US Labor Market Research Articles

Building a multicultural organisation: A conceptual model for organisational change in the 21st century

Over the next 50 years, several factors are expected to change the composition and size of the US labour market, most notably: (1) the growing number of baby boomers retiring from the workforce, (2) the stabilisation of women’s participation in the workforce, and (3) increasing racial and ethnic diversity. With higher population growth, fertility and workforce participation rates, the US multicultural population is projected to account for a much larger proportion of the US workforce in the decades to come. The degree to which corporate America is able to maximise productivity and manage cultural diversity effectively will not only impact workforce participation, but also economic output. This paper proposes a conceptual framework for cultural diversity to help corporations manage their increasingly diverse workforce and help transform their companies into multicultural organisations to better serve their diverse employees — and their consumers. The paper outlines a robust toolkit, arguing that companies must take a comprehensive approach to address the lack of diversity in corporate America rather than launch ‘diversity and inclusion’ initiatives, as many have recently done. Future research and discussions on this topic are warranted.

Career lotto? Labor supply in a superstar market

Abstract Are people prone to selecting occupations with highly skewed income distributions, irrespective of the mean and variance of their expected earnings? This paper introduces a basic theoretical framework to understand labor supply decisions in winner-take-all markets. Assembling a comprehensive longitudinal dataset of potential tennis professionals (a typical superstar market), we use objective and publicly known rankings to construct earnings projections before each player decides whether to enter that labor market. Player- and cohort-age fixed effects account for unobservable factors at the individual level and within a given cohort and year. We find prospective tennis professionals are attracted to highly skewed earnings distributions, independent of mean and variance. Hypothetically, if skewness in prize money fell to the level of the overall US labor market, males would be 7.2% and females 2.6% less likely to continue pursuing a professional tennis career, on average. Superstar labor markets may therefore systematically encourage those with modest talents to pursue long-shot careers.

Beveridgean unemployment gap

This paper develops a sufficient-statistic formula for the unemployment gap—the difference between the actual unemployment rate and the efficient unemployment rate. While lowering unemployment puts more people into work, it forces firms to post more vacancies and to devote more resources to recruiting. This unemployment-vacancy tradeoff, governed by the Beveridge curve, determines the efficient unemployment rate. Accordingly, the unemployment gap can be measured from three sufficient statistics: elasticity of the Beveridge curve, social cost of unemployment, and cost of recruiting. Applying this formula to the United States, 1951–2019, we find that the efficient unemployment rate averages 4.3%, always remains between 3.0% and 5.4%, and has been stable between 3.8% and 4.6% since 1990. As a result, the unemployment gap is countercyclical, reaching 6 percentage points in slumps. The US labor market is therefore generally inefficient and especially inefficiently slack in slumps. In turn, the unemployment gap is a crucial statistic to design labor-market and macroeconomic policies.

The Alpha Beta Gamma of the Labor Market

Based on patterns of employment transitions, we identify three different types of workers in the US labor market: α's β's and γ's. Workers of type α make up over half of all workers, are most likely to remain on the same job for more than 2 years and, when they become unemployed, typically find a new job within 1 quarter. Workers of type γ comprise less than one-fifth of workers, have a low probability of staying on the same job for more than 2 years and, when they become unemployed, face a high probability of remaining jobless for more than 1 year. Workers of type β are in between αs and γ's. The earnings losses caused by displacement are relatively small and transitory for α-workers, while they are large and persistent for γ-workers. During the Great Recession, excess unemployment for α-workers rose by little and was reabsorbed quickly; unemployment for γ-workers rose by 20 percentage points and was not reabsorbed 4 years after its peak. We use a search-theoretic model of the labor market to rationalize the different patterns of employment transitions across types. The model naturally explains both the variation in the consequences of job displacement across types, and the variation in the dynamics of unemployment during the Great Recession. Our view is that several puzzling micro and macro phenomena about the labor market are driven by the behavior of the small group of γ-workers.

