Lawrence Katz

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This paper examines the impact of selected labor market changes on the decline in the
unemployment rate in the 1990s. The first section provides an overview of aggregate unemployment
trends, inflation, and price and wage Phillips curves. The second section examines the effect of
demographic changes on the unemployment rate. The third section examines the impact of the 150
percent increase in the number of men in jail or prison since 1985 on the unemployment rate. The
fourth section examines the impact of evolving labor market intermediaries (namely worker profiling
by the Unemployment Insurance system and the growth of the temporary help industry) on the
unemployment rate. The fifth section explores whether worker bargaining power has become
weaker, allowing for low unemployment and only modest wage pressure, because of worker job
anxiety, the decline in union membership, or increased competitive pressures. The final section
examines the impact of the tightest labor market in a generation on poverty. Our main findings are
that changes in the age structure of the labor force, the growth of the male prison population, and,
more speculatively, the rise of the temporary help sector, are the main labor market forces behind
the low unemployment rate in the late 1990s.

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Brookings Papers on Economic Activity, Vol 0, No. 1, 1999
Krueger, A., & Katz, L. (1999). The High-pressure U.S. Labor Market of the 1990s. Retrieved from (Original work published 05/1999AD)
Working Papers
Year of Publication
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IRRA 43rd. Annual Proceedings, Vol. 43, 1991
Krueger, A., & Katz, L. (1991). The Effect of the New Minimum Wage Law in a Low-Wage Labor Market. Retrieved from (Original work published 01/1991AD)
Working Papers

In this paper we provide theoretical and empirical analyses of an
asymmetric-information model of layoffs in which the current employer is
better informed about its workers’ abilities than prospective employers
are. The key feature of the model is that when firms have discretion with
respect to whom to lay off, the market infers that laid-off workers are of
low ability. Since no such negative inference should be attached to
workers displaced in a plant closing, our model predicts that the post-
displacement wages of otherwise observationally equivalent workers will be
higher for those displaced by plant closings than for those displaced by
layoffs. A simple extension of our model predicts that the post-
displacement unemployment duration of otherwise observationally equivalent
workers will be lower for those displaced by plant closings than for those
displaced by layoffs.
In our empirical work, we use data from the Displaced Workers Supplements
in the January l984 and 1986 Current Population Surveys. For our whole
sample, we find that the evidence (with respect to both re-employment wages
and post-displacement unemployment duration) is consistent with the idea
that laid-off workers are viewed less favorably by the market than are
those losing jobs in plant closings. Furthermore, our findings are much
stronger for workers laid-off from jobs where employers have discretion
over whom to lay off, and much weaker for workers laid-off from jobs where
employers have little or no discretion over whom to lay off.

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Journal of Labor Economics, Vol. 9, No. 4, October 1991.
Gibbons, R., & Katz, L. (1989). Layoffs and Lemons. Retrieved from (Original work published 04/1989AD)
Working Papers

This paper uses two data sets to examine the impact of the potential
duration of unemployment insurance (UI) benefits on the duration of
unemployment and the time pattern of the escape rate from unemployment in the
United States. The first part of the empirical work uses a large sample of
household heads to examine differences in the unemployment spell distributions
of UI recipients and nonrecipients. Sharp increases in the rate of escape
from unemployment both through recalls and new job acceptances are apparent
for UI recipients around the time when benefits are likely to lapse. The
absence of such spikes in the escape rate from unemployment for nonrecipients
strongly suggests that the potential duration of UI benefits affects firm
recall policies and workers’ willingness to start new jobs. The second part
of our empirical work uses accurate administrative data to examine the effects
of the level and length of UI benefits on the escape rate from unemployment of
UI recipients. The results indicate that a one week increase in potential
benefit duration increases the average duration of the unemployment spells of
UI recipients by 0.16 to 0.20 weeks. The estimates also imply that policies
that extend the potential duration of benefits increase the mean duration of
unemployment by substantially more than policies with the same predicted
impact on the total U1 budget that raise the level of benefits while holding
potential duration constant.

