Labor Market Rigidities and the Employment Behavior of Older Workers
July 2007
Working Paper Number:
CES-07-21
Abstract
The labor market is often asserted to be characterized by rigidities that make it difficult for older workers to carry out their desired trajectory from work to retirement. An important source of rigidity is restrictions on hours of work imposed by firms that use team production or face high fixed costs of employment. Such rigidities are difficult to measure directly. We develop a model of the labor market in which technological rigidity affects the age structure of a firm's work force in equilibrium. Firms using relatively flexible technology care only about total hours of labor input, but not hours of work per worker. Older workers with a desire for short or flexible hours of work are attracted to such firms. Firms using a more rigid technology involving team production impose a minimum hours constraint, and as a result tend to have a younger age structure. A testable hypothesis of the model is that the hazard of separation of older workers is lower in firms with an older age structure. We use matched worker-firm data to test this hypothesis, and find support for it. Specification tests and alternative proxies for labor market rigidity support our interpretation of the effect of firm age structure on the separation propensity These results provide indirect but suggestive evidence of the importance of labor market rigidities.
Document Tags and Keywords
Keywords
Keywords are automatically generated using KeyBERT, a powerful and innovative
keyword extraction tool that utilizes BERT embeddings to ensure high-quality and contextually relevant
keywords.
By analyzing the content of working papers, KeyBERT identifies terms and phrases that capture the essence of the
text, highlighting the most significant topics and trends. This approach not only enhances searchability but
provides connections that go beyond potentially domain-specific author-defined keywords.
:
employee,
employ,
employed,
labor,
longitudinal,
retirement,
tenure,
workplace,
workforce,
wages employment,
worker wages,
worker,
industry wages,
employment wages,
firms age,
aging,
pension,
firms young
Tags
Tags are automatically generated using a pretrained language model from spaCy, which excels at
several tasks, including entity tagging.
The model is able to label words and phrases by part-of-speech,
including "organizations." By filtering for frequent words and phrases labeled as "organizations", papers are
identified to contain references to specific institutions, datasets, and other organizations.
:
Standard Industrial Classification,
Longitudinal Business Database,
Chicago Census Research Data Center,
Survey of Income and Program Participation,
Social Security,
Unemployment Insurance,
North American Industry Classification System,
Health and Retirement Study,
Longitudinal Employer Household Dynamics,
LEHD Program
Similar Working Papers
Similarity between working papers are determined by an unsupervised neural
network model
know as Doc2Vec.
Doc2Vec is a model that represents entire documents as fixed-length vectors, allowing for the
capture of semantic meaning in a way that relates to the context of words within the document. The model learns to
associate a unique vector with each document while simultaneously learning word vectors, enabling tasks such as
document classification, clustering, and similarity detection by preserving the order and structure of words. The
document vectors are compared using cosine similarity/distance to determine the most similar working papers.
Papers identified with 🔥 are in the top 20% of similarity.
The 10 most similar working papers to the working paper 'Labor Market Rigidities and the Employment Behavior of Older Workers' are listed below in order of similarity.