Human Capital and Black-White Earnings Gaps, 1966-2017

This paper estimates the contribution of human capital, measured using both educational attainment and test performance, to the Black-white earnings gap in three separate samples of men spanning 1966 through 2017. There are three main findings. First, the magnitude of reductions in the Black-white earnings gap that occur after controlling for human capital have become much larger over time, suggesting a growing contribution of human capital to Black-white earnings disparities. Second, these increases are almost entirely due to growth in the returns to human capital, rather than changing racial gaps in the human capital traits themselves. Finally, growth in the explanatory power of human capital has been primarily due to increases in the association between human capital and the likelihood of non-work, with no clear increases in the extent to which human capital explains Black-white differences in hourly wages or other intensive margins. These findings highlight how apparently race-neutral structural developments in the US labor market, such as increasing skill prices and falling labor force participation rates among less skilled men, have had large impacts on the dynamics of racial inequality. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Labor Market Effects of Trade Induced Technological Change Under Intellectual Property Rights Protection

In this paper I examine the impact of trade liberalization on labor market outcomes using a model with high- and low-skilled workers and intellectual property rights (IPR) protection. I argue that IPR protection is crucial to determine labor market effects of trade liberalization in skill-abundant countries. With IPR protection R&D firms fully internalize the greater market size for their innovation. This leads to low-skill-biased technological change countervailing the negative labor market effects of relative price changes in a Heckscher-Ohlin trade model (Stolper-Samuleson theorem). To solve the general equilibrium model I calibrate it to match the US labor market between 2008 and 2014. I demonstrate that IPR protection cushions the negative price effects of trade liberalization, i.e., the wage gap does not increase as much, all workers face lower unemployment rates and higher wages. Without IPR protection the wages for low skilled workers would decline and their unemployment rate increases after trade liberalization. Moreover, I use CPS (current population survey) data to empirically confirm the model predictions.

The Globalization of Postsecondary Education: The Role of International Students in the Us Higher Education System

In the four decades since 1980, US colleges and universities have seen the number of students from abroad quadruple. This rise in enrollment and degree attainment affects the global supply of highly educated workers, the flow of talent to the US labor market, and the financing of US higher education. Yet, the impacts are far from uniform, with significant differences evident by level of study and type of institution. The determinants of foreign flows to US colleges and universities reflect both changes in student demand from abroad and the variation in market circumstances of colleges and universities, with visa policies serving a mediating role. The consequences of these market mechanisms impact global talent development, the resources of colleges and universities, and labor markets in the United States and countries sending students. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

The International Transmission of Local Economic Shocks Through Migrant Networks

Using newly validated data on geographic migration networks, we study how labor demand shocks in the United States propagate across the border with Mexico. We show that the large exogenous decline in US employment brought about by the Great Recession affected demographic and economic outcomes in Mexican communities that were highly connected to the most affected markets in the US. In the Mexican locations with strong initial ties to the hardest hit US migrant destinations, return migration increased, emigration decreased, and remittance receipt declined. These changes significantly increased local employment and hours worked, but wages were unaffected. Investment in durable goods and children's education also slowed in these communities. These findings document the effects in Mexico when potential migrants lose access to a strong US labor market, providing insight regarding the potential impacts of stricter US migration restrictions. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

The ‘Bilingual Advantage’ in the Workplace: Theoretical Frameworks and Evidence from the US Labor Market

Multilingual hires are a burgeoning feature of the workplace, but there is little evidence on the returns to language skills. This study puts forth a theoretical framework that comprehensively relates language and non-language skills to labor market outcomes drawing upon a variety of fields: linguistics, economic theory, and sociology. We derive testable hypotheses and evaluate them using US Census data. Non-language skills are instrumented with the Occupational Information Network (O*NET) task descriptors and condensed down to cognitive, manual, and interpersonal components using sparse principal component analysis. Findings validate extant evidence that the US economy does not bestow a premium upon bilingual speakers while not upholding a cognitive advantage of bilinguals that transfers to compensations. Furthermore, late learners have a wage advantage over monolinguals captured by unobservable characteristics rather than non-language skills.

Revisiting the Hypothesis of High Discounts and High Unemployment

AbstractWe revisit the hypothesis that cyclical fluctuations in unemployment are caused by shocks to the discount rate. We use a simple but rich search-theoretic model of the labour market in which the UE, EU and EE rates are all endogenous. Analytically, we show that an increase in the discount rate lowers the UE rate and, under some natural conditions, it lowers the EU rate. Quantitatively, we show that an increase in the discount rate from 4% to 10% generates a 3.5% decline in the UE rate and a 6% decline in the EU rate. These findings are at odds with the actual behaviour of the US labour market over the business cycle, which features a negative comovement between the UE and EU rates.

