Wiring the Labor Market

Workers and jobs are naturally heterogeneous and the quality of their interaction when paired is difficult to forecast. The Internet promises to open new channels for worker-firm communications. What are the consequences of this opening? I discuss three labor market features that may be altered: how worker-firm matches are made; how labor services are delivered; and how local markets shape labor demand. Theory predicts these developments will produce social benefits. But the gains are unlikely to be uniform and realizing them will generate novel problems. One result may be the formation of new institutions to address issues accompanying these opportunities.

The polarization of job opportunities in the U.S. labor market: implications for employment and earnings

An in-depth analysis of the state of the U.S. labor market over the past three decades reveals that the U.S. labor market is polarizing into low- and high-skill jobs, with fewer opportunities in the middle.Labor market

This Job Is 'Getting Old:' Measuring Changes in Job Opportunities Using Occupational Age Structure

High- and low-wage occupations are expanding rapidly relative to middle-wage occupations in both the U.S. and the E.U. We study the reallocation of workers from middle-skill occupations towards the tails of the occupational skill distribution by analyzing changes in age structure within and across occupations. Because occupations typically expand by hiring young workers and contract by curtailing such hiring, we posit that growing occupations will get younger while shrinking occupations will 'get old.' After verifying this proposition, we apply this observation to local labor markets in the U.S. to test whether markets that were specialized in middle-skilled occupations in 1980 saw a differential movement of both older and younger workers into occupations at the tails of the skill distribution over the subsequent 25 years. Consistent with aggregate trends, employment in initially middle-skill-intensive labor markets hollowed-out between 1980 and 2005. Employment losses among non-college workers in the middle of the occupational skill distribution were almost entirely countered by employment growth in lower-tail occupations. For college workers, employment losses at the middle were offset in roughly equal measures by gains in the upper- and lower-tails of the occupational skill distribution. But gains at the upper-tail were almost entirely limited to young college workers. Consequently, older college workers are increasingly found in lower-skill, lower-paying occupations.job polarization, occupational structure, age structure, local labor markets, technical change

Why Do Temporary Help Firms Provide Free General Skills Training?

Nominally free, unrestricted training in portable computer skills is offered by the majority of U.S. temporary help supply (THS) establishments, a practice that is inconsistent with the competitive model of training. This paper asks why temporary help firms provide free general skills training. The answer proposed is that in addition to skills formation, training plays an informational role at THS firms by eliciting private information about worker ability. The model is built on the premise that training is more productive and therefore valuable to high ability workers. Firms offer a package of training and initially lower wages that induces self-selection. Workers of high perceived ability choose training in anticipation of a steeper wage profile while low ability workers are deterred by limited expected gains. Firms profit from their sunk training investment via their short-run informational advantage about ability and thereby limited monopsony power. Market competition among THS firms reduces employer rents, yielding higher wages and more training. Detailed tests of the model using representative establishment data on wages and training find strong support. The analysis demonstrates that beyond providing spot market labor, THS firms gather and sell information about worker quality to clients. The rapid growth of THS as a labor market information broker implies that the demand for worker screening is rising.

Will Job Testing Harm Minority Workers?

Because minorities typically fare poorly on standardized tests, job testing is thought to pose an equity-efficiency trade-off: testing improves selection but reduces minority hiring. We develop a conceptual framework to assess when this tradeoff is likely to apply and evaluate the evidence for such a trade-off using data from a national retail firm whose 1,363 stores switched from informal to test-based worker screening over the course of on year. We document that testing yielded more productive hires at this firm -- raising median tenure by 10-plus percent. Consistent with prior research, minorities performed worse on the test. Yet, testing had no measurable impact on minority hiring, and productivity gains were uniformly large among minorities and non-minorities. These results suggest that job testing raised the precision of screening without introducing additional negative information about minority applicants, most plausibly because both the job test and the informal screen that preceded it were unbiased.

Temporary Agency Employment as a Way out of Poverty?

