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Posts Tagged ‘wages’

The Long-Term Effects of Birth Control

A new working paper (PDF; abstract) by Martha J. Bailey, an economics professor at the University of Michigan, analyzes the effects of increased access to birth control in the 1960s and 1970s:

This paper assembles new evidence on some of the longer-term consequences of U.S. family planning policies, defined in this paper as those increasing legal or financial access to modern contraceptives. The analysis leverages two large policy changes that occurred during the 1960s and 1970s: first, the interaction of the birth control pill’s introduction with Comstock-era restrictions on the sale of contraceptives and the repeal of these laws after Griswold v. Connecticut in 1965; and second, the expansion of federal funding for local family planning programs from 1964 to 1973. Building on previous research that demonstrates both policies’ effects on fertility rates, I find suggestive evidence that individuals’ access to contraceptives increased their children’s college completion, labor force participation, wages, and family incomes decades later.

Why It's Hard to Find a Used Bicycle in Denmark

Visiting friends in Copenhagen and cycling around the city, I wondered why so many bicycles were new (and, having experienced Scandinavian pricing, expensive). When I lived in England, I bought a three-speed BSA bicycle from the wonderful Chris Lloyd Bikes repair shop for only £60 (about $100). The bicycle had already lasted 40 or 50 years; according to Laplace’s rule of succession, it would probably last another 40 or 50 years — at least with regular maintenance. Which I provided. When any problem turned up, I took the bicycle back to Chris Lloyd, who set it right for a right price.

That’s the difference from Denmark, with one of the world’s highest hourly wages.

Same Job, Same Wage?

Every time I visit Australia, one of the first things I see in the news is a discussion of minimum wages. Pay rates in Australia are to some extent set by the government; these days by the Fair Work Commission.  Today there is a news story that a labor union will seek to have teenagers paid the same wage as adults for the same job.  This increase in youth wages will decrease the quantity of young workers demanded, especially as that demand is typically quite elastic. Worse still, this will prevent some kids from obtaining job experience, thus reducing their human capital and making them less employable in the future.  As Peter Seeger sang, “When Will They Ever Learn?”

Does Military Service Increase Future Wages?

In this month’s American Economic Journal, David Card and Ana Rute Cardoso explore the relationship between military service and future wages (abstract; PDF): 

We provide new evidence on the long-term impacts of peacetime conscription, using longitudinal data for Portuguese men born in 1967. These men were inducted at age 21, allowing us to use preconscription wages to control for ability differences between conscripts and nonconscripts. We find a significant 4-5 percentage point impact of service on the wages of men with only primary education, coupled with a zero effect for men with higher education. The effect for less-educated men suggests that mandatory service can be a valuable experience for those who might otherwise spend their careers in low-level jobs.

Does Raising the Minimum Wage Increase Unemployment?

Conventional wisdom holds that instituting or raising the minimum wage will increase unemployment. But a recent paper by Jeremy Magruder, an economist at Berekley, finds the opposite effect. Magruder examines the case of Indonesia in the 1990s, “where real minimum wages rose rapidly in a varied way and then dropped quickly with the inflation rate in the South East Asian financial crash.” Here’s an excerpt:

When minimum wages rose in one district relative to their neighbors, that district observed an increase in formal sector employment and a decrease in informal employment. It also observed an increase in local expenditures, which is consistent with the hypothesized mechanism of the big push: that local product demand increases labor demand. Moreover, this increase was only observed in local industries which can be industrialized and do supply local demand, supporting the model further. Tradable manufacturing firms saw no growth in employment, and un-tradable, but non-industrializable services saw an increase in informal employment.

Did Risk of Divorce Drive Boomer Women to Increase Their Education?

A new working paper from authors Raquel Fernandez and Joyce Cheng Wong highlights the stark differences in the lives of two generations of American women: those born in 1935 and those born just 20 years later in 1955. The authors found that education, wage structure and divorce were the main causes to changes in labor force participation.