Did Mortgage Forbearance Reach the Right Homeowners? Income and Liquid Assets Trends for Homeowners during the COVID-19 Pandemic

COVID-19 devastated the US labor market threatening homeowners’ ability to stay current on their mortgage. During the Great Recession, payment relief was more difficult to come by whereas the Coronavirus Aid, Relief, and Economic Security (CARES) Act provided most impacted homeowners with up to 12 months of payment relief if they attested to COVID-related hardship. However, the CARES Act did not cover everyone—it was silent on non-federally backed mortgage holders and those experiencing non-COVID related hardship. Furthermore, many borrowers were either not aware of mortgage relief options and/or were worried about potential balloon payments after forbearance ends. How well did this widespread intervention work? Did it reach all those who might have benefitted? Is there evidence of widespread moral hazard? Using checking account data linked to loan-level mortgage servicing data, we explore these questions. We find that while a third of homeowners in forbearance made all payments to date, a small fraction of homeowners not in forbearance did miss payments. Also, we find little evidence of widespread moral hazard. Families using forbearance to miss mortgage payments showed larger drops in total income than other homeowners and experienced income changes similar to those who have gone delinquent without the protection of forbearance. Also, families in forbearance were more likely to have lost labor income and received UI than families not in forbearance. Finally, we find that forbearance helped families with low levels of liquid assets to maintain their cash buffers. Together these results suggest that CARES Act mortgage forbearance policies helped homeowners experiencing financial hardship in a material way by allowing them to miss payments without adversely affecting their credit scores and maintain their small cash buffers in a world with a lot more economic uncertainty. In addition, these benefits came with little evidence of material moral hazard. However, there is room for improvement in future legislation as a small fraction of homeowners facing hardship did not benefit from forbearance and one main impediment was confusion around balloon payments. All in all the CARES Act forbearance policies appear so far to have been a large step in the right direction relative to policies during the Great Recession.

The distributional impacts of the reduction in remittances in Central America in COVID-19 times

COVID-19 has generated several quarantines and economic lockdowns as the main public policy responses that dramatically affected the dynamic of economic growth and labor markets worldwide. These effects impact remittance inflows to developing countries, in particular those coming from the US, which affect poverty reduction paths in Latin America. Using data from the US labor market and economic performance indicators of the US and remittance recipient countries, this paper estimates the distributional impacts of the change in remittances post-COVID-19 for the region that most rely on remittances, Central America. Results suggest that after COVID-19, remittance inflows are expected to decrease 14 % in the region during 2020 and that effects are heterogeneous among countries: El Salvador and Nicaragua are expected to be the most affected countries while Panama is expected to be the least affected one. The model allows to estimate impacts in other countries in Latin America and the Caribbean. However, due to the lack of household survey availability, this paper only explores the distributional impacts of the change in remittance inflows in Central America. The expected impacts on poverty are also heterogeneous. While poverty in El Salvador is expected to increase by 6 % due to the change in remittances, poverty in Guatemala is expected to increase by 1 %. Results are robust to different specifications.

International students and labour market outcomes of US‐born workers*

AbstractDo international students graduating from US colleges and universities affect labour market outcomes of similarly educated native‐born workers? I address this question by exploiting a change in US visa policy that results in increases in the labour supply of master’s‐level international students to the US labour market in science, technology, engineering and mathematics (STEM) fields. Estimates show that increases in their labour supply via temporary work permits in a certain field reduce employment of recently graduated native‐born holders of a master’s degree but increase earnings of experienced native‐born holders of a master’s degree in the same field. These findings support the hypothesis of substitution between skills of similarly educated immigrants and native‐born individuals in the same age group and complementarity between skills of those in different age groups.

Real-Time Labor Market Estimates During the 2020 Coronavirus Outbreak

This project aims to provide labor market data several weeks ahead of official statistics via a national online labor market survey of a sample representative of the US working age population. We refer to the survey as the Real-Time Population Survey (RPS). Core questions in the RPS closely follow the official US labor market survey (the CPS), which allows us to construct estimates consistent with theirs. The RPS was conducted twice monthly from March through October, and since then is conducted monthly.

The heterogeneous impact of monetary policy on the US labor market

We empirically investigate the role of central banks in the context of heterogeneous labor markets, jobless recoveries and job polarization. Specifically, we estimate the effect of monetary policy on the US labor market using disaggregated time series based on large scale survey data. The impact of interest rate changes on unemployment in 32 occupation groups is explored in a Bayesian factor-augmented vector autoregression framework. The results suggest largely heterogeneous impacts across various occupation groups. This heterogeneity can be explained by differential task profiles of the workers in their respective occupations. Workers with tasks that are easily automated or offshored as well as workers at the bottom of the skill distribution are disproportionately affected following a monetary policy shock. This implies that labor market participants that are highly vulnerable to structural developments such as skill-biased technological change and the globalization of labor markets are also most sensitive to conventional monetary policy measures. From a policy perspective, we conclude that central banks are unlikely to be able to take on a stabilizing role in the context of labor market polarization.

