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  5. Labor Market Competition and the Political Economy
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Labor Market Competition and the Political Economy

Paper Session

Saturday, Jan. 7, 2023 10:15 AM - 12:15 PM (CST)

Hilton Riverside, Steering
Hosted By: Labor and Employment Relations Association
  • Chair: Sydnee Caldwell, Microsoft Research

Local Labor Markets Left Behind? How Recessions Reshape Employment Dynamics Among Firms and Workers

Bryan Stuart
,
Federal Reserve Bank of Philadelphia
Christopher Goetz
,
U.S. Census Bureau
Brad Hershbein
,
W.E. Upjohn Institute for Employment Research

Abstract

U.S. local labor markets with greater employment declines during recessions experience reductions in economic activity--including employment, employment-population ratios, and earnings per worker--that are highly persistent. Drawing upon multiple confidential and proprietary data sources, including the Longitudinal Business Database and the Longitudinal Employer-Household Dynamics merged to job postings at the firm-geography level, this paper examines the mechanisms that drive local labor market hysteresis. In particular, we estimate extended Abowd-Kramarz-Margolis models to understand how the joint distributions of firm and worker "fixed effects" were differentially affected across areas more or less affected by the early 2000s and 2007-2009 recessions. We further investigate how assortative matching between workers and firms changes and how the skill mix demanded by firms evolves, as well as the extent to which these effects are moderated by initial measures of labor market competition. We discuss the implications of our findings for policies to improve local labor market dynamics.

Do Firms Value Court Enforcement of Noncompete Agreements? A Revealed Preference Approach

Takuya Hiraiwa
,
University of Maryland
Michael Lipsitz
,
Federal Trade Commission
Evan Starr
,
University of Maryland
Bledi Taska
,
Lightcast

Abstract

We study the extent to which firms value the legal enforceability of noncompete agreements (NCAs) by examining state laws that established wage thresholds below which non-competes were unenforceable. If firms value the ability to enforce NCAs in court, as suggested by efficient contracting theories, then the discontinuity in NCA enforceability at a specific wage threshold should encourage the firm to take workers earning just below the threshold and raise their wages up to the threshold after the law is passed. Using job posting data and administrative data with difference-in-difference designs, our main results suggest that firms do not value the enforceability of NCAs for workers earning either $13 an hour or $100k per year, including even in high-tech industries where efficiency arguments related to NCAs are stronger. These results are consistent with arguments in which firms value the in terrorem effect of NCAs--regardless of what the law is--are suggestive of the value of other tools that firms already have to protect the same interests.

The Labor Demand Side of Involuntary Part-time Employment

Hyeri Choi
,
University of Pennsylvania
Ioana Marinescu
,
University of Pennsylvania

Abstract

Involuntary part-time employment is a measure of labor market slack that goes beyond the unemployment rate and broadens our understanding of the state of the labor market. Our study examines the determinants of involuntary part-time employment rates by accounting for both supply and demand channels of the labor market. We investigate the role of labor demand by focusing on job vacancies, and labor supply by focusing on unemployment. We use big data on the near universe of online job vacancies collected by Burning Glass Technologies, and the Current Population Survey from 2003 to 2021. We find that, within the commuting zone by 6-digit SOC cell, a ten percent increase in unemployment rate increases the share of involuntary part-time rate by 0.22 percentage points, while a ten percent increase in job vacancies decreases the share of involuntary part-time rate by 0.06 percentage points. Overall, we conclude that higher labor supply and lower labor demand increase involuntary part-time employment. We also provide suggestive evidence that labor market power as measured by labor market concentration may additionally increase involuntary part-time employment. Our study shows that workers are more likely to have their preferred work hours when there are more employers that they can work for.

The Dynamics of Power in Labor Markets: Monopolistic Unions versus Monopsonistic Employers

Samuel Dodini
,
Norwegian School of Economics
Kjell Salvanes
,
Norwegian School of Economics
Alexander Willén
,
Norwegian School of Economics

Abstract

This paper brings together the modern research on employer power and employee power by empirically examining the effects of unionization on worker earnings, employment, and inequality across differently concentrated markets. Exploiting national tax reforms to union membership dues as exogenous shocks to union density, we show that high levels of unionization mitigate the negative wage and employment effects generated by imperfect competition. We also identify considerable effect heterogeneity with respect to worker types across differentially concentrated markets, and show that this has major implications for the role of unions in shaping labor market wage inequality.

Discussant(s)
Evan Starr
,
University of Maryland
Hyeri Choi
,
University of Pennsylvania
JEL Classifications
  • J4 - Particular Labor Markets
  • J2 - Demand and Supply of Labor