Better Off Jobless? Scarring Effects of Contingent Employment in Japan

Previous research fails to address whether contingent employment benefits individuals' careers more than the alternative they often face: being without a job. Using work history data from Japan, this study shows that accepting a contingent job delays individuals' transition to standard employment more than remaining jobless. Moreover, having a contingent job, rather than having no job, leads Japanese men to have lower occupational status after they transition back to standard employment. I argue that in a highly segmented labor market like Japan's, the strict separation of labor pools for standard and contingent jobs makes being labeled as a contingent worker particularly detrimental. Meanwhile, the legacy of Japan's welfare corporatism alleviates the stigma of unemployment, making individuals better off jobless than having a contingent job. This research thus demonstrates the importance of labor-market contexts in shaping the scarring effects of contingent work arrangements.     

STRUCTURAL UNEMPLOYMENT IN THE UNITED STATES: THE EFFECTS OF INTERINDUSTRY and INTERREGIONAL DISPERSION

The effects of sectoral shifts, measured by dispersion in the growth rates of employment or earning across industries or regions, on unemployment are tested in a specification controlling for the effects of other labor-market variables and shifts in the demographic composition of the labor force. Interindustry and geographical shifts in labor demand have significant unemployment effects, with adult males the group most strongly affected. The estimated equations imply that most of the fluctuation in unemployment over the period 1956-87 was been due to microeconomic causes rather than aggregate demand.     

The long-term impact of family difficulties during childhood on labor market outcomes

The literature on child development shows that the promotion of cognitive and non-cognitive skills is essential to prevent inequalities in adult socioeconomic outcomes. In this context, the family environment plays a strategic role, as during childhood, it represents the most important institution for child development. This paper evaluates the long-term impact of various family difficulties during childhood on adult labor market outcomes. Evidence of negative impacts on employment probability and wages emerges from applying propensity score matching to the UK National Child Development Study. Simulation-based sensitivity analysis and standard parametric techniques support our findings. We also find that the intensity of the negative impact appears to increase with the number of recorded family difficulties, while the negative effect does not decline over the cohort’s working life. Moreover, we find that housing and economic (financial and unemployment) problems are responsible for the more serious disadvantages, while disabilities of family members and familial disharmony do not produce statistically negative impacts per se but tend to do so only if associated with other family difficulties, including economic and housing difficulties.     

Countercyclical union wage premium? Evidence for the 1980s

Empirical results based on pooled male data from the Panel Survey of Income Dynamics indicate an overall union wage premium of about 11.92 percent for the 1980s. In response to fluctuations in local labor market conditions, proxied by the local unemployment rate, a much more flexible wage-setting process is found in the nonunion sector relative to the union sector. The long-term effect of unemployment on nonunion real wages suggests an approximate 0.6 percent decline for every one percentage point increase in unemployment, a statistically significant reduction, but the long-term effect of unemployment on real wages of union members is negligible. The union wage premium ranges between 11.6 to 12.3 percent for the sample years. Even though union wages are insensitive to short-run fluctuations in local labor market conditions, and are somewhat countercyclical in nature, widespread union wage concessions which occurred during the 1980s may now be exerting a downward pressure on union wages. We acknowledge financial support of National Science Foundation [OSR-9350540], the Ada Howe Kent Research Fund, and The Fogelman Academic Research Excellence Fund. We thank Barbara Ganley for valuable editorial comments and Noga Peled for her able research assistance. The usual caveat applies.     

The role and significance of endogenous firing costs in a matching model with endogenous job destruction

Traditional models of the labor market assume fixed firing costs. This paper explores the implications of variable firing costs, building this new assumption into a matching model with endogenous job destruction. The available evidence on the outcomes of cases brought to labor courts suggests that firing costs are negatively related with labor market tightness. In such a case, we may no longer invoke “rigidities” on labor markets as the cause of their poor performance. Our model yields three interesting results. First, labor markets may have multiple equilibria that cannot be Pareto-ordered; each with its own configuration in terms of average duration of unemployment and filled jobs, as well as employment protection. Second, the variability of firing costs produces a positive externality affecting the stability properties of these equilibria. Finally, the two externalities affect the efficiency of the social optimum, modifying the Hosios [Hosios, A.J., 1990. On the efficiency of matching and related models of search and unemployment. Review of Economic Studies 57, 279–298] condition. We use these results to interpret the recent history of European unemployment.     

Increasing older persons' employment in Finland: in search of a new strategy.

Using Finland as a case study, it is argued that early retirement will probably no longer be used on a large scale to reduce older-worker labor-force participation and unemployment among older workers. Instead, new strategies are needed to enhance the ability of older workers to remain productive and in the labor force, and to facilitate the reintegration of unemployed older persons back into working life. Both tasks require massive pioneering efforts. Reducing unemployment rates among older workers, particularly, requires completely new kinds of labor-market measures.     

