Decomposing the year-to-year changes in the earnings distribution from 2004 to 2013, we analyze the role of the employer in explaining earnings inequality in the United States. Movements between the bottom, middle, and top involve 20.5 million workers each year. Another 19.9 million move between employment and nonemployment. There are large gains from working at a top-paying firm for all skill types. Working for a high-paying firm produces benefits today, through higher earnings, that persist through an increase in the probability of upward mobility. High-paying firms facilitate moving workers to the top of the distribution and keeping them there.

In the past 30 years, wage inequality has increased steeply while real minimum wages have fallen. This paper demonstrates that a general equilibrium model with endogenous skill choice is required to correctly evaluate the implications of minimum wage changes. The minimum wage not only truncates the wage distribution but also affects skill prices and therefore changes the incentives that people face when making educational decisions. The calibrated model suggests—in line with recent empirical literature—that even though minimum wages affect the bottom end of the wage distribution more, their impact on the top end is significant as well.

The employment to population rate of high school–aged youth has fallen by about 20 percentage points since the late 1980s. One potential explanation is increased competition from substitutable labor, such as immigrants. I demonstrate that the increase in the population of less educated immigrants has had a considerably more negative effect on employment outcomes for native youth than for native adults. At least two factors are at work: there is greater overlap between the jobs that youth and less educated adult immigrants traditionally do, and youth labor supply appears more responsive to immigration-induced wage changes.

Estimated negative substitution effects on work hours question the empirical validity of the classical labor supply model. Estimates are reconciled by allowing a dual choice of hours and effort for piecerate workers. In such a model, these negative substitution effects result from substituting on‐ and off‐the‐job leisure. We test our model using controlled experimentation on human subjects. These experiments, while not naturally occurring environments, represent real economic choices and can generate data unavailable elsewhere (e.g., effort data). The results support our model, and they have implications both for labor management and for empirical research focusing only on the hours choice.

There are persistent differences in self-reported subjective well-being across US metropolitan areas, and residents of declining cities appear less happy than others. Yet some people continue to move to these areas, and newer residents appear to be as unhappy as longer-term residents. While historical data on happiness are limited, the available facts suggest that cities that are now declining were also unhappy in their more prosperous past. These facts support the view that individuals do not maximize happiness alone but include it in the utility function along with other arguments. People may trade off happiness against other competing objectives.

There are two obvious possibilities that can account for the rise in productivity during recent recessions. The first is that the decline in the workforce was not random, and that the average worker was of higher quality during the recession than in the preceding period. The second is that each worker produced more while holding worker quality constant. We call the second effect, "making do with less," that is, getting more effort from fewer workers. Using data spanning June 2006 to May 2010 on individual worker productivity from a large firm, it is possible to measure the increase in productivity due to effort and sorting. For this firm, the second effect-that workers' effort increases-dominates the first effect-that the composition of the workforce differs over the business cycle.

Being hired into a job depends not only on one’s own skill but also on that of other applicants. When another able applicant applies, a well-suited worker may be forced into unemployment or into accepting an inferior job. A model of this process defines over- and underqualification and provides predictions on its prevalence and on the wages of mismatched workers. It also implies that unemployment is concentrated among the least skilled workers, while vacancies are concentrated among high-skilled jobs. Four data sets are used to confirm the implications and establish that the hiring probability is low when competing applicants are able.

Using 1979–2012 CPS data for the United States and 1975–2012 NES data for Great Britain, we study wage behavior in both countries, with particular attention to the Great Recession. Real wages are procyclical in both countries, but the procyclicality of real wages varies across recessions, and does so differently between the two countries, in ways that defy simple explanations. We devote particular attention to the hypothesis that downward nominal wage rigidity plays an important role in cyclical employment and unemployment fluctuations. We conclude that downward wage rigidity may be less binding and have lesser allocative consequences than is often supposed.

We examine the relationship between income volatility and life expectancy in mid-sized U.S. commuting zones between 2006 and 2014. We use a commercial dataset, InfoUSA, to measure income volatility which we link to estimates of life expectancy by gender, county, race, and income. We find that higher income volatility in a county is associated with lower life expectancy, but only at the bottom of the income distribution and primarily for non-Hispanic Whites. Though we cannot extrapolate our findings to individual-level relationships, we do link them to existing literatures on place-based differences in mortality and the relationship between volatility and health.

We propose a model of intergenerational transmission of education wherein children belong to either highly educated or low-educated families. Children choose the intensity of their social activities, while parents decide how much educational effort to exert. Using Add Health data, we find that, on average, children’s homophily acts as a complement to the educational effort of highly educated parents but as a substitute for the educational effort of low-educated parents. We also find that policies that subsidize kids’ socialization efforts can backfire for low-educated students because they tend to increase their interactions with other low-educated students.