Introduction to Heterogeneity Series II: Labor Market Outcomes -Liberty Street Economics
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March 03, 2020

Introduction to Heterogeneity Series II: Labor Market Outcomes



Introduction to Heterogeneity Series II: Labor Market Outcomes

While average outcomes serve as important yardsticks for how the economy is doing, understanding heterogeneity—how outcomes vary across a population—is key to understanding both the whole picture and the implications of any given policy. Following our six-part look at heterogeneity in October 2019, we now turn our focus to heterogeneity in the labor market—the subject of four posts set for release tomorrow morning. Average labor market statistics mask a lot of underlying variability—disparities that factor into labor market dynamics. While we have written about labor market heterogeneity before, this series is an attempt to pull together in a cohesive way new insights on the labor market and highlight details that are not immediately obvious when we study aggregate labor market statistics.


Here is a brief look at each post in the series:

Women Have Been Hit Hard by the Loss of Routine Jobs 1. Women Have Been Hit Hard by the Loss of Routine Jobs, Too
Technological change and globalization have eliminated many “routine jobs”—positions that center on physically intensive activities, such as assembly line work, or on certain cognitively intensive tasks, such as number-crunching. Jaison Abel and Richard Deitz investigate whether the repercussions have differed for male and female workers. Here’s what they found:

  • While both men and women have experienced a decline in routine jobs, the decline was markedly steeper for women.
  • As routine jobs have disappeared, men and women have sorted into different occupations: men are more likely to take engineering positions while women are more likely to take healthcare jobs.
  • In addition, an increasing share of both men and women sorted into low-skilled service jobs or left the labor force altogether.


Is the Tide Lifting All Boats? A Closer Look at the Earnings Growth Experiences of U.S. Workers 2. Is the Tide Lifting All Boats? A Closer Look at the Earnings Growth Experiences of U.S. Workers
Rene Chalom, Fatih Karahan, Brendan Moore, and Giorgio Topa look at the pace of earnings growth across the wage distribution.

  • Average hourly earnings have grown considerably faster at the bottom of the wage distribution than at the top over the past two decades.
  • Workers in the top and bottom quartiles of the earnings distribution have experienced a stronger increase in the rate of earnings growth than those in the middle of the distribution, a pattern that may be related to the decline of routine jobs referenced above.
  • Earnings of more educated workers have grown faster than those for less educated ones. Earnings of Hispanic and African American workers have moved closer to those of white Americans, particularly in the past few years.


Searching for Higher Job Satisfaction 3. Searching for Higher Job Satisfaction
Gizem Kosar, Leo Goldman, and Kyle Smith explore the role of job satisfaction in job search and job-to-job mobility, examining differences by gender and other characteristics.


  • Regardless of race, age, or income level, lower job satisfaction is associated with a higher likelihood of searching for a job.
  • However, differences exist in the job components that men and women care about when choosing whether to search for a new position.
  • Different factors also determine job-to-job mobility for men and women. Compensation is the strongest driver for women while men primarily care about satisfaction with the experience and skills attached to their current job.

How Does Credit Access Affect Job-Search Outcomes and Sorting? 4. How Does Credit Access Affect Job-Search Outcomes and Sorting?
Kyle Herkenhoff, Gordon Phillips, and Ethan Cohen-Cole investigate the effects of credit access on job searches by displaced workers.

  • Displaced workers who have greater credit access take longer to take a new job.
  • Additionally, workers with greater credit access have higher annual earnings a year after losing their jobs, and are more likely to work for more productive firms.
  • The findings suggest that individuals with enough credit have the ability to prolong their search to look for a better job match.

As these posts will demonstrate in greater detail tomorrow, the average outcome doesn’t provide a full picture of the labor market, where outcomes are determined by a range of factors, including differences in race, gender, and credit access, among others. We will continue to study and write about the importance of heterogeneity in the labor market and other segments of the economy.

Related Reading:
LSE Series on Heterogeneity


Chakrabarti_rajashriRajashri Chakrabarti is a senior economist in the Federal Reserve Bank of New York’s Research and Statistics Group.



How to cite this post:
Rajashri Chakrabarti, “Introduction to Heterogeneity Series II: Labor Market Outcomes,” Federal Reserve Bank of New York Liberty Street Economics, March 3, 2020, https://libertystreeteconomics.newyorkfed.org/2020/02/introduction-to-heterogeneity-series-ii-labor-market-outcomes.html.



Disclaimer
The views expressed in this post are those of the author and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the author.
Posted by Blog Author at 07:00:00 AM in Human Capital, Inequality, Labor Economics, Regional Analysis, Unemployment, Wages
Comments

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Thanks for your question.

Existing work both within the Federal Reserve System and outside shows results consistent with this finding. The Atlanta FED wage tracker has been showing similar results for a while. Here is a link to one such article: https://www.frbatlanta.org/blogs/macroblog/2019/12/16/faster-wage-growth-for-the-lowest-paid-workers.

The New York Times also ran a similar story recently relating this to minimum wage hikes. Here: https://www.nytimes.com/2020/01/03/upshot/minimum-wage-boost-bottom-earners.html.

The authors look at this in a slightly different way, specifically they link same people over a 1-year window and study their wage growth. They find that wage growth at the bottom has always been higher, but this is also to be expected because low wages also reflects transitory factors (as discussed in more detail in the post). The earnings measure includes base salary or wage, and tips, bonuses, and overtime compensation. But it does not capture fringe benefits or stock options.

Thanks for this great summary of the 6-part heterogeneity articles. Many points in this article are quite heartening to see (as in the main posts). In particular:

1. Under 2 you mention that race-based wage disparity has reduced.
2. You also mention here that the average hourly earnings have grown faster at the bottom than at the top.

While point 1 is noticeable, point 2 seems contradictory to the popular reports we see in the media. Do you know if for 2, all forms of remuneration were included in computing the average hourly earnings? I'm wondering because at the top other remuneration forms such as stocks, perks and other discretionary remuneration may form a much larger chunk than the base pay.

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