Household job search: A theoretical and empirical model

This article links the literature on family decision making and the economics of job search by examining job search by an unemployed individual within a household context. A theoretical model was developed which demonstrates the interdependence of the utility of household members when one is searching for work. The costs of search are borne by all household members while the benefits are captured in the searcher's expected future wage. A reservation wage was shown to be determined by household financing options, and the perception of relevant labor market parameters. An empirical model of the reservation wage for a sample of unemployment insurance recipients was estimated using two-stage least squares. Results, reported for male and female subgroups, support the hypotheses derived from the household job search model. In particular, the reservation wage was shown to depend on unemployment duration, labor market conditions, increased labor force participation of other household members, use of household assets to finance search, existence of dependents, and unemployment insurance benefits.     

QUIT BEHAVIOR UNDER IMPERFECT INFORMATION: SEARCHING, MOVING, LEARNING

The paper provides a search ––– theoretic interpretation of a well-known empirical regularity ––– the inverse relationship between quit rates and job tenure. We consider a setting where the employed job searcher has incomplete information about non-wage job attributes at the time acceptance decisions are made; hence jobs will be accepted (or refused) without full knowledge of the value of the offers. The model implies that workers with long tenure will be less likely to quit, holding wage rates constant. We also show that a risk-neutral worker is willing to accept a wage offer that falls below his current "full" wage (in the absence of moving costs).     

UNCERTAINTY AND STICKY-DOWNWARD BUT UPWARD-MOBILE WAGES

The usual search models of unemployment hold that firms do not offer wage cuts to employees in time of slack demand because the employees have alternatives open to them at wages higher than the reduced wage that would be required to maintain full employment. This paper extends these models by considering employees as choosing in conditions of uncertainty and showing that refusal to accept a wage cut is often rational in the absence of a higher alternative wage. Additional implications are derived for union behavior and simultaneous inflation and unemployment.     

Employment effects of spatial dispersal of refugees

Refugees subjected to a spatial dispersal tend to be assigned to a location outside the immigrant-dense cities. We argue that such locations are associated with low place utility. Our partial equilibrium search model with simultaneous job and residential location search predicts that the reservation wage for local jobs decreases with place utility. We test the theoretical prediction by estimating the effects of characteristics of the location of assignment on the transition rate into the first job. Our sample is male refugees aged 30–59 who were subjected to the Danish spatial dispersal policy carried out in the period 1986–1998. We find little empirical support for the theoretical prediction. Empirically we find that the transition rate into the first job decreases with the local population size and the number of immigrants while the effect of the local number of co-nationals is insignificant.     

Unemployment Transitions among Brazilians in the United States and Canada

This study uses the job search framework to examine the unemployment experiences of Brazilian immigrants in the North American labour force. Primary data gathered in Canada and the United States is used in these analyses. The model generally used to monitor transitions among the native‐born was modified to make it more appropriate to the immigrant experience. To do this a composite model was constructed that incorporates variables unique to the immigrant experience. Event history analyses revealed that, in general, job search theory is very relevant for examining the transitions of immigrants. However, not all standard measures behaved as predicted (e.g. reservation wage). Several immigrant specific variables were very significant (e.g. target earner and legal status) and improved the overall model fit. Brazilians who worked primarily with other co‐ethnics were more likely to become re‐employed than those who did not, while working for a Brazilian employer had no effect on being re‐employed. US/Canadian comparisons also revealed that residents of Canada endured longer periods of unemployment. We believe this result is because Canadian residents had greater access to public services and, as such, were able to have higher reservation wages.     

Short Term Gain, Long Term Pain

This paper examines the role of informal job search methods on the labour market outcomes of displaced workers. Informal job search methods could alleviate short-term labour market difficulties of displaced workers by providing information on job opportunities, allowing them to signal their productivity and may mitigate wage losses through better post-displacement job matching. However if displacement results from reductions in demand for specific sectors/skills, the use of informal job search methods may increase the risk of job instability. While informal job search methods are associated with lower wage losses, they lead to increased job instability and increased risk of subsequent job displacement.     

