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Introduction [Giupponi, G. and Seibold, A. (eds) (2024), ‘Rethinking Pension Reform‘, CEPR Press]
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Labour market inequality
No full textWage and earnings inequality has been on the rise in the UK since the late 1970s / early 1980s, and with faster increases than comparator countries it is now one of the countries with the highest levels of wage and earnings inequality in the developed world. Labour market inequality arises in various forms: inequalities in employment opportunities, wages and hours worked, but also in other dimensions of employment, such as job security. This paper considers key factors that have shaped labour market inequality in the United Kingdom over the last four decades, with a focus on technological changes and skill demand, labour market institutions and contract regulation
Should we insure workers or jobs during recessions?
No full textWhat is the most efficient way to respond to recessions in the labor market? To this question, policymakers on the two sides of the pond gave diametrically opposed answers during the COVID-19 crisis. In the United States, the focus was on insuring workers by increasing the generosity of unemployment insurance. In Europe, instead, policies were concentrated on saving jobs, with the expansion of short-time work programs to subsidize labor hoarding. Who got it right? In this article, we show that far from being substitutes, unemployment insurance and short-time work exhibit strong complementarities. They provide insurance to different types of workers and against different types of shocks. Short-time work can be effective at reducing socially costly layoffs against large temporary shocks, but it is less effective against more persistent shocks that require reallocation across firms and sectors. We conclude that short-time work is an important addition to the labor market policy-toolkit during recessions, to be used alongside unemployment insurance
Subsidizing labor hoarding in recessions: the employment & welfare effects of short time work
No full textShort time work (STW) policies provide subsidies for hour reductions to workers in firms experiencing temporary shocks. They are the main policy tool used to support labor hoarding during downturns, and were aggressively used during the COVID-19 pandemic. Yet, very little is known about their employment and welfare consequences. This paper leverages unique administrative social security data from Italy and quasi-experimental variation in STW policy rules to offer evidence on the effects of STW on firms’ and workers’ outcomes during the Great Recession. Our results show large and significant negative effects of STW treatment on hours, but large and positive effects on headcount employment. We then analyze whether these positive employment effects are welfare enhancing, distinguishing between temporary and more persistent shocks. We first provide evidence that liquidity constraints and rigidities in wages and hours may make labor hoarding inefficiently low without STW. Then, we show that adverse selection of low productivity firms into STW reduces the long-run insurance value of the program and creates significant negative reallocation effects when the shock is persistent
Consumption responses to an unconditional child allowance in the United States
No full textThe COVID-19 pandemic put families in the United States under financial stress. The
federal government’s largest response in 2021 was the American Rescue Plan Act, which temporarily expanded the Child Tax Credit (CTC) into a large, unconditional child allowance providing monthly payments to families with children. This study investigates consumption responses to the CTC expansion using anonymized mobile-location data and debit/credit card data that track visits and spending at 1.3 million establishments across U.S. counties. For identification, we exploit variation in the size of households’ income gains due to the CTC across counties in a difference-in-differences framework spanning January 2021–May 2022. Counties benefiting most from the CTC expansion experienced larger increases in visits to child care centers and health- and personal-care establishments; and increased visits to and spending per transaction at grocery and general stores. These findings suggest that the CTC expansion increased household consumption and spending on children
Zero-hours contracts and labour market policy
No full textThe evolving nature of atypical work arrangements is studied. A particular focus is placed on one such form of work relation: zero-hours contracts (ZHCs). The paper uses existing secondary data and new survey data collected for the specific purpose of studying alternative work arrangements to describe the nature of ZHC work in the UK labour market. The interaction with labour market policy is explored, in the context of the 2016 introduction of the UK’s National Living Wage. ZHC work is shown to be an important feature of today’s work arrangements, and the wage cost shock induced by the new, higher minimum wage resulted in an increased use of ZHCs in the UK social care sector, and in low wage sectors more generally
The employment and distributional impacts of nationwide minimum wage changes
Full text linkWe assess the impact of nationwide minimum wages on employment throughout the whole wage distribution by exploiting geographical variation in the level of wages à la Card (1992). We find a substantial increase in wages at the bottom of the wage distribution, while we detect a small, statistically insignificant negative effect on employment. Combining the estimated change in the wage distribution with a tax and benefit micro-simulation model, we show that the minimum wage generates considerable proportional income gains up to the middle of the household income distribution
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