-
Working PaperThe Consequences of Long Term Unemployment: Evidence from Matched Employer-Employee Data*
January 2016
Working Paper Number:
CES-16-40
It is well known that the long-term unemployed fare worse in the labor market than the short-term unemployed, but less clear why this is so. One potential explanation is that the long-term unemployed are 'bad apples' who had poorer prospects from the outset of their spells (heterogeneity). Another is that their bad outcomes are a consequence of the extended unemployment they have experienced (state dependence). We use Current Population Survey (CPS) data on unemployed individuals linked to wage records for the same people to distinguish between these competing explanations. For each person in our sample, we have wage record data that cover the period from 20 quarters before to 11 quarters after the quarter in which the person is observed in the CPS. This gives us rich information about prior and subsequent work histories not available to previous researchers that we use to control for individual heterogeneity that might be affecting subsequent labor market outcomes. Even with these controls in place, we find that unemployment duration has a strongly negative effect on the likelihood of subsequent employment. This finding is inconsistent with the heterogeneity ('bad apple') explanation for why the long-term unemployed fare worse than the short-term unemployed. We also find that longer unemployment durations are associated with lower subsequent earnings, though this is mainly attributable to the long-term unemployed having a lower likelihood of subsequent employment rather than to their having lower earnings once a job is found.View Full Paper PDF
-
Working PaperDeclining Migration wihin the US: The Role of the Labor Market
October 2013
Working Paper Number:
CES-13-53
Interstate migration has decreased steadily since the 1980s. We show that this trend is not related to demographic and socioeconomic factors, but that it appears to be connected to a concurrent secular decline in labor market transitions'i.e. the fraction of workers changing employer, industry or occupation. We explore a number of reasons for the dual trends in geographic and labor market transitions, including changes in the distribution of job opportunities across space, polarization in the labor market, concerns of dual-career households, and changes in the net benefit to changing employers. We find little empirical support for all but the last of these hypotheses. Specifically, using data from three cohorts of the National Longitudinal Surveys spanning the 1970s to the 2000s, we find that wage gains associated with employer transitions have fallen, while the returns to staying with the same employer have not changed. We favor the interpretation that, at least from the 1990s to the 2000s, the distribution of outside offers has shifted in a way that has made labor market transitions, and thus geographic transitions, less desirable to workers.View Full Paper PDF
-
Working PaperThe Alpha Beta Gamma of the Labor Market
April 2022
Working Paper Number:
CES-22-10
Using a large panel dataset of US workers, we calibrate a search-theoretic model of the labor market, where workers are heterogeneous with respect to the parameters governing their employment transitions. We first approximate heterogeneity with a discrete number of latent types, and then calibrate type-specific parameters by matching type-specific moments. Heterogeneity is well approximated by 3 types: as, 's and ?s. Workers of type a find employment quickly because they have large gains from trade, and stick to their jobs because their productivity is similar across jobs. Workers of type ? find employment slowly because they have small gains from trade, and are unlikely to stick to their job because they keep searching for jobs in the right tail of the productivity distribution. During the Great Recession, the magnitude and persistence of aggregate unemployment is caused by ?s, who are vulnerable to shocks and, once displaced, they cycle through multiple unemployment spells before finding stable employment.View Full Paper PDF
-
Working PaperHires and Separations in Equilibrium
January 2016
Working Paper Number:
CES-16-57
Hiring occurs primarily to fill vacant slots that occur when workers separate. Equivalently, separation occurs to move workers to better alternatives. A model of efficient separations yields several specific predictions. Labor market churn is most likely when mean wages are low and the variance in wages is high. Additionally, over the business cycle, churn decreases during recessions, with hires falling at the beginning of recessions and separations declining later to match hiring. Furthermore, the young disproportionately bear the brunt of employment declines. More generally, hires and separations are positively correlated over time as well as across industry and firm. These predictions are borne out in the LEHD microdata at the economy and firm level.View Full Paper PDF
-
Working PaperHIRES, SEPARATIONS, AND THE JOB TENURE DISTRIBUTION IN ADMINISTRATIVE EARNINGS RECORDS
September 2014
Working Paper Number:
CES-14-29
Statistics on hires, separations, and job tenure have historically been tabulated from survey data. In recent years, these statistics are increasingly being produced from administrative records. In this paper, we discuss the calculation of hires, separations, and job tenure from quarterly administrative records, and we present these labor market statistics calculated from the U.S. Census Bureau's Longitudinal Employer-Household Dynamics (LEHD) program. We pay special attention to a phenomenon that survey data is ill-suited to analyze: single quarter jobs, which we define as jobs in which the hire and separation occur in the same quarter. We explore the trends of hires, separations, tenure, and single quarter jobs in the United States for the years 1998-2010. We discuss issues associated with creating these statistics from quarterly earnings records, and we identify the challenges that remain.View Full Paper PDF
