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Title: Job Search Under Low Pay, Low Security, and High Unemployment

Citation Type: Miscellaneous

Publication Year: 2022

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Abstract: How is job loss distributed in an unexpected downturn, what are the equity consequences, and how do policy responses affect worker welfare? After demonstrating two novel empirical patterns relating job loss risk to earnings, I construct and estimate a search model with heterogeneous job termination rates to explain the prevailing dynamics, and then use it to evaluate the employment and consumption impact of large-scale transfers, unemployment insurance, and an earnings subsidy during a simulated downturn. Transfers have a minimal employment effect unless the shock also reduces savings. Raising unemployment benefits by 30% leads to a 0.6 point increase in the unemployment rate. Adding an earnings subsidy to unemployment benefits raises employment by 7 percentage points at a 23% lower level of inequality, yet increases costs by only 16-30%. The tradeoff is lower employment at better paying jobs versus higher consumption at subsidized low-wage jobs. In contrast to a compensating differentials framework, the model shows that lower earners tend to be more at risk for layoffs, and that this effect is stronger following a negative aggregate shock. Following a simulated shock, mean consumption falls by 5% yet consumption at the 10th percentile drops by 16%.

Url: https://www.dropbox.com/s/mg5ojdj8vfb0jvg/Abrahams_JMP.pdf?dl=0

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Authors: Abrahams, Scott

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Data Collections: IPUMS CPS

Topics: Labor Force and Occupational Structure

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