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  5. Why and How Do Labor Markets Differ?
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Why and How Do Labor Markets Differ?

Paper Session

Tuesday, Jan. 5, 2021 10:00 AM - 12:00 PM (EST)

Hosted By: Labor and Employment Relations Association
  • Chair: Abigail Wozniak, Federal Reserve Bank of Minneapolis

The Long-Lived Cyclicality of the Labor Force Participation Rate

John Coglianese
,
Federal Reserve Board
Tomaz Cajner
,
Federal Reserve Board
Joshua Montes
,
Federal Reserve Board

Abstract

How cyclical is the labor force participation rate (LFPR)? We measure cyclicality by examining the response of state-level LFPRs to exogenous local business cycle shocks, which sidesteps several challenges with measuring LFPR cyclicality from aggregate time series. We find that the LFPR is highly cyclical, but with a significantly longer lag structure than the unemployment rate. After a negative shock, the LFPR steadily declines and does not reach its trough for 4–5 years, well after the unemployment rate has begun to recover. The LFPR remains significantly depressed in the long run after a shock, although this merely reflects changes in the composition of the population induced by the shock, as the demographically-adjusted LFPR fully recovers. We show that shocks spur relative declines in the population of 25–39 year olds in affected states, likely due to migration, which skews the composition of the population towards groups with lower LFPRs. Further, the response of LFPR varies considerably across skill groups, showing larger cyclicality among men, younger workers, and workers with less education. We conclude that failing to account for the cyclical dynamics of LFPR and focusing only on the unemployment rate is likely to give an incomplete picture of the labor market response to business cycles.

The Geography of Jobs

Eliza Forsythe
,
University of Illinois-Urbana-Champaign
Alexander W. Bartik
,
University of Illinois-Urbana-Champaign

Abstract

There are large differences in wages and job availability across different geographic labor markets in the US within even narrowly defined occupations. Labor economists have explained these patterns using moving costs across geographies, selective migration, or differences in unobserved amenities. However, these explanations are built upon the assumption that jobs within occupational categories are similar across space, thus individuals with relevant occupational qualifications should be able transfer these qualifications across labor markets. If instead jobs vary systematically across labor markets, mobility models may over-estimate the expected returns from migration. In this project, we use detailed information on the tasks, technologies, and skills from online job postings to look within the occupational black box and systematically measure how occupations differ across geographies in the tasks they perform, technologies they use, and skills and qualifications they require.

The Response of the Social Safety Net to Recessions

Brad Hershbein
,
W.E. Upjohn Institute
Bryan Stuart
,
George Washington University

Abstract

This paper studies how the social safety net has responded to recessions over the last 50 years. Building on recent evidence that recessions cause hysteresis in local labor markets, we estimate event study models that quantify the response of government transfers in places that experience more versus less severe recessions. We find that while unemployment insurance benefits increase only temporarily during recessions, retirement and health benefits remain persistently elevated. The lasting increase in transfers only partially offsets the decrease in earnings, leading to long-term declines in per-capita income relative to less affected areas. We do not find significant differences in the responsiveness of transfers before and after welfare reform, largely because cash assistance is a small part of the overall transfer response. Long-term income losses disproportionately fall on lower-income individuals.

Re-Examining Regional Income Convergence: A Distributional Approach

Kevin Rinz
,
U.S. Census Bureau
John Voorheis
,
U.S. Census Bureau
Caroline Walker
,
U.S. Census Bureau

Abstract

Evidence that regional income convergence in the United States has slowed in recent decades has focused on mean regional income, but the forces driving this phenomenon may well have effects that differ across the income distribution. Using income data from tax returns linked with Census and survey data, we reconsider patterns of regional income convergence over the last 20 years, generating measures based on the full distribution of income. We also investigate whether patterns of convergence have differed across demographic groups, and the degree to which the social safety net has alleviated or exacerbated this convergence. Finally, we consider potential determinants of the patters of convergence we observe.
Discussant(s)
Peter Ganong
,
University of Chicago
Laura Giuliano
,
University of Miami
JEL Classifications
  • J2 - Demand and Supply of Labor
  • J1 - Demographic Economics