This website uses cookies.

By clicking the "Accept" button or continuing to browse our site, you agree to first-party and session-only cookies being stored on your device to enhance site navigation and analyze site performance and traffic. For more information on our use of cookies, please see our Privacy Policy.

« Back to Results

Household Balance Sheet

Paper Session

Sunday, Jan. 5, 2020 8:00 AM - 10:00 AM (PDT)

Manchester Grand Hyatt, Mission Beach C
Hosted By: Society of Government Economists
  • Chair: Martha Bailey, University of Michigan

The Effect of the Employer Match and Defaults on Workers’ TSP Saving Behavior

Justin R. Falk
,
U.S. Congressional Budget Office
Nadia S. Karamcheva
,
U.S. Congressional Budget Office

Abstract

Policymakers are weighing options that would change the retirement system for federal workers by shifting more of their deferred compensation from the defined benefit plan toward the defined contribution plan, called the Thrift Savings Plan (TSP). We use administrative longitudinal data on federal workers’ demographics, compensation, and TSP behavior to estimate the effects of an employer match and plan default options on workers’ TSP savings behavior and the cost of employer contributions. We rely primarily on two sources of exogenous variation stemming from policy changes to the TSP: the availability of an employer match for workers hired after 1983 and the introduction of automatic enrollment for workers hired after July 2010. Further, we develop a discrete choice model that can predict how simultaneous changes in the default rate and matching structure affect contributions. That empirical model is flexible enough to accommodate behavior rooted in both neoclassical models and theories from behavioral economics. The neoclassical specification indicates that the match has little effect on employee contributions. But a specification based on psychological anchoring fits the data better and shows that a match can affect employee contributions far more than a default contribution rate. We find that raising the matching threshold from zero percent to 5 percent leads to employees contributing 3.3 percent more of their salaries to TSP. In contrast, an increase in the default contribution rate from zero percent to 3 percent increases employee contributions by 0.3 percent of their salary.

Maternal Labor Force Dynamics: Participation, Earnings, and Employer Changes

Danielle H. Sandler
,
U.S. Census Bureau
Nichole Szembrot
,
U.S. Census Bureau

Abstract

This paper describes the labor dynamics of U.S. women after they have had their first and subsequent children. We build on the child penalty literature by showing the heterogeneity of the size and pattern of labor force participation and earnings losses by demographic characteristics of mothers and the characteristics of their employers. The analysis uses longitudinal administrative earnings data from the Longitudinal Employer-Household Dynamics database combined with the Survey of Income and Program Participation survey data to identify women, their fertility timing, and employment. We find that women experience a large and persistent decrease in earnings and labor force participation after having their first child. The penalty grows over time, driven by the birth of subsequent children. Non-white mothers, unmarried mothers, and mothers with more education are more likely to return to work following the birth of their first child. Conditional on returning to the labor force, women who change employers earn more after the birth of their first child than women who return to their pre-birth employers. The probability of returning to the pre-birth employer and industry is heterogeneous over both the demographics of mothers and the characteristics of their employers.

How Do Mortgage Rate Resets Affect Consumer Spending and Debt Repayment? Evidence from Canadian Consumers

Xiaoqing Zhou
,
Federal Reserve Bank of Dallas
Katya Kartashova
,
Bank of Canada

Abstract

We study the causal effect of mortgage rate changes on consumer spending, debt repayment, and defaults during an expansionary and a contractionary monetary policy episode in Canada. Our identification takes advantage of the fact that the interest rates of short-term fixed-rate mortgages (the dominant product in Canada's mortgage market) have to be reset according to the prevailing market interest rates at predetermined time intervals. Our empirical strategy exploits this exogenous variation in the timing of mortgage rate resets. We find asymmetric responses of consumer durable spending, deleveraging, and defaults. These results can be rationalized by the cash-flow effect in conjunction with changes in consumers' expectations about future interest rates. Our findings help to understand the responses of the household sector to changes in the interest rate, especially in countries where variable-rate, adjustable-rate, and short-term fixed-rate mortgages are prevalent.

Moving Out? The Increasing Prevalence of Living with Parents

Gray Kimbrough
,
American University

Abstract

The prevalence of young American adults living with parents dropped dramatically in the middle of the century. After increasing relatively gradually in the 1970s, 80s, and 90s, living with parents increased rapidly after 2000. In recent years, adults under 35 have reported living with parents at a higher rate than at any time in the previous five decades. These changes coincide with significant changes in labor market conditions for young and less-educated workers, the Great Recession and its aftermath, and dramatic shifts in housing prices. Using data from the decennial Census, American Community Survey, and Current Population Survey, I establish basic facts about parental coresidence from the beginning of the twentieth century through the present. Disaggregating observed effects by gender, education, race, and ethnicity, I produce a comprehensive picture of these dramatic changes in living with parents among young American adults.
Discussant(s)
Yichen Su
,
Federal Reserve Bank of Dallas
Elena Patel
,
University of Utah
Alexander B. Ufier
,
Federal Deposit Insurance Corporation
Meta Brown
,
Stony Brook University
JEL Classifications
  • E0 - General
  • J0 - General