Bruce C. Fallick

Job-Hopping in Silicon Valley: Some Evidence Concerning the Micro-Foundations of a High Technology Cluster

Observers of Silicon Valleys computer cluster report that employees move rapidly between competing firms, but evidence supporting this claim is scarce. Job-hopping is important in computer clusters because it facilitates the reallocation of talent and resources toward firms with superior innovations. Using new data on labor mobility, we find higher rates of job-hopping for college-educated men in Silicon Valleys computer industry than in computer clusters located out of the state. Mobility rates in other California computer clusters are similar to Silicon Valleys, suggesting some role for features of California law that make noncompete agreements unenforceable. Consistent with our model of innovation, mobility rates outside computer industries are no higher in California than elsewhere.

The Minimum Wage and the Employment of Youth: Evidence from the Nlsy

Using panel data on individuals from the National Longitudinal Survey of Youth, we find that employed individuals who were affected by the increases in the federal minimum wage in 1979 and 1980 were about 3 percent less likely to be employed a year later, even after accounting for the fact that workers employed at the minimum wage may differ from their peers in unobserved ways.

The Recent Decline in the Labor Force Participation Rate and Its Implications for Potential Labor Supply

Figure 13 shows the participation rates, estimated trends, and fitted values of the model for teenagers (ages 16-19), young adults (20-24), prime-age adults (25-61), and older adults (62 and over), built up from the more detailed demographic groups included in the model. These aggregates highlight the relatively good fit of the model for the broad range of middle age groups and illustrate our concerns about the deviation of actual observations from the model predictions for the youngest and the oldest age groups. [FIGURE 13 OMITTED] For the 16-19 age group, the model appears to have captured the general trends and turning points in participation rates, although for teenage males there have been long stretches where the model prediction deviated from the data. Most recently, the model has expected participation rates to recover back toward their trends. In fact, actual rates have remained well below trend; although this finding represents a failure of the model, it does mitigate the concern that endpoint bias may be dragging down the estimated trend. Note, however, that for ages 20-24 the model exhibits much smaller errors, which suggests that the model residuals for the teenage groups have not tended to be carried through to older age categories as these cohorts age, and thus that the changes affecting recent cohorts of teens are age specific rather than cohort specific. For ages 25-61 the model fits well overall and is not surprised by the developments of the past few years. Notably, the model effectively captures the dramatic change in slope in the participation rate of prime-age women and the persistent downtrend in the participation rate of prime-age men. In contrast, the actual participation rates for both older men and older women have exceeded the model predictions in recent years. The model also missed actual outcomes fairly uniformly across the older age groups in some earlier periods (for example, 1985-86), suggesting that we may have omitted some salient influence on retirement decisions from the model. For example, the errors in the most recent few years could be related to sizable movements in asset valuations, although, as noted above, we did not find variables representing wealth to be significant in the model. Nevertheless, the large and growing size of this group suggests that these errors represent a substantial risk to our estimated trend. Model Projections and Alternative Simulations We can also use the model to project how the trend in labor force participation will develop in coming years. To do this we employ the following procedure. For birth-year cohorts age 16 or above in 2005, we hold the cohort effects constant at their last values and essentially age these cohorts along the last observed age profile. (47) For cohorts who had not yet entered the labor market by 2005 (so that we have no model estimate of their cohort effect), we assume that the cohort effect is constant at the average value of the last few cohorts and then age them along the last observed age profile. As figure 12 shows, the model projects that the trend in the aggregate labor force participation rate will fall further over the next ten years; indeed, the projected decline from 2005 to 2015 is more than 3 percentage points, which is comparable to the increase over the first ten years of our estimation period, when female participation was rising so rapidly. About 2 percentage points of this decline reflects the projected changes in the age distribution of the population associated with the aging of the baby-boom cohort, and the remainder is due to the models estimates of the trends in the age and cohort profiles over the next ten years. In constructing this projection of the trend, we assumed that the sizable recent model errors for teenagers and for the oldest age groups were not a manifestation of changes in the trend. However, an alternative approach would be to interpret the errors as suggestive of a recent change in the age profiles at those ages. …

Labor Force Participation: Recent Developments and Future Prospects

Since 2007, the labor force participation rate has fallen from about 66 percent to about 63 percent. The sources of this decline have been widely debated among academics and policymakers, with some arguing that the participation rate is depressed due to weak labor demand while others argue that the decline was inevitable due to structural forces such as the aging of the population. In this paper, we use a variety of approaches to assess reasons for the decline in participation. Although these approaches yield somewhat different estimates of the extent to which the recent decline in participation reflects cyclical weakness rather than structural factors, our overall assessment is that much - but not all - of the decline in the labor force participation rate since 2007 is structural in nature. As a result, while we see some of the current low level of the participation rate as indicative of labor market slack, we do not expect the participation rate to show a substantial increase from current levels as labor market conditions continue to improve.

