Michal Myck

Dynamics of health and labor market risks.

While there is little doubt that the probability of poor health increases with age, and that less healthy people face a more difficult situation on the labor market, the precise relationship between facing the risks of health deterioration and labor market instability is not well understood. Using 12 years of data from the German Socio-Economic Panel we study the nature of the relationship between poor health and non-employment on a sample of German men aged 30-59. We propose a joint model of health and labor market risks which identifies the mechanism through which poor health contributes to the probability of being jobless and vice versa. We find an important role of unobserved heterogeneity and evidence for correlation in the unobservable characteristics determining the two processes. The results also show strong persistence in the dynamics of health and labor market risks.

Apply with Caution: Introducing UK-Style In-Work Support in Germany

Estimates of the labour supply effects of recent UK reforms in the area of direct taxes and benefits show that policy can have a significant influence on the level of employment. We confirm this in a simulation of an in-work support system introduced into the German tax and benefit system. Our simulation results suggest that introducing in-work tax credits in Germany would increase the employment of single individuals by over 100,000 but it would simultaneously reduce the labour supply of individuals in couples by about 70,000. We find that tax credits would cause significant declines of labour supply among both women and men in two-earner couples. The outcome derived for men in this study is especially important as it is markedly different from all results found for the UK, where the overall response for men has always been positive. Our estimation results call for a high degree of caution insofar as ‘importing’ UK-style tax credits into Germany is concerned. In-work support based on family income would reinforce the existing work disincentives for secondary earners through joint income taxation, reducing the employment levels of both men and women living in couples.

Poverty and transitions in health in later life

Using a sample of Europeans aged 50+ from 12 countries in the Survey of Health, Ageing and Retirement in Europe (SHARE), we analyse the role of poor material conditions as a determinant of changes in health over a four- to five-year period. We find that poverty defined with respect to relative income has no effect on changes in health. However, broader measures of poor material conditions, such as subjective poverty or low wealth, significantly increase the probability of transition to poor health among the healthy and reduce the chance of recovery from poor health over the time interval analysed. In addition to this, the subjective measure of poverty has a significant effect on mortality, increasing it by 65% among men and by 68% among those aged 50-64. Material conditions affect health among older people. We suggest that if attempts to reduce poverty in later life and corresponding policy targets are to focus on the relevant measures, they should take into account broader definitions of poverty than those based only on relative incomes.

Employment Fluctuations and Dynamics of the Aggregate Average Wage in Poland 1996-2003

The aggregate average wage is often used as an indicator of economic performance and welfare, and as such often serves as a benchmark for changes in the generosity of public transfers and for wage negotiations. Yet if economies experience a high degree of (nonrandom) fluctuation in employment the composition of the employed population will have a considerable effect on the computed average. In this paper we demonstrate the extent of this problem using data for Poland for the period 1996-2003. During these years employment in Poland fell from 51.2% to 44.2% and most of it occurred between the end of 1998 and the end of 2002. We show that about a quarter of the growth in the average wage during this period could be attributed purely to changes in employment.

For Some Mothers More than Others: How Children Matter for Labour Market Outcomes When Both Fertility and Female Employment are Low

We estimate the causal relationship between family size and labour market outcomes for families in low fertility and low female employment regime. Family size is instrumented using twinning and gender composition of the first two children. Among families with at least one child we identify the average causal effect of an additional child on mother’s employment to be -7.1 percentage points. However, we find no effect of additional children on female employment among families with two or more kids. Heterogeneity analysis suggests no causal effects of fertility on female employment among mothers with less than college education and older mothers (born before 1978). Furthermore, we find evidence for the interaction of family size with maternal education and age. An unintuitive feature of our finding is that we identify a positive bias of OLS estimates for highly educated mothers and for mothers born after 1977.

Dynamics of Earnings and Hourly Wages in Germany

There is by now a lot of evidence showing a sharp increase in cross-sectional wage and earnings inequality during the 2000s in Germany. Our study is the first to decompose this cross-sectional variance into its permanent and transitory parts for years beyond 2000. Using data from the German Socio-Economic Panel on fulltime working individuals for years of 1994 to 2006, we do not find unambiguous empirical support for the frequent claims that recent increases in inequality have been driven mainly by permanent disparities. From 1994 on, permanent inequality increases continuously, peaks in 2001 but then declines in subsequent years. Interestingly the decline in the permanent fraction of inequality occurs at the time of most rapid increases in cross-sectional inequality. It seems therefore that it is primarily the temporary and not the permanent component which has driven the strong expansion of cross-sectional inequality during the 2000s in Germany.

Financial support for families with children and its trade-offs: balancing redistribution and parental work incentives

Abstract Financial support for families with children implies inherent trade-offs some of which are less obvious than others. In the end these trade-offs determine the effectiveness of policy with respect to the material situation of families and employment of their parents. We analyse several kinds of trade-offs involved using a careful selection of potential changes to the system of financial support for families with children. We focus on: 1) the trade-off between redistribution of income to poorer households and improving work incentives, 2) the trade-off between improving work incentives for first and for second earners in couples, 3) the tradeoff between improving work incentives for those facing strong and weak incentives in the baseline system. The exercise is conducted on data from Poland, a country characterized by high levels of child poverty, low female employment and one of the lowest fertility rates in Europe. We demonstrate the complexity of potential consequences of family support policy and stress the need for well-defined policy goals and careful analysis ahead of any reform.

Persecution in Central Europe and Its Consequences on the Lives of SHARE Respondents

The analysis of life history of individuals living in Europe would not be accurate and complete without considering the major historical events of the twentieth century. Many respondents in the SHARE sample have lived through periods of Nazi or Soviet occupation, direct World War II experience, the post-war period, and in the case of the Czech Republic, East Germany and Poland, through several decades of communism. In this chapter we provide the first results on effects these historical events have had on the life of individuals and their families in the SHARE sample.

Financial incentives to work in the context of a complex reform package and growing wages: the Polish experience 2005–2011

We examine the consequences of changes in work incentives in Poland between 2005 and 2011 resulting from a complex tax and benefit reform package and substantial real wage growth. While marginal and participation tax rates (PTRs) in the majority of analysed cases fall as a result of the introduced reforms, the conclusions from looking at replacement rates (RRs) for the population eligible for means tested benefits are generally different. These suggest that despite significant tax giveaways incentives on the labour market weakened for families with children and for those eligible to safety net benefits. Yet despite these negative policy implications, we show that work incentives improved substantially over the period due to significant real wage growth. When analysing the effect of the reforms on financial incentives to work, we often find conflicting conclusions when using the PTRs and RRs to reflect financial attractiveness of employment. This is not necessarily surprising, but serves as a note of caution on the use of each of them independently.

For Some Mothers More than Others

We estimate the effect of family size on female labour supply using data from Poland and instrumenting for family size with twinning at first and second birth. To the best of our knowledge, this is the first study to causally address this relationship in a post‐communist country. We identify the average causal effect of an additional child on mothers employment to be −7.0 pp, but we do not find significant effects of additional children on female employment among families with two or more children. Furthermore, we identify a positive bias of OLS in the estimates among highly educated mothers and those from younger cohorts.