Labor relations and the overdose crisis in the United States

Background/Objective To assess the impact of noted long-term changes in US labor relations and labor market structures on the rapid rise of overdose death in the United States. Methods State-level overdose death rates obtained from the Centers for Disease Control were combined with Bureau of Labor Statistics data on manufacturing employment, unionization and self-employment, as well as Census data on key demographic variables to construct a longitudinal dataset (N = 51, including Washington D.C.). Linear regressions were conducted on a logged transformation of overdose death rate increases from 1999 to 2017. Results Deindustrialization and low self-employment significantly predict state-level increases in overdose death rates across all models; union decline approaches significance. Together, these three factors explain nearly 40% of variance in overdose death change between 1999 and 2017, maintaining predictive power in the presence of controls. Conclusion Labor relations emerge as important predictors of overdose death and addiction. Specifically, worker autonomy—which is typically higher in manufacturing over frontline service, self-employed over dependent wage and salary, and unionized over nonunion jobs—appears to contribute in its decline to deleterious substance use.

Robots and Jobs: Evidence from US Labor Markets

As robots and other computer-assisted technologies take over tasks previously performed by labor, there is increasing concern about the future of jobs and wages. We analyze the effect of the increase in industrial robot usage between 1990 and 2007 on US local labor markets. Using a model in which robots compete against human labor in the production of different tasks, we show that robots may reduce employment and wages, and that the local labor market effects of robots can be estimated by regressing the change in employment and wages on the exposure to robots in each local labor market—defined from the national penetration of robots into each industry and the local distribution of employment across industries. Using this approach, we estimate large and robust negative effects of robots on employment and wages across commuting zones. We bolster this evidence by showing that the commuting zones most exposed to robots in the post-1990 era do not exhibit any differential trends before 1990. The impact of robots is distinct from the impact of imports from China and Mexico, the decline of routine jobs, offshoring, other types of IT capital, and the total capital stock (in fact, exposure to robots is only weakly correlated with these other variables). According to our estimates, one more robot per thousand workers reduces the employment to population ratio by about 0.18-0.34 percentage points and wages by 0.25-0.5 percent.

Refugee Admissions and Public Safety: Are Refugee Settlement Areas More Prone to Crime?

According to the United Nations High Commissioner for Refugees, the number of refugees worldwide rose to 25.9 million in 2018. Despite the increased need for refugee resettlements, resistance to the welcoming of refugees appears to have grown. The perception that refugees may engage in criminal behavior has served as fuel for closing the door to refugees in the United States and Europe. Is there any basis for this fear? We exploit variation in the geographic and temporal distribution of refugee resettlements across counties to ascertain if their presence can be linked to greater local violence in the case of the United States. We fail to find any statistically significant evidence of refugee resettlements raising local arrest or offense rates. Institutions that help refugees assimilate into the US labor market may contribute to these favorable outcomes. Overall, these findings widen our understanding of refugee resettlement in the United States and suggest that the adoption of humanitarian efforts to support these international flows need not be discouraged.

US agricultural exports and labor market adjustments

AbstractThis study empirically investigates the impact of US agricultural exports on farm and nonfarm employment and tests how individuals adjust to agricultural export shocks. Based on the data from 1991 to 2017 and a Bartik‐style instrument that exploits cross‐regional variation in agricultural export exposure stemming from initial differences in agricultural specialization and temporal variation in predicted US exports from exogenous tariff reductions, we find that a 1% increase in agricultural exports increases farm employment by 0.302% and has no statistically significant impact on nonfarm employment. The individual‐level analysis shows that, in response to positive agricultural export demand shocks, natives with a college degree are more likely to become self‐employed and start farm activities and while non‐natives without a college degree are more likely to become hired farmworkers. A back‐of‐the‐envelope calculation based on the estimates of agricultural trade elasticities of employment shows that on balance, job gains due to US agricultural exports are slightly larger than job loss due to agricultural imports, resulting in a net gain of around 0.24 million farm jobs over 1991–2017.

The Evolution of Work in the United States

Using the text from job ads, we introduce a new dataset to describe the evolution of work from 1950 to 2000. We show that the transformation of the US labor market away from routine cognitive and manual tasks and toward nonroutine interactive and analytic tasks has been larger than prior research has found, with a substantial fraction of total changes occurring within narrowly defined job titles. We provide narrative and systematic evidence on changes in task content within job titles and on the emergence and disappearance of individual job titles. (JEL E24, J21, J24, J31, N32)