Job Market Paper

This paper examines whether labor market frictions can explain the level and growth of the college wage premium in the US. I develop a novel model where both capital skill complementarity and differences in the search frictions faced by college and non-college workers drive the college wage premium. The presence of search frictions, and hence monopsonistic power, provides a range of explanations for rising college premiums not present in competitive models i.e. changes to relative job offer rates, to firm heterogeneity or to bargaining power between education groups. College workers enjoy substantially lower job destruction rates and higher job offer rates than non-college workers, which generates the presence of a significant, and relatively stable, college wage premium in my model. I also find that bargaining strength, as captured by unionization rates, starts off at similar levels for college and non-college workers but declines more severely for non-college workers. This trend explains a substantial portion of the growth in the college wage premium in my baseline model.

Working Papers

The impact of the Covid-19 pandemic on the UK labour market has been extremely heterogeneous, with strong variation both by occupation and industrial sector. The extent to which workers adjust their job search behaviour in response to this reallocation of employment has an important bearing on the future course of the labour market. At an aggregate level we see evidence consistent with search responding to changes to the state of the economy. In particular, changes to job search by employees are closely linked to changes in vacancies, and we also see flows from unemployment to inactivity peak at the same time as vacancies bottom-out. A key novelty in this paper is that we can additionally see whether the link between job search and changing employment patterns holds at a micro level, using the COVID supplement of the UK Household Longitudinal Survey, which shows the industries and occupations targeted by job searchers. The vast majority of job searchers target growing occupations and industries, which suggests job searchers are responding to conditions at a micro as well as macro level. This is also suggested by the fact that job searchers who were in occupations that expanded in the pandemic seek to switch occupations less frequently than those in shrinking occupations.

We assess the effect of the minimum wage on labor market outcomes such as employment, unemployment, and labor force participation for most workers affected by the policy. We apply modern machine learning tools to construct demographically-based treatment groups capturing around 75% of all minimum wage workers—a major improvement over the literature which has focused on fairly narrow subgroups where the policy has a large bite (e.g., teens). By exploiting 172 prominent minimum wages between 1979 and 2019 we find that there is a very clear increase in average wages of workers in these groups following a minimum wage increase, while there is little evidence of employment loss. Furthermore, we find no indication that minimum wage has a negative effect on the unemployment rate, on the labor force participation, or on the labor market transitions. Furthermore, we detect no employment or participation responses even for sub-groups that are likely to have a high extensive margin labor supply elasticity—such as teens, older workers, or single mothers. Overall, these findings provide little evidence for changing search effort in response to a minimum wage increase.

This paper examines the impact of minimum wages when search frictions are present and firms can substitute away from low skilled workers to both higher skilled workers and to capital. This represents a contribution to the search literature, which typically assumes labour is the only input of production and perfect substitution between labour inputs. I examine whether the model I develop features significant nonlinearities in the impact of the minimum wage on unemployment. I find that the theoretical contribution of this paper, i.e. allowing for search frictions and imperfect substitutability of factor inputs, is quantitatively significant. Specifically, the nonlinear unemployment response in my model is much less pronounced if I use the typical assumptions of the search literature, which imply a considerably more linear response of unemployment to the minimum wage.

Using a model featuring search frictions and risk averse workers with access to risk-free savings, I find that the workers' ability to self-insure via asset accumulation has an important role in determining the response of consumption inequality to minimum wage increases. Workers increase their savings to self-insure against the increased unemployment risk of higher minimum wage levels. Thus in our baseline model minimum wages achieve reductions in consumption inequality even at relatively high levels that cause unemployment to rise. In a model without savings, increasing the minimum wage level to such levels would increase consumption inequality because increased unemployment risk has a more significant pass-through to consumption inequality.

Projects

Gender, Social Norms and the Labor Market

This project looks at the role of technological change in shaping gender gaps in the labor market and wider social outcomes. As part of this we will consider how technological change interacts with social norms to shape the evolution of wages and labor market participation by gender. Our approach will be to formulate a structural model of the labor market and take this to cross-country panel data.

Teaching

  • 2016, BSc Econ, Industrial Relations
  • 2015, BSc Econ, Introduction to Economics
  • 2014, BSc Econ, International Trade
  • 2014, Awarded Teaching Excellence Award
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