by David H. Autor – #17697 (HE LS PE)

Abstract:

Two ailments limit the effectiveness and threaten the long-term viability of the U.S. Social Security Disability Insurance program (SSDI). First, the program is ineffective in assisting the vast majority of workers with less severe disabilities to reach their employment potential or earn their own way. Second, the program’s expenditures on cash transfers and medical benefits– exceeding $1,500 per U.S. household–are extremely high and growing unsustainably. There is no compelling evidence, however, that the incidence of disabling conditions among the U.S. working age population is rising. This paper discusses the challenges facing the SSDI program, explains how its design has led to rapid and unsustainable growth, considers why past efforts to slow program growth have met with minimal and fleeting success, and outlines three recent proposals that would modify the program to slow growth while potentially improving the employment prospects of workers with disabilities. Because these proposals depart substantially from a program design that has seen little change in half a century, their efficacy is unproven. Additionally, even well-meaning efforts to place the SSDI program on a sustainable trajectory run the risk of creating additional hurdles for claimants who are truly unable to work. Nevertheless, the imminent exhaustion of the SSDI Trust Fund provides an impetus and an opportunity to explore innovative solutions to the longstanding policy challenges posed by the SSDI program.

http://papers.nber.org/papers/W17697

by Thomas C. Buchmueller, John DiNardo, and Robert G. Valletta

We examine the effects of the most durable employer health insurance mandate in the United States, Hawaii’s Prepaid Health Care Act, using Current Population Survey data covering the years 1979 to 2005. Relying on a variation of the classical Fisher permutation test applied across states, we find that Hawaii’s law increased insurance coverage over time for worker groups with low rates of coverage in the voluntary market. We find no statistically significant support for the hypothesis that the mandate reduced wages and employment probabilities. Instead, its primary detectable effect was an increased reliance on exempt part-time workers. (JEL G22, I18, J23, J32)

American Economic Journal: Economic Policy 3 (November 2011): 25–51

Abstract:

Many theoretical models of labor market search imply a tight link between worker flows (hires and separations) and job gains and losses at the employer level. Partly motivated by these theories, we exploit establishment-level data from U.S. sources to study the relationship between worker flows and job flows in the cross section and over time.  We document strong, highly nonlinear relationships of hiring, quit and layoff rates to employer growth in the cross section.  Simple statistical models that capture these cross-sectional relationships greatly improve our ability to account for fluctuations in aggregate worker flows.  We also evaluate how well various theoretical models and views fit the patterns in the data.  Aggregate fluctuations in layoffs are well captured by micro specifications that impose a tight cross-sectional link between worker flows and job flows.  Aggregate fluctuations in quits are not.  Instead, quit rates rise and fall with booms and recessions across the distribution of establishment growth rates, but more so at shrinking employers.  Finally, we use our preferred statistical models – in combination with data on the cross-sectional distribution of establishment growth rates – to construct synthetic JOLTS-type measures of hires, separations, quits and layoffs back to 1990.

http://papers.nber.org/papers/W17294

Abstract:

We use data from the American Time Use Survey (ATUS), covering both the recent recession and the pre-recessionary period, to explore how foregone market work hours are allocated to other activities over the business cycle.  Given the short time series, it is hard to distinguish business cycle effects from low frequency trends by simply comparing time spent on a given category prior to the recession with time spent on that category during the recession.  Instead, we identify the business cycle effects on time use using cross state variation with respect to the severity of the recessions.  We find that roughly 30% to 40% of the foregone market work hours are allocated to increased home production.  Additionally, 30% of the foregone hours are allocated to increased sleep time and increased television watching.  Other leisure activities absorb 20% of the foregone market work hours.  We use our evidence from the ATUS to calibrate and test the predictions of workhorse macroeconomic models with home production.  We show that the quantitative implications of these models regarding the allocation of time over the business cycle matches reasonably well the actual behavior of households.

http://papers.nber.org/papers/W17259

by Carrie H. Colla, William H. Dow, Arindrajit Dube  -  #17198 (HC HE LS)

Abstract:
A key issue surrounding employer benefit mandates is the incidence on workers through wages and employment.  In this paper, we address this question using a pay-or-play policy implemented in San Francisco in 2008 that requires employers to either provide health benefits or contribute to a public option health plan.  We estimate the impact on employment and earnings for the private sector overall, as well as for high impact sectors:  retail and accommodation and food services.

