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Skills, Tasks, and Jobs

Paper Session

Sunday, Jan. 8, 2023 1:00 PM - 3:00 PM (CST)

Hilton Riverside, Chequers
Hosted By: Econometric Society
  • Chair: Lance Lochner, University of Western Ontario

The Worker-Job Surplus

Ilse Lindenlaub
,
Yale University
Fabien Postel-Vinay
,
University College London

Abstract

The worker-job surplus - the sum of the worker's and the employer's net values of an employment relationship - is the object that drives decisions in most matching models of the labor market. In this paper, we develop a theory-based empirical method to determine which, from a set of observable worker and job characteristics, impact the worker-job surplus in the data. We exploit the mobility choices of employed workers. Our method further indicates whether workers sort along those surplus-relevant attributes when searching for jobs. It also provides a test of the commonly used single-index assumption, according to which worker and job heterogeneity can each be summarized by scalar indices. We implement our method on US data using the Survey of Income and Program Participation and the O*NET. The results suggest that a relatively sparse model underlies the data. On the job side, a cognitive and an interpersonal skill requirement impact the surplus along with the (dis)amenity of work duration as well as the workplace size. On the worker side, we find that most of the relevant characteristics are symmetric to the selected job requirements. We reject the existence of a single-index representation of these relevant multi-dimensional worker and job attributes. We use our results in a new approach to defining the economy's labor submarkets, highlighting a potentially important application of our methodology.

Skill Prices, Occupations, and Changes in the Wage Structure for Low Skilled Men

Nicolas A. Roys
,
Royal Holloway
Christopher R. Taber
,
University of Wisconsin-Madison

Abstract

This paper studies the effect of the change in demand for occupations on wages for low skilled men. We develop an equilibrium model of occupational assignment in which workers have multi-dimensional skills that are exploited differently across different occupations. We allow for a rich specification of technological change which has heterogeneous effects on different occupations and different parts of the skill distribution. We estimate the model combining four datasets: (1) O*NET, to measure skill intensity across occupations, (2) NLSY79, to identify life-cycle supply effects, (3) CPS (ORG), to estimate the evolution of skill prices and occupations over time, and (4) NLSY97 to see how the gain to specific skills has changed and to identify change in preferences. We have three main findings. First, the reallocation away from manual jobs towards services and changes in the wages structure were driven by demand factors while the supply of skills, selection into different occupations and changes in preferences played lesser role. Second, frictions play an important role in preventing wages in traditional blue-collar occupations from falling substantially relative to other occupations. Finally, while we see an increase in the payoff to interpersonal skills, manual skills still remain the most important skill type for low-educated males.

Estimating a Life-Cycle Generalized Roy Model of Pay and Task Assignment: Compensating Differentials, Discrimination and Racial Gaps

Limor Golan
,
Washington University-St. Louis

Abstract

Pay dispersion and inequality increase with experience; the increase in pay and pay dispersion is accompanied by occupational changes. There are several canonical life-cycle earnings models that explain this fact. Our model is a dynamic Roy model that incorporates a job ladder, and sorting, On-the-Job-Training, Compensating Differentials; our model nests incomplete information about skills and matching, and we develop a two estimator to estimate the model. The specification nest statistical and potentially parameters, estimate the model, and perform counterfactual exercises in order to decompose the source of these long run inequality and pay gaps within and across racial groups, accounting for dynamic selection. In our results, 21% of the total accumulated pay gap after 15 years is explained by higher entry costs of black workers into complex-task occupation and higher non-pecuniary costs of black workers working in occupations with lower representation of black workers. Also, equating the initial skills (test scores and education) and the initial mean differences in beliefs (which reflect differences in initial unobserved skills) explains about 57% of the total gaps in earnings after 15 years. Our estimates indicate that the variance of the unobserved (to the econometricians) expected productivity component higher and is increasing more for white workers. This is consistent with models of statistical discrimination (e.g. Phelps 1972) and may also reflects unobserved promotion and training racial gaps. The observed skill gaps (education and test scores) are the most important factor explaining the long-run pay gaps for workers in the bottom quintile of the initial pay distribution while for workers at the top quintile, the most important factor is the differences in the distribution and evolution of the unobserved component of the pay. While the skill gaps (observed and unobserved) between black and white workers are clearly an important factor in the labor market outcome gaps, frictions, taste differences, and discrimination are important determinants of differences across races in life-cycle labor market outcomes.

Skill Heterogeneity and Aggregate Labor Market Dynamics

John Grigsby
,
Princeton University

Abstract

This paper studies aggregate labor market dynamics when workers have heterogeneous skills for tasks which are subject to non-uniform labor demand shocks. When workers have different skills, movements in aggregate wages partly reflect a reallocation of different workers across tasks and into employment. This ensures that there nearly always exists some combination of task-specific demand shocks that induce aggregate employment and wages to negatively comove even in a frictionless economy. Furthermore, such reallocation effects would be interpreted either as a labor wedge or as a shift in an aggregate labor supply curve in representative agent economies. Developing a method to estimate the multidimensional skill distribution, I show that a frictionless model with realistic heterogeneity can replicate the mean wage increase and employment collapse of the Great Recession. Reduced-form composition-adjustment methods recover positive comovements between employment and wages in recent periods suggesting an increasing role for composition effects through time, which the model rationalizes through changes in the skill distribution and composition of sectoral shocks.
JEL Classifications
  • J24 - Human Capital; Skills; Occupational Choice; Labor Productivity
  • J31 - Wage Level and Structure; Wage Differentials