the right reforms could reduce job destruction rates by about 0.05–1.3 % points and unemployment rates by up to 4 % points depending on the country considered.

Explaining the Gender Wage Gap: Estimates from a Dynamic Model of Job Changes and Hours Changes

I address the causes of the gender wage gap with a new dynamic model of wage, hours, and job changes that permits me to decompose the gap into a portion due to gender differences in preferences for hours of work and in constraints. The dynamic model allows the differences in constraints to reflect possible gender differences in job arrival rates, job destruction rates, the mean and variance of the wage offer distribution, and the wage cost of part-time work. The model is estimated using the 1996 panel of the Survey of Income and Program Participation. I find that the preference for part-time work increases with marriage and number of children among women but not among men. These demographic factors explain a sizable fraction of the gender gap in employment, but they explain no more than 6 percent of the gender wage gap. Differences in constraints, mainly in the form of the mean offered wages and rates of job arrival and destruction, explain most of the gender wage gap. Policy simulation results suggest that, relative to reducing the wage cost of part-time work, providing additional employment protection to part-time jobs is more effective in reducing the gender wage gap.

A Dynamic Model of Weak and Strong Ties in the Labor Market

The study develops a simple model where workers can obtain a job through either their strong or weak ties. It shows that increasing the time spent with weak ties raises the employment rate of workers. It also shows that when the job-destruction rate or the job-information rate increases, workers choose to rely more on their weak ties to find a job. The model is extended so unemployed workers can also learn of a vacancy directly from an employer. Results show that equilibrium employment and time spent with weak ties are sometimes, but not in all cases, positively related.

Jobs: More Slowly Created, More Slowly Destroyed

Employment can swing widely during economic expansions and contractions. During the most recent recession, the total number of jobs fell by about 5.5 percent, a drop of roughly 7.6 million jobs. 1 The economy has improved substantially since the downturn, and in 2015 the total number of jobs has surpassed pre-recession lev els. At the industry level, the recovery from this recession has been far from balanced. Certain industries experi enced strong recoveries, while others still remain below their prerecession highs. In particular, the bulk of employment gains were concentrated in the professional business services, leisure and hospitality, and education and health services industries with increases of roughly 6, 10, and 15 percent, respectively. Numerous job losses occurred in the con struc tion, manufacturing, and information industries with declines of 20, 12, and 9 percent, respectively. 2 These rates reflect net employment changes for the dif ferent industries. However, more than 7 million jobs are created and almost as many are destroyed in the U.S. economy every quarter . 3 During recessions, fewer jobs are created and more are destroyed, leading to a net drop in total employment. During expansions, the opposite hap pens and more jobs are created than destroyed. The large magnitudes of job creation and destruction highlight the dynamism of the U.S. labor market and the pace at which resources are reallocated to alternative—presumably better—uses. The accompanying figure shows the pace of job cre ation and destruction relative to employment for a select ed group of industries with the largest net job gains and loss es in the most recent downturn and subsequent recovery. The series are interpreted as the number of jobs created or destroyed in a quarter relative to the total number of jobs at the end of the quarter. For example, on average, 4.2 per cent of manufacturing jobs are created and 4.6 percent are destroyed each quarter. With the exception of education and health services, all industries destroy more jobs than they create during recessions (denoted by the shaded bars in the graphs). Despite the large cyclical swings in net employment and gross job destruction and creation rates, most industries share a common feature: The rate of job creation and destruction has been falling. In other words, all the graphs exhibit a common downward trend. This reduced dynamism in the labor market is consistent with more stable and longer-lasting employment relationships, given that fewer jobs are being destroyed. However, it is also consistent with a longer duration of joblessness and less job switching, as fewer jobs are being created.

Job Turnover: What the Russian Statistics Tells Us

The paper analyzes job turnover in the Russian economy on the basis of aggregate data provided by the Federal State Statistics Service (Rosstat) since 2008. It describes main trends in job creation and job destruction in the Russian labor market over 2008-2012 and explores variation in intensity of these processes by types of ownership, sectors and regions. Cross-country comparisons indicate that job turnover in the Russian economy remains low. However, its private sector demonstrates much higher job creation and job destruction rates.

Trade Reforms, Foreign Competition, and Labor Market Adjustments in the U.S.

Using data on trade-induced displacements, this paper documents that locations facing more foreign competition in the U.S. have: higher job destruction rates, lower job creation rates, and thereby lower employment rates. In contrast to standard trade theory, a model with variable markups and heterogeneous segmented labor markets is consistent with these facts. Foreign competition has a correlated effect on job destruction and job creation precisely because the most vulnerable locations also have lower productivity. Following an unexpected trade liberalization with limited mobility, employment sharply falls in the worse hit locations while welfare and employment increase in the aggregate.

Variation in Job Creation and Destruction across the States Through Boom and Bust: Could Minimum Wage Matter?

This study explores variation in the employment growth of US states between 2003 and 2010, by investigating factors affecting rates of job creation, job destruction, and net job creation separately. It considers the role of minimum wage within a context controlling for variables commonly used in growth analyses. It contributes to the minimum wage literature by taking into account the endogeneity of minimum wage increases. It finds that larger increases in minimum wages lead to significantly lower rates of job creation the following year, all else unchanged. The effect on net job creation is not quite statistically significant, however.

Dynamics of Firm-level Job Flows in Slovenia, 1996–2011

Firm-level employment changes were associated with simultaneous high rates of gross job creation, destruction, and reallocation. These job flows primarily reflected persistent firm-level employment changes. There was considerable variation in job flow rates across sectors. Sectors that created more jobs also destroyed more jobs. Job destruction was more volatile than job creation. Relative volatility was negatively related to net employment growth. Sectoral and aggregate economy-wide shocks exerted considerable influence on variations in job creation and destruction rates. However, idiosyncratic factors were also important. Passive learning about initial conditions explained a small, but significant, fraction of job reallocation.

News and Labour Market Dynamics in the Data and in Matching Models

This paper uses a vector autoregression model estimated with Bayesian methods to identify the effect of productivity news shocks on labour market variables by imposing that they are orthogonal to current technology but they explain future observed technology. In the aftermath of a positive news shock, unemployment falls, whereas wages and the job finding rate increase. The analysis establishes that news shocks are important in explaining the historical developments in labour market variables, whereas they play a minor role for movements in real activity. We show that the empirical responses to news shocks are in line with those of a baseline search and matching model of the labour market and that the job destruction rate and real wage rigidities are critical for the variables’ responses to the news shock.