ENTITLEMENT EFFECTS, UNEMPLOYMENT INSURANCE AND EMPLOYMENT DECISIONS

Many studies have identified the work disincentive effects of unemployment insurance. This paper points out the entitlement effect of this and other social insurance programs on employment, as the risks of labor-market participation are reduced by the existence of unemployment benefits. This employment-increasing effect can offset the disincentive effect, with the net impact on employment becoming an empirical issue. Using data on a sample of married women for 1971, we find that on net there is a slight negative effect on employment of higher unemployment insurance benefits. The entitlement effect on employment is, though, generally positive and significant, suggesting that the provisions of social insurance induce increased labor-force participation among women who otherwise would remain out of the labor force.     

Unemployment: A labor market perspective

Twentieth century economists have made countless attempts to resolve the causes and cures of unemployment. However none have ventured to consider unemployment not as a social problem but as a market response to political and economic incentives. By treating unemployment as a labor market, where workers rationally select periods of joblessness and where special interest groups profit from unemployment, this paper develops a theoretically consistent model to explain the effects that policy and economic variables have on unemployment. Empirical results support this approach and the worker disincentive effects of UI compensation by estimating simultaneously a demand and supply for unemployment.     

Increasing Older Persons' Employment in Finland

ABSTRACT

Using Finland as a case study, it is argued that early retirement will probably no longer be used on a large scale to reduce older-worker labor-force participation and unemployment among older workers. Instead, new strategies are needed to enhance the ability of older workers to remain productive and in the labor force, and to facilitate the reintegration of unemployed older persons back into working life. Both tasks require massive pioneering efforts. Reducing unemployment rates among older workers, particularly, requires completely new kinds of labor-market measures.     

Extracting a revised labor supply theory from Becker's model of the household

Conflicting assumptions about labor supply behavior lie at the nexus of ideological and theoretical debates regarding the reality of involuntary unemployment, the efficacy of Keynesian macro-policy, and the appropriate nature of welfare policy. This can in part be attributed to the fact that orthodox theory is effectively predicated upon describing the behavior of individuals whose level of affluence enables them to voluntarily withhold their labor from the market. Ironically, a means of resolution appears if we extend Gary Becker's utility producing model of the household to recognize two latent behavioral concerns: (1) the ‘need’ of households for money income in order to produce utility, and (2) the presence of work activity in the home. The resulting generalized labor supply model extends Becker's analysis to explicitly encompass both the behavior of the affluent, and the behavior of the poor who need to work in order to sustain their existence.     

Transformations of employment and occupation patterns in Taiwan's transition to an information society

This study investigates the employment and occupation patterns that have emerged as Taiwan has evolved into an information society. The study shows that the unemployment problem that arose after Taiwan's transformation to an information society is closely related to the inability of information-intensive industries (particularly information-intensive manufacturing) to absorb the labor released from labor-intensive industries. Second, the changing trends in occupation structure under the transformation to an information economy have made Taiwan's labor market unbalanced, benefiting workers who are more highly skilled in information, are more professional, and have higher levels of education. This state of unbalance negatively affects inequality and bias in the labor market.     

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.     

HYSTERESIS IN A NEW KEYNESIAN MODEL

This paper provides a simple, tractable way of incorporating “hysteresis,” in which persistent unemployment takes on structural characteristics, into a macroeconomic model. Hysteresis is modeled as deterioration in labor market matching efficiency as the average duration of unemployment increases. This is embedded in a basic New Keynesian macro model. A decline in labor market matching efficiency would be consistent with the observed rightward shift of the Beveridge curve since the 2007–2009 recession. Hysteresis is shown to lead to larger and more persistent responses of the unemployment rate and unemployment duration to productivity, intertemporal preference, and monetary shocks. Hysteresis also generates an increase in the natural rate of unemployment. (JEL E24, J64, E32)     

A Stochastic Monopsony Theory of the Business Cycle

Two distinct regimes, contractions and expansions, are generated in a model in which goods markets clear and all individuals are optimizing, strict wage and price takers, have fully rational expectations, and are heterogeneous in both preferences and resource endowments. Involuntary unemployment, asymmetric monetary policy effectiveness, and a changing relationship between real wages and employment over the business cycle are the result of optimizing behavior by monopsonistic, wage-setting, and price-taking firms faced with price uncertainty, an upward-sloped supply of employees, and efficiency wage behavior. Disequilibrium and involuntary unemployment can occur at the level of the individual firm's labor market.     

What Happens to Defined Contribution Accounts When Labor Markets and Financial Markets Move Together?

The relationship among earnings, savings, and retirement is well known; however, the linkage between labor market outcomes and financial market performance is generally unacknowledged. We examine the implications of the link between labor markets and financial markets for workers who save money in individual retirement accounts. Specifically, differences in labor market outcomes across groups may imply differences in the timing of investments, which may reduce savings over time for these groups compared to their counterparts. Using monthly data from the Current Population Survey (1979–2002), we generate hypothetical investment portfolios using stock and bond indices. We exploit differences across demographic groups in unemployment and wage growth and use these differences to examine each group's investment outcomes. We then disaggregate the total effects into short-term and long-term components. We find some evidence of short-term market timing effects on investment, but we find much larger long-term effects for some groups. Our findings suggest that, for many people, the retirement savings losses associated with the timing of markets are similar to the costs of annuitizing savings upon retirement. The differences are especially pronounced by education and gender.     

