Observations and Conjectures on the U.S. Employment Miracle
This paper has three goals. First, to place U.S. job growth in international perspective
by exploring cross-country differences in employment and population growth. This section finds
that the U.S has managed to absorb added workers -- especially female workers -- into
employment at a greater rate than most countries. The leading explanation for this phenomenon
is that the U.S. labor market has ﬂexible wages and employment practices, whereas European
labor markets are rigid. The second goal of the paper is to evaluate the labor market rigidities
hypothesis. Although greater wage ﬂexibility probably contributes to the U.S.'s comparative
success in creating jobs for its population, the slow growth in employment in many European
countries appears too uniform across skill groups to result from relative wage inﬂexibility alone.
Furthermore, a great deal of labor market adjustment seems to take place at a constant real wage
in the U.S. This leads to the third goal: To speculate on other explanations why the U.S. has
managed to successfully absorb so many new entrants to the labor market. We conjecture that
product market constraints contribute to the slow growth of employment in many countries.
Observations and Conjectures on the U.S. Employment Miracle
This study proposes and implements a specification test for the
hypothesis that unemployment represents intertemporal labour supply
behavior. The test allows for uncertainty and endogenous unemployment.
Given standard specifications of the intertemporal labour supply model, I
find strong evidence against this interpretation of unemployment. These
results indicate the need to turn to either 1) alternative models where
unemployed workers are off a supply function or ii) more complex models
of intertemporal substitution.
During the 1980s, many European countries introduced ﬁxed-term contracts to ﬁght high
and persistent levels of unemployment. Although these contracts have been widely used,
unemployment remains about the same after ﬁfteen years. This paper builds a theoretical
model to reconcile these facts. I analyze the labor market effect of the introduction of
ﬁxed-term contracts in an efficiency wage model. The form of incentive compatible ﬁxed-
term contracts and the firm’s choice of contracts are studied. Permanent contracts are the
standard way to offer incentives, but ﬁxed-term contracts are cheaper. This generates an
externality, which can make employment higher in the system with only permanent contracts.
As a consequence, from a social point of view, the share of ﬁxed-term contracts is too large.
Increases in the renewal rate of ﬁxed-term contracts into permanent contracts lead to higher
employment levels. The model highlights the interaction between different rigidities in the
labor market. Aggregate employment and the share of temporary contracts are affected in
the same way by ﬁring costs and the ﬂexibility of wages.
This paper presents a survey of recent microeconometric studies of
the labor market, focusing on research that emphasizes the possible
failure of measured wage rates to separate individual supply and demand
decisions. On both the demand and supply sides of the labor market
there is evidence that forces from the other side of the market
influence employment outcomes through some mechanism other than the
wage. On the supply side, this evidence takes the form of correlations
between individual labor supply outcomes and market—level measures of
employment demand in the individual's local labor market. On the demand
side, it takes the form of correlations between firms’ employment decisions and measures of their employees‘ outside opportunities. Both sets
of findings are inconsistent with simple supply and demand models, and
suggest the need for alternative models of the labor market, which
permit an uncoupling of short-run employment decisions from wage rates.
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 the 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
of the short-term unemployed versus the long-term unemployed becomes significantly higher in
This paper provides new evidence on job search intensity of the unemployed in the U.S., modeling job search intensity as time allocated to job search activities. The main findings are: 1) the average unemployed worker in the U.S. devotes about 41 minutes to job search on weekdays, which is substantially more than his or her European counterpart; 2) workers who expect to be recalled by their previous employer search substantially less than the average unemployed worker; 3) across the 50 states and D.C., job search is inversely related to the generosity of unemployment benefits, with an elasticity between -1.6 and -2.2; 4) the predicted wage is a strong predictor of time devoted to job search, with an elasticity in excess of 2.5; 5) job search intensity for those eligible for Unemployment Insurance (UI) increases prior to benefit exhaustion; 6) time devoted to job search is fairly constant regardless of unemployment duration for those who are ineligible for UI. A nonparametric Monte Carlo technique suggests that the relationship between job search effort and the duration of unemployment for a cross-section of job seekers is only slightly biased by length-based sampling.