The hiring of new labor by expanding industries

Abstract This paper documents a tendency for workers newly hired into relatively fast-growing industries to be drawn disproportionately from new entrants and reentrants to the labor force. This tendency should lengthen the unemployment of incumbent workers whose job loss is associated with sectoral shifts in the demand for labor. The tendency is explained by the prevalence of part-time work in the fast-growing industries and by the degree of unionization of the industries in which the incumbents previously worked. Surprisingly, older workers are more likely than younger workers to be part of an expanding industrys new labor force.

THE ENDOGENEITY OF ADVANCE NOTICE AND FEAR OF DESTRUCTIVE ATTRITION

This study simultaneously estimates the likelihoods that a worker receives advance notice of a plant closing and that a notified worker quits the job before its scheduled end. The author finds that fear of early attrition is a significant determinant of a firms decision to provide advance notice. Explicit consideration of employers concerns may significantly improve prediction of advance notice. Copyright 1994 by MIT Press.

Job-to-Job Flows and the Consequences of Job Separations

This paper extends the literature on the earnings losses of displaced workers to provide a more comprehensive picture of the earnings and employment outcomes for workers who separate. First, we compare workers who separate from distressed employers (presumably displaced workers) and those who separate from stable or growing employers. Second, we distinguish between workers who do and do not experience a spell of joblessness. Third, we examine the full distribution of earnings outcomes from separations - not the impact on only the average worker. We find that earnings outcomes depend much less on whether a job separation is associated with a distressed employer than on whether the separator experienced a jobless spell after the separation. Moreover, we find that workers separating from distressed firms are faster to find jobs at new employers than are other separators.

Unionization and Acquisitions

This article explores the question of whether unionization influences the decision of a firm to merge with another firm. The authors combine merger data, taken from COMPUSTAT, with firm-specific union data obtained from several sources. An econometric matching model allows them to isolate the effects of unionization on the probability that the firms studied will be involved in a merger. The authors find that unionization increases the likelihood that a firm will enter the acquisition market and that firms with similar union statuses tend to merge with one another. Copyright 1996 by University of Chicago Press.

Why Do Earnings Fall with Job Displacement

The earnings of workers are reduced for many years after being displaced from their jobs, and those workers and their families face increased risk of other problems as well. The ills suffered by displaced workers motivated several recent expansions of government programs, including the unemployment insurance system, and have spurred calls for wage insurance that would provide longerrun earnings replacement. However, while the magnitude of the losses is relatively clear, the theory of why displacement matters is scattered and somewhat undeveloped. Much of the policy discussion appears to interpret displacementinduced losses through the lens of specifi c human capital theory, and there is considerable empirical support for that model. But there are several other theories of why job displacement is costly. This paper reviews theories of costly job displacement and discusses their consistency with the available empirical evidence. We find that theories of human capital and matching are an important perspective on the losses of displaced workers, but we cannot rule out important roles for other theories, some of which suggest different policy responses.

Downward Nominal Wage Rigidity in the United States During and After the Great Recession

Rigidity in wages has long been thought to impede the functioning of labor markets. One recent strand of the research on wage flexibility in the United States and elsewhere has focused on the possibility of downward nominal wage rigidity and what implications such rigidity might have for the macroeconomy at low levels of inflation. The Great Recession of 2008-09, during which the unemployment rate topped 10 percent and price deflation was at times seen as a distinct possibility, along with the subsequent slow recovery and persistently low inflation, has added to the relevance of this line of inquiry. In this paper, we use establishment-level data from a nationally representative establishment-based compensation survey collected by the Bureau of Labor Statistics to investigate the extent to which downward nominal wage rigidity is present in U.S. labor markets. We use several distinct methods proposed in the literature to test for downward nominal wage rigidity, and to assess whether such rigidity is more severe at low rates of inflation and in the presence of negative economic shocks than in more normal economic times. Like earlier studies, we find evidence of a significant amount of downward nominal wage rigidity in the United States. We find no evidence that the high degree of labor market distress during the Great Recession reduced the amount of downward nominal wage rigidity and some evidence that operative rigidity may have increased during that period.