The high incidence of temporary agency employment among participants in government employment programs has catalyzed debate about whether these jobs help the poor transition into stable employment and out of poverty. We provide direct evidence on this question through analysis of a Michigan welfare-to-work program in which program participants were randomly allocated across service providers ('contractors') with different job placement practices. We draw on a telephone survey of contractors and on administrative program data linked with wage records data on all participants entering the program over a three-and-a half-year period. Our survey evidence documents a consensus among contractors that temporary help jobs are generally easier for those with weak skills and experience to obtain, but no consensus on whether temporary help jobs confer long-term benefits to participants. Our analysis of the quasi-experimental data introduced in Autor and Houseman (2005) shows that placing participants in either temporary or direct-hire jobs improves their odds of leaving welfare and escaping poverty in the short term. However, we find that only direct-hire placements help reduce welfare dependency over longer time horizons. Our findings raise questions about the incentive structure of many government employment programs that emphasize rapid placement of program participants into jobs and that may inadvertently encourage high placement rates with temporary help agencies.

Do Temporary-Help Jobs Improve Labor Market Outcomes for Low-Skilled Workers? Evidence from 'Work First'

Temporary-help jobs offer rapid entry into paid employment, but they are typically brief and it is unknown whether they foster longer-term employment. We utilize the unique structure of Detroit's welfare-to-work program to identify the effect of temporary-help jobs on labor market advancement. Exploiting the rotational assignment of welfare clients to numerous nonprofit contractors with differing job placement rates, we find that temporary-help job placements do not improve and may diminish subsequent earnings and employment outcomes among participants. In contrast, job placements with direct-hire employers substantially raise earnings and employment over a seven quarter follow-up period.Temporary-help, welfare to work, job placement, low-skill workers, causal effects

The Growth in the Social Security Disability Rolls: A Fiscal Crisis Unfolding

More than 80 percent of nonelderly U.S. adults are insured against the risk of disabling physical or mental illness by Social Security Disability Insurance (SSDI). This article evaluates the causes of the extraordinary growth in SSDI enrollment, considers its fiscal ramifications, and discusses potential policy responses. While aggregate population health has improved by most measures in recent decades, the rate of SSDI receipt among nonelderly adults has nearly doubled since 1984. We project that SSDI receipt will rise by an additional seventy percent before reaching a steady state rate of approximately 6.5 percent of adults between the ages of 25 and 64, with cash benefit payments exceeding $150 billion annually (excluding Medicare). We trace the rapid expansion of SSDI to: (1) congressional reforms to disability screening in 1984 that enabled workers with low mortality disorders such as back pain, arthritis and mental illness to more readily qualify for benefits; (2) a rise in the after-tax DI income replacement rate, which strengthened the incentives for workers to seek benefits; (3) and a rapid increase in female labor force participation that expanded the pool of insured workers. Notably, the aging of the baby boom generation has contributed little to the growth of SSDI to date. Among several avenues for reducing SSDI growth, we suggest that the most promising are revamping the disability appeals process--in which the Social Security Administration currently loses nearly three-quarters of all appeals--and reducing the attractiveness of DI benefits for work-capable disabled individuals by providing additional access to public health insurance. By contrast, previous efforts to reduce the SSDI rolls by discontinuing benefits or by providing stronger return-to-work incentives have proved remarkably unsuccessful.

Inequality and Specialization: The Growth of Low-Skill Service Jobs in the United States

After a decade in which wages and employment fell precipitously in low-skill occupations and expanded in high-skill occupations, the shape of U.S. earnings and job growth sharply polarized in the 1990s. Employment shares and relative earnings rose in both low and high-skill jobs, leading to a distinct U-shaped relationship between skill levels and employment and wage growth. This paper analyzes the sources of the changing shape of the lower-tail of the U.S. wage and employment distributions. A first contribution is to document a hitherto unknown fact: the twisting of the lower tail is substantially accounted for by a single proximate cause − rising employment and wages in low-education, in-person service occupations. We study the determinants of this rise at the level of local labor markets over the period of 1950 through 2005. Our approach is rooted in a model of changing task specialization in which "routine" clerical and production tasks are displaced by automation. We find that in labor markets that were initially specialized in routine-intensive occupations, employment and wages polarized after 1980, with growing employment and earnings in both high-skill occupations and low-skill service jobs.skill demand, job tasks, inequality, polarization, technological change, occupational choice