Pensions and job search: Survey evidence from unionized workers in canada

Research on the disincentives for quitting under employer-sponsored pension plans have limited generalizability as tests of the implicit contract thesis because of the way that job changing, pension back-loading, and plausible alternative explanations for pension effects have been operationalized. Using a unique data set that addresses some of these concerns, I find that pension back-loading and insecurity about the viability of a long-term employment contract are quantitatively the most significant determinants of job search intentions, followed by other seniority related benefits, such as vacation pay and shared investments in firm-specific training. No support for pension information, wage tilt, or efficiency wage arguments is found. Males and the better educated are also more likely to intend to search. Implications for theory, policy, and future research are discussed. I thank Morley Gunderson for helpful comments made on an earlier draft of this paper. Financial assistance from the Social Sciences and Humanities Research Council is gratefully acknowledged.     

OPTIMAL STRATEGIES FOR WORKERS ON TEMPORARY LAYOFF

In this paper we analyze the worker's behavior when faced with job offers which include possible temporary layoff spells of varying (known) durations. We show that of the three strategies which can be optimal, two involve search in all or part of the layoffs. We also show that the duration of any particular spell plays no role in determining which strategy is optimal to pursue. And finally, we develop an index for evaluating jobs with different wage and layoff probabilities and show that the worker's reservation wage monotonically increases, decreases or remains constant during the course of a layoff.     

ECONOMIC SEARCH: AN EXPERIMENTAL STUDY

This paper presents results of experiments designed to test several of the hypotheses present in the theoretical literature on "optimal" economic search. First we test whether the subjects (searchers) actually search for wages in ways that are consistent with setting an optimal reservation wage. We then proceed to determine experimentally the effects of risk aversion, increased search costs, changes in risk (brought about by a mean-preserving transformation of the distribution of wage offers), the presence or absence of recall, the existence of a finite horizon, and the searcher's state of knowledge about the underlying distribution of wages. In general, we find that the searchers exhibit behavior that is consistent with that predicted by theory. Differences between risk neutral and risk averse searchers are found, and the responses of both groups to changes in search costs, in the degree of risk, or in the state of knowledge are consistent with theoretical predictions.     

THE DURABILITY OF HUMAN CAPITAL: SOME NEW EVIDENCE

This paper analyzes the effect of chronological aging, experience, job search, change of job and/or employer, and formal training on the wage growth of a sample of young men. Following the human capital literature, wage growth directly corresponds to human capital and the analysis allows for the assessment of the durability or rate of depreciation of human capital if further investments are not made. The findings suggest that human capital is not very durable, contrary to some previous estimates given in the literature.     

LABOR QUEUES AND INVOLUNTARY UNEMPLOYMENT

This paper outlines a job search model which emphasizes the placing of applications by job searchers and the firm's use of a queue of applicants as an inventory of labor. The paper analyzes the consequences of the assumption that firms hold queues of applicants both for the decisions of a single firm and for a market composed of several such firms. The aggregate results suggest that considering such labor market queuing helps explain wage rigidity and involuntary unemployment.     

Relative wages and exit behavior among registered nurses

I examine the exit decision of registered nurses using the longitudinal data files generated by the March Current Population Surveys (CPS) from 1983 through 1994. By examining the wages of workers outside of nursing, a measure of the reservation wage is constructed and related to the decision to leave nursing, either for an alternative job or to exit employment. My results indicate that nurses respond to outside wage opportunities. A one standard deviation decrease in the difference between the actual and predicted log wage results in an 8 percent increase in the exit of nurses. Secretaries, however, are shown to have a much greater sensitivity to outside wages due to the lower degree of occupation-specific training required for secretarial jobs. A similar increase in the wage gap for secretaries results in an 18 percent increase in turnover. RNs employed in hospitals, covered by a union contract, and employed in the public sector are relatively attached to the nursing profession. The author appreciates the helpful comments of Barry Hirsch, David Macpherson, and Leola Ross.     

JOB MOBILITY AND EARNINGS INSTABILITY

There is still no consensus on the causes of the increase in the variance of transitory earnings (earnings instability) in the United States. It is difficult to attribute the rise in instability to job mobility because there is no evidence of a concurrent increase in job turnover or separations. Using an error component model of the covariance structure of earnings on Panel Survey of Income Dynamics and Survey of Income and Program Participation data, this study shows that job mobility and the increase in the variance of wage changes upon job change accounts for a substantial part of the increase in earnings instability. The empirical evidence is consistent with the simulations of a search and matching model where an increase in the variance of productivity shocks increases on‐the‐job search and earnings instability among job changers while leaving job turnover approximately constant. (JEL J21, J31)     

AN INCOME-SATIATION MODEL OF EFFICIENCY WAGES

Efficiency wages are wages that exceed a worker's reservation wage. A standard explanation for such wages is "bonding": high wages increase the cost of being discharged for misbehavior and so help ensure worker honesty. A neglected alternative is "satiation": by decreasing the worker's marginal utility of income, the high wage decreases the benefit from misbehavior. Satiation, unlike bonding, applies even in a one-period model, but it relies on the misbehavior having a monetary benefit and on at least part of the punishment being nonmonetary.     