We develop a novel approach for individual case studies by combining both spatial discontinuity in policies and permutation-type inference using other MSAs.  We find that, compared to control counties, employment and earnings patterns in San Francisco did not change appreciably following the policy.  This was true for industries most affected by the mandate, as well as for overall private sector employment.  The results are generally robust to inclusion of different control groups, county-specific time trends, and varying pre-periods.  In contrast to the small effects on the labor market, we do find that about 25% of surveyed restaurants imposed customer surcharges, with the median surcharge being 4% of the bill.  These results indicate that while little of the burden of the mandate fell on San Francisco workers, approximately half of the incidence of the mandate fell on consumers.

http://papers.nber.org/papers/W17198

Abstract:

We analyze how firms renegotiate labor contracts to extract concessions from labor.  While anecdotal evidence suggests that firms tend to renegotiate down wages in times of financial distress, there is no empirical evidence that documents such renegotiation, its determinants, and its magnitude.  This paper attempts to fill this gap.  Using a unique data set of airlines that includes detailed information on wages and pension plans we document an empirical link between airline financial distress, pension underfunding, and wage concessions.

http://papers.nber.org/papers/W17192

Abstract

This paper studies the long-term effects of the business cycle on workers’ future promotions and wages. Using the Swedish employer-employee matched data, we find that a cohort of workers entering the labor market during a boom gets promoted faster and reaches higher ranks. This pro-cyclical promotion cohort effect persists even after controlling for workers’ initial jobs, and explains at least half of the wage cohort effects that previous studies have focused on. We repeat the same analyses using personnel records from a single US company, and obtain the same qualitative results.

Economists have shown that large and persistent differences in productivity levels across businesses are ubiquitous. This finding has shaped research agendas in a number of fields, including (but not limited to) macroeconomics, industrial organization, labor, and trade. This paper surveys and evaluates recent empirical work addressing the question of why businesses differ in their measured productivity levels. The causes are manifold, and differ depending on the particular setting. They include elements sourced in production practices—and therefore over which producers have some direct control, at least in theory—as well as from producers’ external operating environments. After evaluating the current state of knowledge, I lay out what I see are the major questions that research in the area should address going forward.
(JEL D24, G31, L11, M10, O30, O47)

Full text access [PDF, restricted]

Abstract:

We reformulate the Smets-Wouters (2007) framework by embedding the theory of unemployment proposed in Gali (2011a,b).  We estimate the resulting model using postwar U.S. data, while treating the unemployment rate as an additional observable variable.  Our approach overcomes the lack of identification of wage markup and labor supply shocks highlighted by Chari, Kehoe and McGrattan (2008) in their criticism of New Keynesian models, and allows us to estimate a “correct” measure of the output gap.  In addition, the estimated model can be used to analyze the sources of unemployment fluctuations.

http://papers.nber.org/papers/W17084

A step in the right direction. (This paper has been out for a while, but is finally an NBER working paper. )

Journal of Economic Perspectives 25(2) [pdf, gated; ungated version here]

In this paper, we show that the substitution of imported for domestically produced goods and services—often known as offshoring—can lead to overestimates of U.S. productivity growth and value added. We explore how the measurement of productivity and value added in manufacturing has been affected by the dramatic rise in imports of manufactured goods, which more than doubled from 1997 to 2007. We argue that, analogous to the widely discussed problem of outlet substitution bias in the literature on the Consumer Price Index, the price declines associated with the shift to low-cost foreign suppliers are generally not captured in existing price indexes. Just as the CPI fails to capture fully the lower prices for consumers due to the entry and expansion of big-box retailers like Wal-Mart, impor t price indexes and the intermediate input price indexes based on them do not capture the price drops associated with a shift to new low-cost suppliers in China and other developing countries. As a result, the real growth of imported inputs has been understated. And if input growth is understated, it follows that the growth in multifactor productivity and real value added in the manufacturing sector have been overstated. We estimate that average annual multifactor productivity growth in manufacturing was overstated by 0.1 to 0.2 percentage points and real value added growth by 0.2 to 0.5 percentage points from 1997 to 2007. Moreover, this bias may have accounted for a fifth to a half of the growth in real value added in manufacturing output excluding the computer and electronics industry.