New Perspectives on Labor Participation, Search and Employment

Paper Session

Friday, Jan. 6, 2017 10:15 AM – 12:15 PM

Hyatt Regency Chicago, Burnham
Hosted By: Econometric Society
  • Chair: Andreas I. Mueller, Columbia University

The Consequences of Long Term Unemployment: Evidence From Matched Employer-Employee Data

Katharine G. Abraham
,
University of Maryland
John C. Haltiwanger
,
University of Maryland
Kristin Sandusky
,
U.S. Census Bureau
James R. Spletzer
,
U.S. Census Bureau

Abstract

Prior research has not been able to sort out the relative importance of pre-existing heterogeneity versus duration dependence to explaining the poor subsequent labor market outcomes realized by the long-term unemployed. This paper uses Current Population Survey data on the unemployed linked to administrative data from state unemployment insurance systems that capture the same individuals’ employment and earnings histories to address this question. We find that, if anything, the long-term unemployed have a stronger prior attachment to the labor market than the short-term unemployed, meaning that fixed individual differences cannot explain their poorer subsequent labor market outcomes. Differences in employment and earnings trajectories explain some of the difference in outcomes, but the poorer subsequent labor market success of the long-term unemployed is mainly a direct consequence of their extended unemployment. Further, these adverse outcomes are manifested primarily along the extensive margin (lower employment probabilities) rather than the intensive margin (lower earnings on jobs that are accepted). Both the long-term and the short-term unemployed fare better when the overall labor market is stronger, but better labor market conditions are not associated with a statistically meaningful narrowing of the outcome gap between the long-term and the short-term unemployed.

Job Search Behavior Among the Employed and Non-Employed

Andreas I. Mueller
,
Columbia University
Jason Faberman
,
Federal Reserve Bank of Chicago
Aysegul Sahin
,
Federal Reserve Bank of New York
Giorgio Topa
,
Federal Reserve Bank of New York

Abstract

Using a unique new survey, we study the relationship between search effort and search outcomes for employed and non-employed job seekers. Our data have extensive information on individuals’ current and previous employment situations, search behavior, job offers, accepted offers, and reservation wages. We find that the unemployed fare much worse than the employed in their job search prospects along several dimensions, despite higher job search effort. The unemployed receive fewer offers per job application, and conditional on an offer, they are offered lower pay, fewer benefits, and fewer hours. Despite this, they are more likely to accept these lower-quality offers but are also much more likely to again engage in job search on their new job. In contrast, employed job seekers receive a higher fraction of both solicited and unsolicited job offers. In fact, the employed that are not searching tend to generate more plentiful and higher-quality job offers than the unemployed. We apply our results to a model of on-the-job search with search frictions and endogenous search effort. A simple application of the estimates to the model suggest that the employed are substantially more efficient in their job search relative to the unemployed.

Changes in Labor Participation and Household Income

Robert Hall
,
Stanford University
Nicolas Petrosky-Nadeau
,
Federal Reserve Bank of San Francisco

Abstract

Since the start of the Great Recession, there has been a substantial decline in the rate of labor force participation (LFPR). A novel contribution of our approach is to examine how this decline varies across the distribution of household income. Using the SIPP, we find that almost all of the decline in the LFPR of 25- to 54-year-olds can be attributed to declining participation by individuals in households in the upper half of the household income distribution. The result that the decline in prime-age LFPR is concentrated in higher-income households continues a trend that started as early as 2001, and is strongest for men. We find similar patterns among 16 to 24 year olds, and no significant difference across household income for the population over 55.

Aggregate Recruiting Intensity

Giovanni L. Violante
,
New York University
Alessandro Gavazza
,
London School of Economics and Political Science
Simon Mongey
,
New York University

Abstract

We develop a model of firm dynamics with random search in the labor market where hiring firms exert recruiting effort by spending resources to fill vacancies faster. Consistent with micro evidence, fast-growing firms invest more in recruiting activities and achieve higher job-filling rates. In equilibrium, individual recruiting decisions of hiring firms aggregate into an index of economy-wide recruiting intensity. We use the model to study how recruiting intensity responds to aggregate shocks, and whether it can account for the dynamics of aggregate matching efficiency around the Great Recession. Productivity and financial shocks can lead to sizable procyclical fluctuations in matching efficiency through recruiting effort. Quantitatively, the main mechanism is that firms attain their employment targets by adjusting their recruitment effort as labor market tightness varies. Instead, fluctuations in new-firm entry have a negligible effect on aggregate recruiting intensity, despite their contribution to aggregate job creations.
Discussant(s)
Steven Davis
,
University of Chicago
Laura Pilossoph
,
Federal Reserve Bank of New York
Thijs van Rens
,
University of Warwick
Richard Rogerson
,
Princeton University
JEL Classifications
  • J0 - General