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Journal of Public Economics, Vol. 41, No.1, February, 1990.
Meyer, B., & Katz, L. (1988). The Impact of the Potential Duration of Unemployment Benefits on the Duration of Unemployment. Retrieved from (Original work published 11/1988AD)
Working Papers

We re-examine the evidence presented by Neumark and Wascher (1992) on
the employment effect of the minimum wage. We find three critical flaws in
their analysis. First, the school enrollment variable that plays a pivotal
role in their specifications is derived on the false assumption that
teenagers either work or attend school. Measurement error biases
contaminate all the empirical estimates that use this enrollment variable.
Second, Neumark and Wascher measure the effect of the minimum wage by a
coverage-weighted relative minimum wage index. This variable is negatively
correlated with average teenage wages. Taken literally, their results show
that a rise in the coverage-weighted relative minimum wage lowers teenage
wages. Examining the direct effects of state-specific minimum wages, we
find that increases in state minimum wages raise average teenage wages but
have essentially no employment effects.
Finally, a careful analysis of Neumark and Wascher's data shows that
subminimum wage provisions are rarely used. This casts doubt on their
claim that subminimum provisions blunt any disemployment effect of the
minimum wage.
Neumark and Wascher contend that other minimum wage studies are biased
by failing to control for school enrollment, and by failing to consider the
lagged effects of minimum wages. We re-analyze the experiences of
individual states following the April 1990 increase in the Federal minimum
wage, allowing for a full year lag in the effect of the law and controlling
for changes in (properly measured) enrollment rates. Contrary to their
claims, allowing for lagged effects and controlling for enrollment status
actually strengthens the conclusion that the 1990 increase in the Federal
minimum had no adverse employment effect.

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Industrial and Labor Relations Review, Vol. 47, No. 3, April, 1994
Krueger, A., Card, D., & Katz, L. (1993). Comment on David Neumark and William Wascher, "Employment Effects of Minimum and Subminimum Wages: Panel Data on State Minimum Wage Laws". Retrieved from (Original work published 04/1993AD)
Working Papers

Using data from a longitudinal survey of fast food restaurants in Texas, the authors examine
the impact of recent changes in the federal minimum wage on a low-wage labor market. The authors
draw three main conclusions. first. the survey results indicate that less than 5 percent of fast food
restaurants use the new youth subminimum wage even though the vast majority paid a starting wage
below the new hourly minimum wage immediately before it went into effect. Second, although some
restaurants increased wages by an amount exceeding that necessary to comply with higher minimum
wages in both 1990 and 1991, recent increases in the federal minimum wage have greatly compressed
the distribution of starting wages in the Texas fast food industry. Third, employment increased
relatively in those firms likely to have been most affected by the 1991 minimum wage increase, while
price changes appear to be unrelated to mandated wage changes. These employment and price
changes do not seem consistent with conventional views of the effects of increases in a binding
minimum wage.

Year of Publication
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Citation Key
Industrial and Labor Relations Review, Vol 46, No. 1, October, 1992
Krueger, A., & Katz, L. (1992). The Effect of the Minimum Wage on the Fast Food Industry. Retrieved from (Original work published 02/1992AD)
Working Papers

This paper examines the short-run impacts of a change in residential neighborhood on the
well-being of low-income families, using evidence from a program in which eligibility for a housing
voucher was determined by random lottery. We examine the experiences of households at the
Boston site of Moving To Opportunity (MTO), a demonstration program in five cities. Families in
high poverty public housing projects applied to MTO and were assigned by lottery to one of three
groups: Experimental — offered mobility counseling and a Section 8 subsidy valid only in a Census
tract with a poverty rate of less than 10 percent; Section 8 Comparison — offered a geographically
unrestricted Section 8 subsidy; or Control — offered no new assistance, but continued to be eligible
for public housing.
Our quantitative analyses of program impacts uses data on 540 families from a baseline
survey at program enrollment, a follow-up survey administered l to 3.5 years after random
assignment, and state administrative data on earnings and welfare receipt. 48 percent of the
Experimental group and 62 percent of the Section 8 Comparison group moved through the MTO
program. One to three years after program entry, families in both treatment groups were more likely
to be residing in neighborhoods with low poverty rates and high education levels than were families
in the Control group. However, while members of the Experimental group were much more likely
to be residing in suburban communities than were those in the Section 8 group, the lower program
take-up rate among the Experimental group resulted in more families remaining in the most
distressed communities. Households in both treatment groups experienced improvements in
multiple measures of well-being relative to the Control group including increased safety, improved
health among household heads, and fewer behavior problems among boys. Experimental group
children were also less likely to be a victim of a personal crime, to be injured, or to experience an
asthma attack. There are no significant impacts of either MTO treatment on the employment,
earnings, or welfare receipt of household heads in the first three years after random assignment.