From the abstract:

Women born in 1935 went to college significantly less than their male counterparts and married women’s labor force participation (LFP) averaged 40% between the ages of thirty and forty. The cohort born twenty years later behaved very differently. The education gender gap was eliminated and married women’s LFP averaged 70% over the same ages… We find that the higher probability of divorce and the changes in wage structure faced by the 1955 cohort are each able to explain, in isolation, a large proportion (about 60%) of the observed changes in female LFP.

Explaining the Black-White Wage Gap

As of 2010, black men in America earned 74.5 percent of a typical white man’s wage; black women earned 69.6 percent. A new paper from Harvard’s Roland Fryer (certified genius), Princeton’s Devah Pager and Jorg L. Spenkuch of the University of Chicago examines some of the factors driving the black-white wage gap.
Using data from unemployed workers in New Jersey who sought employment for up to 12 weeks, the authors show that racial discrimination accounts for one-third of the wage difference. They also estimate that blacks have a 7 percent lower reservation wage than their white counterparts at a comparable job that demands a comparable skill level. Fryer and his colleagues control for skill level by measuring the job applicants’ wage at their previous job against the wage they were seeking.
Here’s the abstract:

Do Lower Wages and Higher Unemployment Increase Voter Turnout?

A recent study by Kerwin Kofi Charles and Melvin Stephens Jr argues that increases in wages and employment reduce voter turnout in gubernatorial elections, though not in presidential contests.
From the abstract:

This paper argues that, since activities that provide political information are complementary with leisure, increased labor market activity should lower turnout, but should do so least in prominent elections where information is ubiquitous. Using official county-level voting data and a variety of OLS and TSLS models, we find that increases in wages and employment: reduce voter turnout in gubernatorial elections by a significant amount; have no effect on Presidential turnout; and raise the share of persons voting in a Presidential election who do not vote on a House of Representative election on the same ballot.

Enlisting in the Military Increases Earnings, But Only If You Stick Around

A new RAND research report prepared for the U.S. Army explores the effect of military enlistment on individual earnings and the labor market. The authors used data from applicants to “active-component enlisted service” from 1989 through 2003, and followed them for up to 18 years. From the report:

The authors find that military enlistment increases earnings in both the short and long-term: The percentage increase in earnings attributable to enlistment is about 40 percent in the first few years following application and diminishes to about 11 percent 14–18 years following application. Enlistment significantly delays college education in the short run. In the longer run, enlistment slightly increases the likelihood of attaining a two-year college degree, but it also decreases the likelihood of attaining a four-year college degree, especially among higher-aptitude youth.

How Does High Unemployment Affect Wages of Those Who Remain Employed?

Of course higher unemployment generally raises unemployment among men, women and minorities. But how does it affect the wages of workers who keep their jobs? I believe a new paper that I coauthored with Jeff Biddle is the first to use large amounts of data to address this question about cycles in wage discrimination. Here’s the abstract:

Using CPS data from 1979-2009 we examine how cyclical downturns and industry-specific demand shocks affect wage differentials between white non-Hispanic males and women, Hispanics and African- Americans. Women’s and Hispanics’ relative earnings are harmed by negative shocks, while the earnings disadvantage of African-Americans may drop with negative shocks. Negative shocks also appear to increase the earnings disadvantage of bad-looking workers. A theory of job search suggests two opposite-signed mechanisms that affect these wage differentials. It suggests greater absolute effects among job-movers, which is verified using the longitudinal component of the CPS.

How Is This Economic Recovery Unlike the Rest?

A recent study by a team of economists at Northeastern University’s Center for Labor Market Studies argues that the current economic recovery is the worst since World War II for worker pay and job growth — but the best for corporate profits. The headline:

Over this six-quarter period [from Q2 of 2009 to Q4 of 2010], corporate profits captured 88% of the growth in real national income while aggregate wages and salaries accounted for only slightly more than 1% of the growth in real national income.

