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  5. Workers' Outside Options and Welfare
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Workers' Outside Options and Welfare

Paper Session

Friday, Jan. 5, 2024 2:30 PM - 4:30 PM (CST)

Grand Hyatt, Crockett C/D
Hosted By: Labor and Employment Relations Association
  • Chair: Marta Lachowska, W.E. Upjohn Institute for Employment Research

Unemployment Insurance Extensions, Labor Market Concentration, and Match Quality

David Wasser
,
U.S. Census Bureau

Abstract

: Unemployment insurance (UI) extensions can improve the bargaining power of job seekers relative to employers by improving workers' outside options. In this paper, I investigate whether the effects of UI extensions are different for workers exposed to higher levels of local labor market concentration, a potential source of employer market power. I exploit measurement error in state unemployment rates that led to quasi-random assignment of UI durations in the U.S. during the Great Recession. Using matched employer-employee data from the Longitudinal Employer Household Dynamics program, I find that UI extensions lengthen nonemployment durations by one week and cause economically meaningful but not statistically significant increases in earnings. The UI-earnings effect is significantly lower at higher levels of concentration, while there is no difference in the UI-duration effect. The lower UI-earnings effect is driven by differences at the extremes of the distribution of concentration. Workers exposed to higher concentration also are slightly more likely to change workplaces, local labor markets, and industries following an extension, but they are not induced to match into less-concentrated markets. My results imply that the benefits of more generous UI, in terms of match quality, are attenuated at higher levels of concentration, and so UI policy that accounts for local concentration is warranted.

Labor Market Competition and Its Effect on Firms and Local Communities

Samuel Dodini
,
Norwegian School of Economics
Katrine Loken
,
Norwegian School of Economics
Alexander Willén
,
Norwegian School of Economics

Abstract

We isolate the consequences of increased labor market competition on the entire ecosystem of local communities using unique features of the Scandinavian labor market. A shock to labor mobility from Sweden to Norway caused a substantial increase in labor competition for Swedish firms on the border with Norway. Using individual-level register data linked across the two countries, we show that Swedish firms respond by raising worker wages relative to productivity and reducing their workforces. A compositional change in the workforce results in a drop in the average quality of workers, generating a decline in firm value added and a higher risk of firm exit. The negative effects on firms spill over to the local communities, which experience population flight, declining business activity, increased inequality, and changing political sentiments. These effects persist for at least a decade after the initial shock. We conclude that changes to workers’ outside options can have a dramatic and persistent effect on local communities and send ripples across all segments of society, even in countries with automatic stabilizers specifically designed to blunt the impact of local shocks.

The Response of Wages to Rejected Offers

Junjie Guo
,
University of Wisconsin-Madison

Abstract

Using the Survey of Consumer Expectations, which asks employed workers to report their salaries and job offers every four months, we find that rejecting an outside offer does not have a significant effect on a worker's salary with the current employer, the expected probability that the current employer will match a job offer with a higher salary from another firm, and the employed worker's reservation salary for another job. The results suggest that wage renegotiation in response to changes in an employed worker's outside option does not play a significant role for individual wages.

New Evidence on Employee Noncompete, No Poach, and No Hire Agreements in the Franchise Sector

Peter Norlander
,
Loyola University-Chicago

Abstract

This paper presents new evidence about the prevalence, source, scope, content, and variety of anti-competitive behavior in the labor market. Drawing from a text corpus of 17,785 franchise disclosure filings, I find that 26% of filings from January 2011-August 2022 contained an employee noncompete clause that requires franchisees to bar employees from working for a competitor after leaving. Further, 44% contained a non-solicitation clause barring recruitment between firms, and 25% contain a no hire clause. Using new open-source, replicable methods to classify unstructured text, this paper also publicly releases: a document corpus, the software used to analyze the data, a knowledge base of rules to detect anti-competitive clauses, and an opensource machine learning classifier to detect no poach clauses. While prior evidence on anti-competitive practices largely draws from individual complaints, survey data, and limited hand-coded samples, this paper spotlights a large and representative sample of previously hidden inter-firm contracts that block employee mobility and describes tools that can automatically identify future unseen instances.

Discussant(s)
David Wasser
,
U.S. Census Bureau
Junjie Guo
,
University of Wisconsin-Madison
JEL Classifications
  • J3 - Wages, Compensation, and Labor Costs
  • J1 - Demographic Economics