-
Working PaperTechnology Use and Worker Outcomes: Direct Evidence from Linked Employee-Employer Data
August 2000
Working Paper Number:
CES-00-13
We investigate the impact of technology adoption on workers' wages and mobility in U.S. manufacturing plants by constructing and exploiting a unique Linked Employee-Employer data set containing longitudinal worker and plant information. We first examine the effect of technology use on wage determination, and find that technology adoption does not have a significant effect on high-skill workers, but negatively affects the earnings of low-skill workers after controlling for worker-plant fixed effects. This result seems to support the skill-biased technological change hypothesis. We next explore the impact of technology use on worker mobility, and find that mobility rates are higher in high-technology plants, and that high-skill workers are more mobile than their low and medium-skill counterparts. However, our technology-skill interaction term indicates that as the number of adopted technologies increases, the probability of exit of skilled workers decreases while that of unskilled workers increases.View Full Paper PDF
-
Working PaperRanking Firms Using Revealed Preference
January 2017
Working Paper Number:
CES-17-61
This paper estimates workers' preferences for firms by studying the structure of employer-toemployer transitions in U.S. administrative data. The paper uses a tool from numerical linear algebra to measure the central tendency of worker flows, which is closely related to the ranking of firms revealed by workers' choices. There is evidence for compensating differential when workers systematically move to lower-paying firms in a way that cannot be accounted for by layoffs or differences in recruiting intensity. The estimates suggest that compensating differentials account for over half of the firm component of the variance of earnings.View Full Paper PDF
-
Working PaperBusiness Volatility, Job Destruction, and Unemployment
August 2008
Working Paper Number:
CES-08-26
Unemployment inflows fell from 4 percent of employment per month in the early 1980s to 2 percent or less by the mid 1990s and thereafter. U.S. data also show a secular decline in the job destruction rate and the volatility of firm-level employment growth rates. We interpret this decline as a decrease in the intensity of idiosyncratic labor demand shocks, a key parameter in search and matching models of unemployment. According to these models, a lower intensity of idiosyncratic shocks produces less job destruction, fewer workers flowing through the unemployment pool and less frictional unemployment. To evaluate the importance of this theoretical mechanism, we relate industry-level unemployment flows from 1977 to 2005 to industry-level indicators for the intensity of idiosyncratic shocks. Unlike previous research, we focus on the lower frequency relationship of job destruction and business volatility to unemployment flows. We find strong evidence that declines in the intensity of idiosyncratic labor demand shocks drove big declines in the incidence and rate of unemployment. This evidence implies that the unemployment rate has become much less sensitive to cyclical movements in the job-finding rate.View Full Paper PDF
-
Working PaperThe Shifting Job Tenure Distribution
January 2016
Working Paper Number:
CES-16-12R
There has been a shift in the U.S. job tenure distribution toward longer-duration jobs since 2000. This change is apparent both in the tenure supplements to the Current Population Survey and in matched employer-employee data. A substantial portion of this shift can be accounted for by the ageing of the workforce and the decline in the entry rate of new employer businesses. This shift is accounted for more by declines in the hiring rate, which are concentrated in the labor market downturns associated with the 2001 and 2007-2009 recessions, rather than declines in separation rates. The increase in average real earnings since 2007 is less than what would be predicted by the shift toward longer-tenure jobs because of declines in tenure-held-constant real earnings. Regression estimates of the returns to job tenure provide no evidence that the shift in the job tenure distribution is being driven by better matches between workers and employers.View Full Paper PDF
-
Working PaperHow Do Health Insurance Costs Affect Firm Labor Composition and Technology Investment?
September 2023
Working Paper Number:
CES-23-47
Employer-sponsored health insurance is a significant component of labor costs. We examine the causal effect of health insurance premiums on firms' employment, both in terms of quantity and composition, and their technology investment decisions. To address endogeneity concerns, we instrument for insurance premiums using idiosyncratic variation in insurers' recent losses, which is plausibly exogenous to their customers who are employers. Using Census microdata, we show that following an increase in premiums, firms reduce employment. Relative to higher-income coworkers, lower-income workers see a larger increase in their likelihood of being separated from their jobs and becoming unemployed. Firms also invest more in information technology, potentially to substitute labor.View Full Paper PDF
