Unexpected Inflation, Real Wages, and Employment Determination in Union Contracts

This paper presents new microeconometric evidence on the relevance of nominal contracting for employment determination in the unionized sector. Real wages in long term union contracts contain an unanticipated component that reflects unexpected changes in prices and the degree of indexation. These unexpected wage components provide a convenient tool for separating the causal effects of wages on employment from other endogenous sources of employment and wage variation. The empirical analysis of employment and wage outcomes among collective agreements in the Canadian manufacturing sector reveals that employment and wages are only weakly related. When unexpected changes in real wages are used as an instrumental variable for the contract wage, however, employment is consistently negatively related to wages. The results imply that the institutional structure of wage determination has important effects on the cyclical characteristics and persistence of employment changes.

Dropout and Enrollment Trends in the Post-War Period: What Went Wrong in the 1970s?

Over most of the 20th century successive generations of U.S. children had higher enrollment rates and rising levels of completed education. This trend reversed with the baby boom cohorts who attended school in the 1970s, and only resumed in the mid-1980s. Even today, the college entry rate of male high school seniors is not much higher than it was in 1968. In this paper, we use a variety of data sources to address the question What went wrong in the 1970s?' We focus on both demand-side factors and on a particular supply-side variable the relative size of the cohort currently in school. We find that tuition costs and local unemployment rates affect schooling decisions, although neither variable explains recent trends in enrollment or completed education. We also find that larger cohorts have lower schooling attainment, and that aggregate enrollment rates are correlated with changes in the earnings gains associated with a college degree. For women, our results suggest that the slowdown in education in the 1970s was a temporary response to large cohort sizes and low returns to education. For men, however, the decline in enrollment rates in the 1970s and slow recovery in the 1980s point to a permanent shift in the inter-cohort trend in educational attainment that will affect U.S. economic growth and trends in inequality for many decades to come.

A software technology evaluation program

A set of quantitative approaches is presented for evaluating software development methods and tools. The basic idea is to generate a set of goals which are refined into quantifiable questions which specify metrics to be collected on the software development and maintenance process and product. These metrics can be used to characterize, evaluate, predict, and motivate. They can be used in an active as well as passive way by learning form analyzing the data and improving the methods and tools based upon what is learned from that analysis. Several examples were given representing each of the different approaches to evaluation. The cost of the approaches varied inversely with the level of confidence in the interpretation of the results

Racial Segregation and the Black-White Test Score Gap

Racial segregation is often blamed for some of the achievement gap between blacks and whites. We study the effects of school and neighborhood segregation on the relative SAT scores of black students across different metropolitan areas, using large microdata samples for the 1998-2001 test cohorts. Our models include detailed controls for the family background of individual test-takers, school-level controls for selective participation in the test, and city-level controls for racial composition, income, and region. We find robust evidence that the black-white test score gap is higher in more segregated cities. Holding constant family background and other factors, a shift from a fully segregated to a completely integrated city closes about one-quarter of the raw black-white gap in SAT scores. Specifications that distinguish between school and neighborhood segregation suggest that neighborhood segregation has a consistently negative impact but that school segregation has no independent effect (though we cannot reject equality of the two effects). We find similar results using Census-based data on schooling outcomes for youth in different cities. Data on enrollment in honors courses suggest that within-school segregation increases when schools are more highly integrated, potentially offsetting the benefits of school desegregation and accounting for our findings.

Why Have Unemployment Rates in Canada and the U.S. Diverged?

Throughout the post-war period, U.S. and Canadian unemployent rates moved in tandem, but this historical link apparently ended in 1982. During the past three years, Canadian unemployment rates have been some three percentage points higher than their U.S. analogues, and this gap shows no sign of diminishing. This paper is an empirical evaluation of a variety of explanations for this new unemployment gap. We first show that the demographic and industrial composition of the two countries is remarkably similar, so that no simple mechanical hypothesis explain the basic puzzle. It is also evident that the increase in Canadian unemployment relative to U.S. unemployment can not be fully attributed to output movements. We find that the gap between actual and predicted Canadian output, based on U.S. output, has fallen dramatically since 1982 while the unemployment gap has widened. We also find that unemployment in Canada was 2 to 3 percentage points higher in 1983 and 1984 than predicted by Canadian output. We have investigated a variety of hypotheses to explain the slow growth of employment in Canada after 1982. These hypotheses attribute the slow growth of employment to rigidities in the labor market that raise employers' costs and restrict the flow of workers between sectors. The evidence does not support the notion that the growth in relative unemployment in Canada is due to differences in the regulation of the labor market in the two countries. Minimum wage laws and unemployment benefits are fairly similar in Canada and the U.S., and neither has changed relative to the other in the last decade. Unionization rates have increased in Canada relative to US. since 1970. Most of this divergence occured before 1980, however, and does not seem to have created an unemployment gap prior to 1980. Finally,the hypothesis that differential real wage rates are a major determinant of relative employment in the U.S. and Canada is soundly rejected by the data. Real wage rates have been essentially uncorrelated with employment movements within each country and between the two countries.

Racial Segregation and the Black-White Test Score Gap

Segregation, desegregation, SAT scores, cities, urban economics

Can Falling Supply Explain the Rising Return to College for Younger Men? A Cohort-Based Analysis

Although the college-high school wage gap for younger men has doubled over the past 30 years, the gap for older men has remained nearly constant. We argue that these shifts reflect changes in the relative supply of highly-educated workers across age groups. Cohorts born in the first half of the century had steadily rising educational attainments that offset rising demand for better-educated workers. This trend ended abruptly in the early 1950s and has only recently resumed. Using a model with imperfect substitution between similarly-educated workers in different age groups, we show that a slowdown in the rate of growth of educational attainment across cohorts will lead to a rise in the return to college for young workers that eventually works its way through the age distribution. This prediction is remarkably consistent with data for the U.S. over the period from 1959 to 1995. Estimates based on a version of the model with two education groups high school equivalent and college equivalent workers suggest that the elasticity of substitution between different age groups is large but finite (around 5) while the elasticity of substitution between the two education groups is about 2.5. We also examine data for the United Kingdom and Canada: both countries experienced similar slowdowns in the rate of growth of educational attainment. Results from these countries are comparable to the U.S. findings, and underscore the importance of cohort-specific relative supplies in interpreting movements in education-related wage differentials.

Did the Elimination of Mandatory Retirement Affect Faculty Retirement Flows?

A special exemption from the 1986 Age Discrimination Act allowed colleges and universities to enforce mandatory retirement of faculty at age 70 until 1994. We compare faculty turnover rates at a large sample of institutions before and after the federal law change, and at a set of institutions that were covered by earlier state laws prohibiting compulsory retirement. Retirement rates at institutions that enforced mandatory retirement exhibited sharp 'spikes' at ages 70 and 71. About 90 percent of professors who were still teaching at age 70 retired within two years. After the elimination of compulsory retirement the retirement rates of 70 and 71-year-olds fell to levels comparable to 69-year-olds, and over one-half of 70-year-olds were still teaching two years later. These findings indicate that U.S. colleges and universities will experience a rise in the number of older faculty over the coming years. The increase is likely to be larger at private research universities, where a higher fraction of faculty has traditionally remained at work until age 70.