Year of Publication
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Quarterly Journal of Economics, May 2001
Liebman, J., Katz, L., & Kling, J. (2000). Moving to Opportunity in Boston: Early Results of a Randomized Mobility Experiment. Retrieved from (Original work published 06/2000AD)
Working Papers

This paper uses job applications data to test the existence of non-competitive, ex—ante rents in the labor market. We first examine whether
jobs that pay the legal minimum wage face an excessive supply of labor as
measured by the number of job applications received for the most recent
position filled by the firm. The results indicate that openings for jobs
that pay the minimum wage attract significantly more job applications than
jobs that pay either more or less than the minimnum wage. This spike in the
job application rate distribution indicates that ex-ante rents generated for
enp1oyees by an above market-level minimum wage do not appear to be
completely dissipated by employer actions.
The second part of the paper uses a similar approach to examine whether jobs in high-wage industries pay above market-clearing wage rates. We find a
weak, positive relationship between inter-industry application differentials
and inter-industry wage differentials. In addition, our results indicate
that employer size has a sizeable positive effect on the job application rate
even after controlling for the wage rate. The paper considers several
possible explanations for these findings.

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Quarterly Journal of Economics, Vol 106, August 1991
Holzer, H., Krueger, A., & Katz, L. (1988). Job Queues and Wages: New Evidence on the Minimum Wage and Inter-Industry Wage Structure. Retrieved from (Original work published 04/1988AD)
Working Papers

We study adult economic and health outcomes in the Moving to Opportunity (MTO)
demonstration, a randomized housing mobility experiment in which families living in highpoverty
U.S. public housing projects in five cities were given vouchers to help them move to
private housing units in lower-poverty neighborhoods. An “experimental” group was offered
vouchers valid only in a low-poverty neighborhood; a “Section 8” group was offered traditional
housing vouchers without geographic restriction; a control group was not offered vouchers. Our
sample consists largely of black and Hispanic female household heads with children.
Five years after random assignment, the families offered housing vouchers through MTO
lived in safer neighborhoods that had significantly lower poverty rates than those of the control
group not offered vouchers. However, we find no significant overall effects on adult
employment, earnings, or public assistance receipt -- though our sample sizes are not sufficiently
large to rule out moderate effects in either direction. In contrast, we do find significant mental
health benefits of the MTO intervention for the experimental group. We also demonstrate a more
general pattern for the mental health results using both treatment groups of systematically larger
effect sizes for groups experiencing larger changes in neighborhood poverty rates. In our
analysis of physical health outcomes, we find a significant reduction in obesity, but no
significant effects on four other aspects of physical health (general health, asthma, physical
limitations, and hypertension), and our summary measure of physical health was not significantly
affected by the MTO treatment for the overall sample.

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Sanbonmatsu, L., Liebman, J., Katz, L., & Kling, J. (2004). Moving to Opportunity and Tranquility: Neighborhood Effects on Adult Economic Self-Sufficiency and Health From a Randomized Housing Voucher Experiment. Retrieved from (Original work published 04/2004AD)
Working Papers

The Moving to Opportunity (MTO) demonstration assigned housing vouchers via random
lottery to low-income public housing residents in five cities. We use the exogenous variation in
residential locations generated by the MTO demonstration to estimate the effects of
neighborhoods on youth crime and delinquency. We find that the offer to relocate to lowerpoverty
areas reduces the incidence of arrests among female youth for violent crimes and
property crimes, and increases self-reported problem behaviors and property crime arrests for
male youth -- relative to a control group. Female and male youth move through MTO into
similar types of neighborhoods, so the gender difference in MTO treatment effects seems to
reflect differences in responses to similar neighborhoods. Within-family analyses similarly show
that brothers and sisters respond differentially to the same new neighborhood environments with
more adverse effects for males. Males show some short-term improvements in delinquent
behaviors from moves to lower-poverty areas, but these effects are reversed and gender
differences in MTO treatment effects become pronounced by 3 to 4 years after random

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Katz, L., Kling, J., & Ludwig, J. (2004). Youth Criminal Behavior in the Moving to Opportunity Experiment. Retrieved from (Original work published 03/2004AD)
Working Papers