The End of Economic Growth? Unintended Consequences of a Declining Population
American Economic Review, November 2022, Pages 3489-3527
In many models, economic growth is driven by people discovering new ideas. These models typically assume either a constant or growing population. However, in high income countries today, fertility is already below its replacement rate: women are having fewer than two children on average. It is a distinct possibility that global population will decline rather than stabilize in the long run. In standard models, this has profound implications: rather than continued exponential growth, living standards stagnate for a population that vanishes. Moreover, even the optimal allocation can get trapped in this outcome if there are delays in implementing optimal policy.
As Wages Increase, Do People Work More or Less? A Wage Frame Effect
Luxi Shen & Samuel Hirshman
Management Science, forthcoming
In jobs in which workers have the flexibility to decide how much work to supply, such as in the gig economy, the effect of a wage change on work supply can be hard to predict. A wage increase offers workers the opportunity to make more money. At the same time, it allows them to make money faster, so they can enjoy more leisure and do not need to work as much. Economic theory alone does not predict which outcome is more likely to occur, and the empirical evidence is also mixed. This paper provides some psychological insights into this economic problem by showing that the short-term effect of a wage change on work supply depends on how the change is framed. Given a current wage of "work l hours to earn $m," a pay-change frame ("work the same l hours and earn $M") facilitates a change in work supply in the same direction as the wage change, whereas a load-change frame ("work L hours and earn the same $m") facilitates the opposite change. Hence, if strategically framed, a wage decrease can elicit the same increase in work supply as a wage increase. A set of studies demonstrate this wage frame effect on both actual work performance and expressed willingness to work. The findings from these studies offer a behavioral perspective on a classic labor economics problem, document a novel framing effect for the judgment and decision-making literature, and suggest a nudge strategy that managers and policy makers can use in incentive designs.
The Minimum Wage and Union Membership Among Minimum Wage Workers: Why Do Unions Advocate for Minimum Wage Increases?
Jeffrey Clemens & Michael Strain
University of California Working Paper, October 2022
Over the past decade, organized labor has played a significant role in advocating for minimum wage increases. In this paper, we investigate the effects of minimum wage increases on union membership among individuals in minimum wage intensive industries. Consistent with a "freeriding" hypothesis, we find that minimum wage increases predict declines in union membership among low-skilled's most direct beneficiaries. We find no evidence of a change in union membership among high-skilled workers in these industries.
How Has COVID-19 Impacted Disability Employment?
Ari Ne'eman & Nicole Maestas
NBER Working Paper, November 2022
While the COVID-19 public health emergency has had disastrous health impacts for people with disabilities, it remains unclear what impact the associated economic recession and subsequent recovery have had on disability employment. We evaluated employment trends for people with and without disabilities over the course of the COVID-19 recession and subsequent economic recovery, both overall and by occupational category (essential, non-essential, teleworkable, non-teleworkable, frontline, nonfrontline). We made use of data from the nationally representative Current Population Survey. Linear probability models were used to estimate percent changes in employment-to-population ratios and identify differences between disabled and non-disabled employment in each quarter broadly and within specific occupational categories. As the COVID-19 recession began in Q2 2020, people with disabilities experienced employment losses that were proportionately similar to those experienced by people without disabilities. However, during the subsequent economic recovery, the employment rate of people with disabilities has grown more quickly in Q4 2021 through Q2 2022, driven by increased labor force participation. These employment gains have been concentrated in teleworkable, essential, and non- frontline occupations. Our findings suggest that people with disabilities are disproportionately benefiting from the rapid recovery from the initial economic contraction at the start of the pandemic.
How Much Lifetime Social Security Benefits Are Americans Leaving On the Table?
David Altig, Laurence Kotlikoff & Victor Yifan Ye
NBER Working Paper, November 2022
Americans are notoriously bad savers. Large numbers are reaching old age too poor to finance retirements that could last longer than they worked. This study uses the 2018 American Community Survey to impute retirement ages for 2019 Survey of Consumer Finance (SCF) respondents. Next, we run the SCF respondents through the Fiscal Analyzer (TFA) to measure the size and distribution of forgone lifetime Social Security benefits. TFA is a life-cycle, consumption-smoothing research tool that incorporates Social Security and all other major federal and state tax and benefit policies. The program can optimize lifetime Social Security choices. We find that virtually all American workers age 45 to 62 should wait beyond age 65 to collect. More than 90 percent should wait till age 70. Only 10.2 percent appear to do so. The median loss for this age group in the present value of household lifetime discretionary spending is $182,370. Optimizing would produce a 10.4 percent increase in typical workers' lifetime spending. For one in four, the lifetime spending gain exceeds 17 percent. For one in ten, the gain exceeds 26 percent. Among the poorest fifth of 45 to 62 year-olds, the median lifetime spending increase is 15.9 percent, with one in four gaining more than 27.4 percent.
The Impact of Financial Reporting Mandates on Labor Unions
Qingkai Dong & Anthony Le
Columbia University Working Paper, October 2022
Labor unions in the United States are subject to financial reporting mandates, requiring them to disclose detailed financial information annually. This paper studies the effects of the reporting mandate on unions' representation elections and union charges. Exploiting a regulatory threshold that determines the amount of information publicly disclosed by unions, we document that unions just above the threshold, who are required to disclose more information, file fewer election petitions, are less likely to win elections, and receive fewer votes during those elections than unions just below the threshold. These effects are the strongest when employers hire labor relations consultants during elections. Additionally, we find that unions above the threshold have significantly fewer charges and grievances filed against them. This result is primarily driven by a decrease in non-meritorious charges. Collectively, our results suggest that mandated financial reporting imposes a substantial proprietary cost on unions during representation activities.
Rising Longevity, Increasing the Retirement Age, and the Consequences for Knowledge-based Long-run Growth
Michael Kuhn & Klaus Prettner
We assess the long-run growth effects of rising longevity and increasing the retirement age when growth is driven by purposeful research and development. In contrast to economies in which growth depends on learning-by-doing spillovers, raising the retirement age fosters economic growth. How economic growth changes in response to rising life expectancy depends on the retirement response. Employing numerical analysis, we find that the requirement for experiencing a growth stimulus from rising longevity is fulfilled by the USA, nearly met by the average OECD economy, but missed by the European Union and by Japan.
Experience Rating as an Automatic Stabilizer
Mark Duggan, Andrew Johnston & Audrey Guo
NBER Working Paper, November 2022
Unemployment insurance taxes are experience-rated to penalize firms that dismiss workers. We examine whether experience rating acts as an automatic stabilizer in the labor market. We exploit the fact that penalties for layoffs vary by state using detailed data on state tax schedules, and we measure whether firms react less to labor-demand shocks in the presence of greater layoff penalties. The average penalty for layoffs reduces firm adjustment to negative shocks by 11 percent. The results imply experience rating has a stabilizing influence on labor markets. Experience rating saved, for instance, nearly a million jobs in the Great Recession.
What Are the Consequences of Right-to-Work for Union Membership?
Kevin Murphy et al.
ILR Review, forthcoming
Beginning in 2012, several states enacted right-to-work laws, which hamper the ability of labor unions to collect agency fees to finance union services and activities. Because the processes by which these adoptions took place are arguably exogenous, identification of the causal effect of right-to-work on unionization within a state becomes possible. The author uses a set of semi-independent cross-sections drawn from the Current Population Survey for years 2000 to 2018 to investigate the impact of right-to-work on the probability of unionization in the five states that adopted it after 2011. The empirical analysis reveals an economically meaningful and statistically significant adverse effect from right-to-work adoption on union density that is distinct from other factors influencing unionization during that time period.