I focus on two aspects of Job loss. First, I examine evidence on the
incidence of job loss by worker and job characteristics including age,
education, race, sex, industry, and tenure over the period from 1982 to 1991.
Second, I examine the cost of job loss to workers in the form of 1) lower
post-displacement employment probabilities, 2) lower probabilities of
full-time employment for re—employed workers, and 3) lower earnings for
Using data from Displaced Workers Surveys (DWS) from 1984 through 1992
to study job loss from 1982-91, I find that older workers and more educated
workers are relatively more likely to suffer a job loss in the latter part of
this period. Additionally, job loss became more common in some important
service industries and relatively less common in manufacturing during the
latter part of the ten-year period studied.
Supplementing the DWS data with data from the outgoing rotation groups
of the Current Population Survey from 1982-1991, I find that displaced workers
are, relative to non-displaced workers, 1) less likely to be employed and 2)
more likely to be employed part-time conditional on being employed. These
effects seem to decline with time since displacement. There is no systematic
secular change in these costs of displacement, either in the aggregate or for
particular groups. Finally, I examine the earnings losses of full-time
re—employed displaced workers by comparing their earnings change with the
earnings change of full-time employed workers who were not displaced. I find,
consistent with what others have found, that these earnings losses are
Overall, the costs to displaced workers of job loss are substantial and
come in several forms. However, the public perception that the current
sluggish economy is worse than earlier downturns may reflect more who has lost
jobs recently rather than either increased overall job loss or increased costs
to those who are losing Jobs.
Recent efforts to expand unemployment insurance (UI) eligibility are expected to increase low-earning workers’ access to UI. Although the expansion’s aim is to smooth the
income and consumption of previously ineligible workers, it is possible that UI benefits simply displace other sources of income. Standard economic models predict that UI delays reemployment, thereby reducing wage income. Additionally, low-earning workers are often eligible for benefits from means-tested programs, which may decrease with UI benefits. In this paper, we estimate the impact of UI eligibility on employment, means-tested program participation, and income after job loss using a unique individual-level administrative data set from the state of Michigan. To identify a causal effect, we implement a fuzzy regression discontinuity design around the minimum earnings threshold for UI eligibility. Our main finding is that while UI eligibility increases jobless durations by up to 25 percent and temporarily lowers receipt of cash assistance (TANF) by 63 percent, the net impact on total income is still positive and large: In the quarter immediately following job loss, UI-eligible workers have 46-61 percent higher incomes than ineligibles.
This paper provides new evidence on time use and subjective well-being of employed and unemployed individuals in 14 countries. We devote particular attention to characterizing and modeling job search intensity, measured by the amount of time devoted to searching for a new job. Job search intensity varies considerably across countries, and is higher in countries that have higher wage dispersion. We also examine the relationship between unemployment benefits and job search.
While policymakers often promote further education for displaced workers, evidence on its effectiveness in the U.S. context primarily comes from evaluations of specific government sponsored training programs, which only represent one narrow avenue for skill acquisition. This paper studies the returns to retraining among unemployed workers, where retraining is broadly defined as enrollment in community colleges, four-year institutions, and technical centers. We link together high quality administrative records from the state of Ohio and estimate the returns using a matching design in which we compare the labor market outcomes of similar workers who do and do not enroll. Our matching specification is informed by a separate validation exercise in the spirit of LaLonde (1986), which evaluates a wide array of estimators using a combination of experimental and non-experimental data in a setting similar to ours. We graphically present the average quarterly earnings trajectories of the enrollees and matched non-enrollees over a nine-year period and show that there is little difference in earnings pre-enrollment, followed by temporarily depressed earnings among enrollees during the first two years after enrolling, and sustained positive returns thereafter. We find that enrollees experience an average earnings gain of seven percent three to four years after enrolling, and that the returns are driven by those who switch industries, particularly to healthcare.