Category Archives: Unemployment

Employment, Hours, and Earnings Consequences of Job Loss: US Evidence from the Displaced Workers Survey

Source: Henry S. Farber, Journal of Labor Economics 35, no. S1, July 2017
(subscription required)

From the abstract:
Data are used from the 1984–2016 Displaced Workers Surveys (DWS) to investigate the incidence and consequences of job loss, 1981–2015. These data show a record high rate of job loss in the Great Recession, with serious employment consequences for job losers, including very low rates of re-employment and difficulty finding full-time employment. The average reduction in weekly earnings for job losers making a full-time–full-time transition are relatively small, with a substantial minority reporting earning more on their new job than on the lost job. Most of the cost of job loss comes from difficulty finding new full-time employment.

Seattle’s Minimum Wage Experience 2015-16

Source: Michael Reich, Sylvia Allegretto, and Anna Godoey, University of California – Berkeley, Institute for Research on Labor and Employment, Center on Wage and Employment Dynamics (CWED), June 2017

From the abstract:
This brief on Seattle’s minimum wage experience represents the first in a series that CWED will be issuing on the effects of the current wave of minimum wage policies—those that range from $12 to $15. Upcoming CWED reports will present similar studies of Chicago, Oakland, San Francisco, San Jose and New York City, among others. The timing of these reports will depend in part upon when quality data become available. We focus here on Seattle because it was one of the early movers. …. Our results show that wages in food services did increase—indicating the policy achieved its goal—and our estimates of the wage increases are in line with the lion’s share of results in previous credible minimum wage studies. Wages increased much less among full-service restaurants, indicating that employers made use of the tip credit component of the law. Employment in food service, however, was not affected, even among the limited-service restaurants, many of them franchisees, for whom the policy was most binding. These findings extend our knowledge of minimum wage effects to policies as high as $13. …

Press Release

Minimum Wage Increases, Wages, and Low-Wage Employment: Evidence from Seattle
Source: Ekaterina Jardim, Mark C. Long, Robert Plotnick, Emma van Inwegen, Jacob Vigdor, Hilary WethingNBER Working Paper No. 23532, June 2017
(subscription required)

From the abstract:
This paper evaluates the wage, employment, and hours effects of the first and second phase-in of the Seattle Minimum Wage Ordinance, which raised the minimum wage from $9.47 to $11 per hour in 2015 and to $13 per hour in 2016. Using a variety of methods to analyze employment in all sectors paying below a specified real hourly rate, we conclude that the second wage increase to $13 reduced hours worked in low-wage jobs by around 9 percent, while hourly wages in such jobs increased by around 3 percent. Consequently, total payroll fell for such jobs, implying that the minimum wage ordinance lowered low-wage employees’ earnings by an average of $125 per month in 2016. Evidence attributes more modest effects to the first wage increase. We estimate an effect of zero when analyzing employment in the restaurant industry at all wage levels, comparable to many prior studies.

Five Flaws in a New Analysis of Seattle’s Minimum Wage
Source: Rachel West, Center for American Progress, June 28, 2017

A team of faculty and students at the University of Washington was tasked with assessing how Seattle’s 2014 minimum wage ordinance, which is gradually raising the city’s minimum wage to $15 per hour, is affecting low-wage workers. This week, the group released a working paper—without peer review—that looks at the ordinance’s first two phases, under which the minimum wage for most workers increased from $9.47 to $11 per hour in 2015 and then to $13 per hour in 2016.

Methodological flaws plague the group’s approach, causing them to draw conclusions wildly out of step with dozens of studies of similarly sized wage increases cited by both critics and proponents of higher minimum wages. The vast majority of rigorous, credible studies conclude that higher minimum wages have appreciably boosted workers’ earnings with little or no effects on employment. By contrast, the University of Washington researchers conclude that higher minimum wages not only reduced employment and hours worked in Seattle, but that the costs of the wage hike outweigh the benefits for the average low-wage worker—a finding at odds with the conclusions of even the most skeptical mainstream researchers. At the same time, the study’s results suggest—implausibly and largely inexplicably—that the wage hike to $13 per hour caused substantial growth in jobs paying more than $19 per hour in the restaurant industry. That’s just one of several questionable results that should give readers serious pause…..