That’s right. Of the $528 billion in real national income gained between the second quarter of 2009 and the fourth quarter of 2010, pre-tax corporate profits accounted for $464 billion, while wages rose by just $7 billion.

FREAK-est Links

MIT turns 150, women prefer sad men to happy ones, an interactive map of wages in cities across the U.S., and more.

The Demand for Econ Professors

My Department chairman is mystified: You would think that with the crisis in public budgets, the demand for new economics faculty members would have shifted leftward. Similarly, with graduate students having delayed entry into the market, the supply of new Ph.D.s this year would have shifted rightward. Together, these changes should have lowered the price (wage) that the market pays new Ph.D.s.


A student writes that she had a problem: An armadillo died in her family’s front yard, and its odor was attracting vultures.

A Very Interesting Paragraph From …

… Economic Lives: How Culture Shapes the Economy, by Viviana A. Zelizer, an economic sociologist at Princeton: Suppose for a moment that this is the year 2096. Let’s take a look at American families: although by now money often takes postelectronic forms unfamiliar to the twentieth century, in the “traditional” home, “housewives” and “househusbands” receive monthly stipulated sums of money as salaries from their wage-earning spouses.

Personnel Economics: Paying the Babysitter

Very applied personnel economics. During an upcoming stay in Florida with the extended family, all six adults want to go out to a fancy dinner, leaving the six kids alone (since their parents say the older ones – boy, 14; boy, 13; girl, 12; girl, 11 – can care for the little boys, ages 7 and 4). The older ones have had a lot of successful babysitting experience, and their parents say they typically get paid. But what payment mechanism is both efficient (will induce careful babysitting) and equitable?

Technology and Trade

Are imports from low-wage countries driving technology advancements in the U.S.?

The Economics of Superstardom

Labor economists use the term “superstar” very specifically, based on a wonderful paper by the late Sherwin Rosen: A superstar is one of the very top people in an occupation offering huge pay because performances are widely reproducible (through recordings, TV, movies, books, etc.). (By this definition it is hard to imagine an economist superstar!)

Trading Overtime

The latest Economist has an article about an Italian firm whose workers negotiated a deal during the recession for time off with no pay cut in exchange for promises to work overtime without extra pay when the firm’s demand recovers.

What Do 3,000 Years Do to Wages?

One of the better-known biblical passages, Leviticus 27:1-7, lists the value of pledges of silver to the temple based on the value of a person: 50 shekels for a man between the ages of 20 and 60, 30 shekels for a woman of the same age, 15 shekels for a man over 60, and 10 shekels for a woman over 60. Once we ignore differences in labor-force participation, the earnings ratios today are not that far from what was expected 3,000 years ago.

The Economic Value of Popularity

It probably seems obvious to most people that being likeable and having good friends could be valuable in life. Since most economists are neither likeable nor have good friends, it is an idea that hasn’t been studied by economists until now. My friend Gabriella Conti and a host of co-authors try to quantitatively measure the association between high-school popularity and . . .

If Your Income Goes Up, Will You Watch TV in the Bathroom?

In the long run, the increasing opportunity cost of people’s time, as wages rise, is one of the most important driving forces in economic behavior. Much of our racing around is due to adjustments to the increasing relative scarcity of time compared to income, as are efforts to introduce time-saving technology. A neat example of such an innovation is the . . .

Using the Minimum Wage to Beat the Competition

Germany is considering a new government-imposed minimum wage — a price floor in the labor market — to apply to postal carriers and related workers. One of the major proponents of the plan has been one of Germany’s biggest employers — its privatized postal service, Deutsche Post. One might wonder why a big employer is pushing a plan that might . . .

The FREAK-est Links

Can a future of Internet gridlock be avoided? Corporate prediction markets conference kicks off in Kansas City, Mo. A breakdown of Halloween spending. Expert debunks myths about current U.S. wages and productivity.