UNEMPLOYMENT AND OTHER MEASURES OF LABOR MARKET INEFFICIENCY: A COMPARISON OF U.K. AND U.S. LABOR MARKETS 1931–96

Although unemployment is often used as a measure of labor market inefficiency, economic theory indicates that market inefficiency is determined by both the gap between and the elasticities of supply and demand. Using time series data for the United States and United Kingdom, this article investigates how good the unemployment rate is as a measure of labor market inefficiency by calculating the deadweight loss associated with unemployment rates over time. Results show that the loss arising from unemployment is low across time and countries and that the unemployment rate is often a weak proxy for comparing labor market inefficiency. (JEL J6 )     

Labor force participation,household composition and sponsorship among Southeast Asian refugees

This article investigates more fully the complexity of refugees' participation in the US labor market and possible sources of variations in their experience. The article focuses specifically on the labor market experiences of Southeast Asian refugees. The data used in this analysis are derived from 2 national surveys of more than 7000 Southeast Asian refugees conducted in 1982 and 1983 by the US Office of Refugee Resettlement. Although there are encouraging signs of progress, especially rapid in the earliest years, Southeast Asian refugees are persistently 10-15% less likely to be in the labor force than the US population. Once in the labor force, like other ethnic minorities, they also experience considerably higher levels of unemployment. Household structure, both in terms of the presence of children and in kinship relations, has a strong and varied impact on participation. Residence in California also constrains both men's and women's behavior independently of the refugees' background skills or household structures. Even English language proficiency is sensitive to its social evaluation by employers and the community. The most novel outcome of this analysis involves the influence that type of sponsorship has on refugees' economic behavior. According to these results, sponsorship reflects the impact of the formation of an ethnic community that is primarily working class, concentrated in low wage jobs, and participating at a relatively high rate in public assistance programs. The networks it has to offer are considerably less well placed economically than in other forms of incorporation.     

Returning migrant characteristics and labor market demand in Greece

Immigrants who repatriate bring with them modern work skills which many observers in labor exporting regions describe as a great contribution to the mother country. Using data from 2 samples of Greek repatriates as well as projections of industrial labor force demands in Greece for the 1980s, this article challenges this concept. The authors find that the uneven regional development and stunted industrial growth which pushed these workers abroad are also responsible for the narrowly limited employment options which they face once they repatriate. For the urban repatriate, the market is limited to unemployment, the urban informal sector and scattered jobs, while for the rural repatriate, small-scale agriculture, multiple job holdings and unemployment are the only viable options.     

The Effect of Unemployment Duration on National Suicide Rates: A Time Series Analysis, 1948–1982

Abstract

Periods of increasing unemployment are associated with increases in suicide rates. Unemployment increases suicide among laid off persons, new entrants, reentrants to the labor market, and groups indirectly affected—the underemployed, those fearing unemployment, the families of the unemployed, and even those suffering from falling real wages, a condition endemic in major recessions. The present investigation deals with a neglected unemployment measure: the duration of unemployment, a condition known to be critical to the generation of extreme behavior such as suicide. Controls are introduced from alternative perspectives on the problem including the incidence of divorce. The data analyzed refer to yearly measures of the variables over a 31 year period. The results of a Cochrane-Orcutt iterative regression analysis indicate that the greater the duration of unemployment the greater the suicide rate. Using ex post forecasting techniques it is estimated that increases in unemployment during the Reagan administration have been associated with at least 929 additional deaths from suicide. The duration of unemployment increases suicide rates for both males and females. The model explains between 59 and 88 percent of the variance in suicide.     

Befristete Beschäftigung: Chance oder Risiko?

The paper investigates whether increased labor market flexibility leads to a reinforcement of the existing segmentation of the labor market or whether it is dismantling the barriers in the labor market. Using spell data (employment and unemployment periods) from the German Socio-economic Panel (GSOEP, time period: 1984–1999) both determinants of fixed-term contracts and their consequences (renewed temporary employment, unemployment) are investigated with the help of random-effects logit-models. The results show that respondents’ characteristics (amount and type of human capital, formerly experienced periods of unemployment), structural variables (branch, firm size), and occupational characteristics (position, marginal employment) are influencing the risk of getting a temporary job. Furthermore it becomes evident that fixed-term contracts are increasing the risk of getting a temporary job again or of becoming unemployed after termination of the temporary job. These results show that fixed-term contracts above all are part of the secondary labor market, and that they especially have negative consequences for the employees in this segment. On the other hand fixed-term contracts can be seen as a chance in the way that they offer at least an alternative to unemployment. Hence, a too narrow evaluation of temporary employment would be too simplistic.