How Does Boosting Workers' Outside Options Affect Job Mobility and Wage Setting? Quasi-Experimental Evidence from Administrative Data

National Bureau Of Economic Research Inc, Cambridge MA

Investigators

Abstract

This award funds research on labor markets. The goal is to identify whether and how a change in the options available to workers outside their current employment affects their wages and the chances that they will move to a different job. The research team will measure the effects of several policy changes that shifted workers outside options using population level administrative data. The changes include changes in the vesting of pension benefits and changes in unemployment compensation. Real wage growth for the median worker in the United States has stalled in recent decades despite positive growth in productivity. The research will help us understand how labor markets determine wages, considering a variety of forces including bargaining power, unemployment insurance, and competition between employers. Through a better understanding of these forces, the project will provide insight into whether specific policies will lead to higher wage growth for American workers. The research will advance our knowledge of wage determination using quasi-experimental approaches that illuminate the role of outside options. While previous work has analyzed shifts in inside values of matches, this project focuses on outside options. It will help us understand what constitutes worker outside options and how wages and worker mobility respond to shifts in different types of outside options. The project will provide an identified estimate of how clean, measurable shifts in the cost of switching employers affects job-to-job mobility and wages and thereby provides a novel test of how employer monopsony power and mobility frictions shape the wage structure. This award reflects NSF's statutory mission and has been deemed worthy of support through evaluation using the Foundation's intellectual merit and broader impacts review criteria.