Seat­tle and the (Method­ol­ogy of the) Eco­nom­ics of Min­i­mum Wage
Source: Ben­jamin Sachs, OnLabor blog, June 26, 2017

….Noam Scheiber also has a good story on the UW pa­per which lays out a cri­tique worth men­tion­ing here. In sum, the em­ploy­ment ef­fects iden­ti­fied by the UW study might be due, not to Seat­tle’s min­i­mum wage in­crease, but to a boom­ing job mar­ket in which high-wage jobs are re­plac­ing low-wage jobs. On this the­ory, the em­ploy­ment “losses” in the low-wage sec­tor that the UW study re­ports would ac­tu­ally just be peo­ple mov­ing from low- to high-wage em­ploy­ment. …

How a Rising Minimum Wage Affects Jobs in Seattle
Source: Norm Scheiber, New York Times, June 26, 2017

Seat­tle and the Eco­nom­ics of Min­i­mum Wage
Source: Ben­jamin Sachs, OnLabor blog, June 26, 2017

….There are, as al­ways, caveats. First, the Wash­ing­ton pa­per has yet to be sub­ject to peer re­view – it was re­leased on­line as an NBER work­ing pa­per. Sec­ond, an­other re­cent study – this one from Berke­ley – found that the Seat­tle or­di­nance “raises pay with­out cost­ing jobs.” As FiveThir­tyEight also re­ports, the Berke­ley study fo­cused ex­clu­sively on the fast food in­dus­try, and the Wash­ing­ton study it­self found no em­ploy­ment ef­fects of the min­i­mum wage hike on the restau­rant in­dus­try. One pos­si­bil­ity, then, is that the Wash­ing­ton study’s broader fo­cus is pick­ing up ef­fects that are missed by the (more tra­di­tional) fo­cus on the restau­rant in­dus­try. Many econ­o­mists, in­clud­ing Jared Bern­stein, how­ever, de­fend the method­olog­i­cal de­ci­sion to fo­cus a min­i­mum wage study on restau­rants. There are also, as al­ways, ad­di­tional method­olog­i­cal crit­i­cisms of the Wash­ing­ton study. (EPI has a press re­lease and pa­per that iden­ti­fies a num­ber of these con­cerns.)

Then there is an im­por­tant caveat in the other di­rec­tion: Seat­tle might be a city in the best po­si­tion to ab­sorb min­i­mum wage in­creases, which means – if the Wash­ing­ton study is right – that the em­ploy­ment ef­fects could be even stronger else­where. ….

The “high road” Seattle labor market and the effects of the minimum wage increase – Data limitations and methodological problems bias new analysis of Seattle’s minimum wage increase
Source: Ben Zipperer and John Schmitt, Economic Policy Institute, June 26, 2017

From the summary:
A team of researchers at the University of Washington has released an analysis of the economic impacts of the 2015 and 2016 increases in the Seattle minimum wage. The study, Jardim et al. (2017), looks at the first two stages of a phased-in set of increases that will eventually take the minimum wage in the city to $15.00 per hour. The authors of the study argue that they find large job losses associated with these first two rounds of increases, in which the minimum wage for most workers rose from $9.47 per hour to $11.00 per hour in April 2015 and then to $13.00 per hour in January 2016.

The authors’ analysis, however, suffers from a number of data and methodological problems that bias the study in the direction of finding job loss, even where there may have been no job loss at all. One initial indicator of these problems is that the estimated employment losses in the Seattle study lie far outside even those generally suggested by mainstream critics of the minimum wage (see, for example, Neumark and Wascher [2008])—as the authors themselves acknowledge.

In this report, we describe the most important shortcomings in the new analysis and make suggestions for how the researchers can attempt to correct for these problems in future iterations of their long-term study of the Seattle minimum wage.
See also: press release

What we know and don’t know about declining labor force participation: A review

Source: Eleanor Krause and Isabel V. Sawhill, Brookings Institution, May 2017

From the summary:

For decades, the portion of prime-age men (ages 25 to 54) in the labor force has been in decline. More recently, the labor force participation rate of prime-age women has stagnated and also declined. This paper addresses the consequences of, and reasons for, these declines, especially among men. A subsequent effort will address appropriate policy responses.

Women’s increasing workforce participation through the late 1990s largely masked the precipitous decline in male participation rates. Men’s rates have fallen about 8 percentage points over the past 60 years. On both fronts, the U.S. is also falling behind other advanced economies. U.S. prime-age female participation fell from 6th to 17th of 22 OECD member countries between 1990 and 2010. Over the same period, the decline in the prime-age male participation rate was the second most severe of the OECD countries, and is now the third lowest among the 34 member countries. The U.S. trends are particularly pronounced for non-Hispanic black men and less-skilled adults. There is now an 11 percentage point gap in participation rates between men with a college degree and those with a high school degree or less—whereas 50 years ago, the two rates were very similar.

Explanations for these trends tend to focus either on the demand for workers or the supply of labor. Trade and technology have reduced the demand for certain types of work, particularly less-skilled labor in fields like manufacturing. Of the two, most economists believe that automation has played the larger role. Manufacturing’s share of GDP has remained relatively stable but, thanks in part to productivity improvements, the sector now employs only two-thirds as many people as it did 30 years ago. Technological change has widened the wage gap between skill levels. While a man with a high school degree earned about three-quarters of the wages of his college-educated counterpart in 1980, he now earns about half as much. At the same time that technology has made certain jobs obsolete, new jobs are being created in other areas (both high-wage managerial and technical jobs and low-wage service sector jobs), but these new jobs often require different skills or pay lower wages…..

