Knowledge that Transforms

We survey unemployment insurance (UI) in the United States and provide new evidence on the UI payroll tax. Most UI receipt is due to firms that pay part of the UI costs of their layoffs, but weak experience rating leads most firms to pay considerably less than the full costs. Industries consistently receiving subsidies from the UI system are construction, manufacturing, and mining. Finally, a large fraction of layoffs resulting in payment of UI are made by firms that are not charged for the costs of the claim because they have employed the individual for less than 2 quarters.

Neoclassical wage theory is based on the premise that a worker's utility is based on his own wage and his own hours of work, without reference to the wages and hours of others. This article reviews anecdotal evidence that the wages of others are a powerful force in determining worker satisfaction, such that utility goes down when the wages of others go up. The resulting comparisons are a powerful force in determining wage structure, but do not exclude ultimate effect of neoclassical wage determinants.

Researchers agree that household equivalence scales are intended to measure the variation in income needed to bring households of different composition to the same welfare level. Researchers do not agree, however, about how the term "household welfare" is to be defined. This article traces the historical and philosophical development of three distinct definitions. When the conceptual bases of several popular methods for the estimation of equivalence scales are explored, it becomes clear that advances in theoretical rigor have not always worked to bring the literature closer to answering questions of policy concern.

This study tests the efficiency wage hypothesis by estimating wage and quit equations with data from the Employment Opportunity Pilot Project survey of firms. An efficiency wage model is derived that predicts effects of turnover costs and unemployment on wages as functions of first and second derivatives from the quit equation. The model is tested by examining the relationships between the coefficients in the wage and quit equations; the results are generally favorable to efficiency wage theory. Other important findings are that firm characteristics raising workers' productivity tend to raise wages and that a rise in turnover costs reduces quits.

This article examines the job-search methods of jobless workers and emphasizes sample selectivity in choice of job-search strategies (especially use of public employment agencies). Longitudinal data from the Labour Force Survey of Canada for 1981, 1983, and 1986 indicate that job-search methods change with the business cycle and that many people find jobs without any reported search. The determinants of job-search success also vary substantially over the business cycle, implying a substantial social return to public employment agencies at the 1983 trough of the recession but no noticeable benefits when aggregate unemployment is relatively low.

This article reports on an empirical analysis of the relationships between alcoholism and income and working. We show that the relationships between alcoholism and labor market success have important age or life-cycle dimensions. We present evidence that alcoholism may affect income more by restricting labor market participation than by affecting the wages of workers. Finally, we demonstrate that the effects of alcoholism on earnings depend on the extent to which one controls for other covariates associated with alcoholism; as such, we suggest that there may be important indirect as well as direct effects of alcoholism on labor market success.

Over the 1980s, there were sharp increases in the return to schooling estimated with conventional wage regressions. The authors explore whether the relationship between ability and schooling changed over this period in ways that would have increased the schooling coefficient in these regressions. Their empirical results reject the hypothesis that an increase in the bias of the schooling coefficient, due to a change in the relationship between ability and schooling, has contributed to observed increases in the return to schooling. The authors also find that the increase in the schooling return has occurred for workers with relatively high levels of academic ability. Copyright 1993 by University of Chicago Press.

According to human capital theory, technological change will influence the retirement decisions of older workers in two ways. First, workers in industries with high rates of technological change will retire later if there is a net positive correlation between technological change and on-the-job training. Second, an unexpected change in the rate of technological change will induce older workers to retire sooner because the required amount of retraining will be an unattractive investment. We matched industry data on productivity growth and occupational data on required training with data from the National Longitudinal Surveys of Older Men to test these hypotheses. Our results support both hypotheses.

This article examines the resource allocations of parents in the form of both shared residence with and financial transfers to their young adult sons. Based on an overlapping generations model incorporating a game between parents and adult children, estimates of the determinants of such transfers are obtained from the kinship-linked cohorts of the National Longitudinal Surveys. The estimates suggest that both types of parental assistance are as important as governmental transfers in supporting young men and are responsive to the current and anticipated earnings of their offspring, suggesting that young men cannot adequately smooth their consumption without parental help.

This article uses a two-industry model of unemployment duration and job search to estimate rates of transition of displaced workers from unemployment to employment, distinguishing between employment in a worker's previous industry and in other industries. The competing-risks model allows inferences about search strategies to be drawn from data concerning employment outcomes and allows tests of some fundamental implications of search theory. There is evidence that improvements in the prospects for employment in their previous industry induce displaced workers to reduce search intensity or increase reservation wages in other industries.