Dissertation

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 Low-Educated Workers in the U.S. and Canada:

Essays in Job Mobility and Self-Sufficiency

 

My dissertation is focused on the labor market dynamics of low-educated, low-wage workers in the U.S. and in Canada.  It is broken into three parts coinciding with the following three chapters:

  1. Are Low-educated Workers Disproportionately Affected by a Change in the Minimum Wage?
  2. Stepping Stone Jobs:  Theory and Evidence (with Peter Gottschalk)
  3. Do Earnings Subsidies Affect the Choice of Jobs?  The Impact of SSP Subsidies on Wage Growth (with Peter Gottschalk)

Click here for pdf version of abstracts:

Are Low-educated Workers Disproportionately Affected by a Change in the Minimum Wage?

Abstract:  Does a rise in the minimum wage prompt employers to hire a more educated workforce?  Conventional wisdom says “yes”—a larger supply of workers affords employers an opportunity to pick the most educated workers who are the most productive.  This paper argues that an increase in the minimum wage need not lead to more-educated workers displacing less-educated workers since higher education need not imply higher productivity in the minimum wage sector.  In fact, the reverse may be true if being better educated is associated with a distaste for minimum wage work, and such distaste is associated with lower productivity in that work.  I present an analytical model that shows that an increase in the minimum wage need not lead to a displacement of minimum wage workers.

 

My empirical results from the Survey of Income and Program Participation (SIPP) indicate that, for males, the conventional wisdom appears to hold—higher minimum wages are associated with a better-educated male workforce.  But for females, the conventional wisdom does not hold; there is little change in their educational mix.  Further, low-educated females are more likely than high-educated females to move from unemployment to minimum wage jobs after a minimum wage increase—a result that runs directly counter to conventional wisdom.

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Stepping Stone Jobs:  Theory and Evidence

(with Peter Gottschalk)

Boston College Working Paper #427

Abstract:  This paper explores the wage and job dynamics of less-skilled workers by estimating a structural model in which agents choose among jobs that differ in initial wage and wage growth.  The model also formalizes the intuitive notion that some of these jobs offer "stepping stones" to better jobs.  The estimated model assumes that job offers consist of three attributes: an initial wage, an expected wage growth, and an indicator of the distibution from which future offers will come.  We derive the conditions under which agents accept these offers and the effect of non-economic job separations on the acceptance decision.  This model shows that the probability of leaving an employer depends both on the slope and the intercept of the current and offered jobs and the probability of gaining access to the dominant wage offer distribution.

We use the SIPP to estimate this model, which allows us to recover parameters of the wage offer distributions and the probability that a job is a stepping stone job.  Our empirical work indicates that wage offer distributions vary systematically with the slope and intercept of wages in the current job and that there is a non-zero probability of being offered a stepping stone job.

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Do Earnings Subsidies Affect the Choice of Jobs?  The Impact of SSP Subsidies on Wage Growth

(with Peter Gottschalk)

Boston College Working Paper #498

Abstract:  Previous studies of wage subsidies have focused on their effect on the decision of whether or not to work.  This paper expands the focus by asking whether wage subsidies can affect the type of job that is chosen.  We provide an analytical framework that identifies the key causal links between earnings subsidies and both within- and between-job wage growth.  This framework highlights the importance of the form of the subsidy on the decision about the type of job to accept.  We find that the subsidy will lead participants to place a higher value on jobs with wage growth if the relationship between pre- and post-subsidy earnings is convex, but the subsidy is predicted to have no effect on within-job wage growth if the transformation is linear.  The subsidy is predicted to affect between-job wage growth, but the direction of the effect can not be signed as it relies on two opposing forces: (1) an increase in on-the-job search, which lowers the reservation wage and increases between-job wage growth; and (2) an increase in those who stop searching altogether, which lowers the mean acceptable offer as well as between-job wage growth.

 

We use experimental data collected as part of the Self-Sufficiency Project (SSP) to measure the impact of this particular subsidy on wage growth.  We find no statistical difference between experimentals and controls in within-job wage growth, which is consistent with our theoretical results since, in the effective range, post-subsidy earnings are a linear function of pre-subsidy earnings.  Between-job wage growth is, however, significantly larger for experimentals than controls.  We conclude that this wage subsidy does not affect wage growth in the job that is chosen, but does encourage transitions to jobs with higher starting wages.

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connollh@bc.edu