JOB SECURITY and JOB SEARCH IN MORE THAN ONE LABOR MARKET

I analyze job search behavior of unemployed workers who may search for work in several sectors of the economy. Although reservation wages are equal in each sector, workers search more intensively in sectors with lower layoff rates. Thus workers more quickly find and accept jobs with more security.     

Evidence Review on Labour Market and Job Place Retention: Mentoring Pathways Towards Employment

In Europe, there are four main active labour market programs: training, job search assistance, wage subsidies and subsidized public sector employment. Literature indicates that among all four, job search assistance, which includes mentoring, is the active employment policy with the most positive results. This paper, an output of an European funded project work package, is aimed to answer the question ‘What is there that says that mentoring is effective in job place retention?’ In order to answer this question, we conducted a literature review. In terms of content, our literature review’s results could be categorized into 14 main topics: Retention, Employee, Supervisor, Leadership, Education, Health Care, Management &; Marketing, ICT &; IT, Finance, Programme, Benefits, Mentee, Mentor, Less positive about mentoring. In addition to the academic literature review, we conducted a review in four different EU countries: Cyprus, Romania, Hungary and Portugal. Based on these reviews we will discuss the recommendations considering the three types of actors present in an effective mentoring process: mentoring coordinator, mentor and mentee.     

International job search: Mexicans in and out of the US

It is argued that migration from Mexico to the US and return migration are determined by international wage differentials and preferences for origin. We use a model of job search, savings and migration to show that job turnover is a crucial determinant of the migration process. We estimate this model by Simulated Method of Moments (SMM) and find that migration practically disappears, it goes down from 19 to 0.5%, had Mexico US arrival rates while employed. A lower decrease in migration, to 7%, occurs by an increase in Mexican wage offers. On the other hand, doubling migration costs reduces migration rates from 19 to 5%, while subsidizing return migration in $300 reduces migration rates only to 14%.     

THE EFFECT OF MINIMUM WAGES IN THE PRESENCE OF FRINGE BENEFITS: AN EXPANDED MODEL

Firms may react to a minimum wage hike by reducing their expenditures on fringe benefits. This possibility is incorporated into an expanded model of minimum wages. A set of predictions that differentiate this expanded model from current minimum wage models is derived and tested. The expanded model is shown to better predict the effect of minimum wages on labor force participation, quit rates, and prices than previous models. An interesting result of the expanded model is that a covered worker may be worse off due to a minimum wage hike even if he retains his job.     

From wage rigidity to labour market institution rigidity: A turning-point in explaining unemployment?

In this paper we offer a critical discussion about the concept of labour market rigidity in the light of recent theoretical approaches that have aimed to provide sound micro-foundations to the presence of unemployment in market economies. We point out that the concept of labour market rigidity usually referred to in such theories has changed over time, involving in succession the rigidity of wages, contracts and labour market institutions. We also appraise the factors that lead labour market institutions rigidity, stressed by the search literature, to challenge the more widespread explanation of unemployment grounded on wage rigidity. Moreover, we analyse some theoretical and empirical issues that cast doubt on the ability to deal with unemployment, disentangling the role of institutional rigidities from that of wage stickiness.     

Job turnover, wage rates, and marital stability: How are they related?

This study examines the interplay between job stability, wage rates, and marital stability. We use a Dynamic Selection Control model in which young men make sequential choices about work and family and estimate the model using an approach that takes account of self-selection, simultaneity and unobserved heterogeneity. The results quantify how job stability affects wage rates, how both affect marital status, and how marital status affects earnings and job stability. The study reveals robust evidence that job changes lower wages and the likelihood of getting married and remaining married. At the same time, marriage raises wage rates and job stability. To project the sequential effects linking job change, marital status, and earnings, we simulate the impacts of shocks that raise preferences for marriage and that increase education. Feedback effects cause the simulated wage gains from marriage to cumulate over time, indicating that long-run marriage wage premiums exceed conventional short-run estimates.