The Employment Service-Unemployment Insurance Partnership: Origin, Evolution, and Revitalization

Source: David E. Balducchi, Christopher J. O’Leary, W.E. Upjohn Institute, Upjohn Institute working paper ; 17-269, 2017

From the abstract:
This study traces the origin and evolution of the partnership between the employment service and unemployment insurance programs in the United States. We examine objectives of the framers of the Wagner-Peyser and Social Security Acts that established these programs. Using primary sources, we then analyze early actions of the architects of social insurance to facilitate cooperation between the two programs to meet economic exigencies, grapple with political cronyism, and surmount legal barriers. We also discuss factors that caused changes in the employment service–unemployment insurance partnership over time. We identify reasons for the erosion in cooperation starting in the 1980s, and explain why ever since there has been a continuous decline in service availability. Reviewing evidence on the effectiveness of in-person employment services for unemployment insurance beneficiaries, we suggest ways to revitalize the employment service–unemployment insurance partnership. We explore the source of Wagner-Peyser Act funding, how it was formalized, then eroded, and how it can be renewed.

235,000 Job Growth in February Is Good News for the Economy, But State and Local Government Job Growth Remains Weak

Source: Lucy Dadayan, Donald J. Boyd, Rockefeller Institute of Government, By The Numbers, March 2017

• Nationally, state and local government employment is 1.5 percent below its prior peak, while private sector employment is 6.4 percent above its prior peak.
• State government employment nationally is 2.5 percent below its peak level and local government employment is 1.3 percent below its peak level.
• State government non-education employment, for services such as corrections, hospitals and other health care, public welfare, and highways, has fared the worst among the government subsectors —- currently, 5.5 percent below its peak even though the population has grown 6.9 percent over the same period.
• Local government education and non-education employment are 2.0 percent and 0.8 percent below their respective prior peaks, while elementary and secondary enrollment has risen by more than 2.0 percent during the same period.
• The only subsector that has grown is state government education employment for universities, colleges, and similar services; here employment is up 1.2 percent above the prior peak, but still far weaker than in previous economic recoveries.
• Although state and local government employment did not decline as much during the Great Recession as private sector employment, it has been recovering far more slowly and has regained the jobs lost to the Great Recession.

Dimick on Other Avenues Unions Can Serve their Members (and Encourage Membership)

Source: Matthew Dimick, Workplace Prof blog, Guest Post, February 23, 2017

…A few weeks ago, featured a post I wrote about the Ghent system and progressive federalism. At the end of that post, I referred to “other avenues for Ghent-type experiments” beyond the main one discussed in the article, which would require changes in the current federal-state cooperative system of unemployment insurance. Mentioning these “other avenues” prompted several queries from readers, and I will use this opportunity here at the Workplace Prof Blog to talk about those.

First, some background. To remind readers, the Ghent system is a form of union-administered (but government paid-for) unemployment insurance that has a substantial, positive impact on the rate of union membership in the countries that have it. What makes the Ghent system a prospect for union revitalization in the US is the system of unemployment insurance we have here, which basically incentivizes states to adopt, finance, and administer their own unemployment-insurance systems subject to federal guidelines and oversight by the Secretary of Labor. It also helps that states are given more latitude under federal labor law preemption when it comes to the design and administration of unemployment insurance….

Report to the New Leadership and the American People on Social Insurance and Inequality

Source: Benjamin W. Veghte, Elliot Schreur, and Alexandra L. Bradley (eds.), National Academy of Social Insurance, January 2017

From the abstract:
Our nation’s social insurance infrastructure forms the foundation of economic and health security for American workers and their families. Like all infrastructure, it must be periodically strengthened and modernized if it is to continue to meet the needs of a changing economy and society. This Report presents the new Administration and Congress with a range of evidence-based policy options, developed by the nation’s top social insurance experts, for doing so.

The first part of the Report takes stock of the policy challenges facing existing social insurance programs: Social Security, the major health insurance programs, and Unemployment Insurance. The second part discusses potential new directions for social insurance in coping with emerging needs in the areas of long-term services and supports, caregiving supports, and nonstandard work.

America’s male employment crisis is both urban and rural

Source: Alan Berube, Brookings Institution, December 5, 2016

In the wake of the 2016 presidential election, many analysts have interpreted Donald Trump’s victory as the product of economic anxiety among the white working class—particularly in the smaller towns and rural areas that provided his electoral margin in closely contested states like North Carolina, Michigan, Pennsylvania, and Wisconsin.

This piece does not purport to explain why people voted the way they did, or what role economic factors played in their decisions. Rather, it acknowledges that the state of the economy in small-town and rural America highlighted throughout the campaign and after the election surely deserves attention….