Using US Census employer-employee matched data, I show that employer financial distress accelerates the exit of employees to found start-ups. This effect is particularly evident when distressed firms are less able to enforce contracts restricting employee mobility into competing firms. Entrepreneurs exiting financially distressed employers earn higher wages prior to the exit and after founding start-ups, compared to entrepreneurs exiting non-distressed firms. Consistent with distressed firms losing higher-quality workers, their start-ups have higher average employment and payroll growth. The results suggest that the social costs of distress might be lower than the private costs to financially distressed firms.
An Aging Dynamo: Demographic Change and the Decline of Entrepreneurial Activity in the United States by Joseph Victor Kopecky :: SSRNFebruary 7, 2017
The rate of new business startups has fallen drastically over the last thirty-five years, accelerating greatly since the year 2000. Other measures of business dynamism such as the job reallocation rate are consistent with this trend, raising serious concern given the importance that young, high growth, firms have in employment. The timing of this decline coincides with the start of a steady increase in the age of the United States workforce which has accelerated along with the aging of the baby boomers. I document an empirical ‘hump shape’ between an individual’s propensity to select into entrepreneurship as they age. I then construct life cycle model of entrepreneurial choice that accounts for this hump shape, and study a number of channels that link demographic forces to entrepreneurial selection. I find that demographic channels can account for a large portion of the recent decline in startup activity and predict a continued decline as the pool of potential entrepreneurs continues to age. I conclude with a discussion of the potential policy tools that will affect individual’s life cycle risk attitudes and the predicted effects that such measures will have on the rate of new business startups.
Estimating the Employment Effects of Recent Minimum Wage Changes: Early Evidence, an Interpretative Framework, and a Pre-Commitment to Future Analysis by Jeffrey P. Clemens, Michael R. Strain :: SSRNFebruary 2, 2017
This paper presents early evidence on the employment effects of state minimum wage increases enacted between January 2013 and January 2015, and offers an interpretative framework to understand why it is of interest to study recent changes in isolation. Given the ongoing transitions of many states’ minimum wage rates, we also set the stage for a pre-committed analysis of the minimum wage changes scheduled for coming years. Through 2015, we estimate that employment among young adults and young individuals with less than a completed high school education expanded modestly less quickly in states that enacted one-time or multi-phase statutory minimum wage increases than in states that enacted no minimum wage increases. Across the specifications we implement and the samples we analyze, many of our estimates are statistically indistinguishable from zero. Data on the longer-run effects of this period’s minimum wage changes will be essential for more fully assessing these changes’ effects and for drawing strong conclusions regarding how minimum wage increases affect employment in this decade’s institutional and economic environment. As data become available for the full 2016 through 2019 calendar years, we will execute and report the results of analyses that follow the road map this paper develops.
Source: Estimating the Employment Effects of Recent Minimum Wage Changes: Early Evidence, an Interpretative Framework, and a Pre-Commitment to Future Analysis by Jeffrey P. Clemens, Michael R. Strain :: SSRN
From 2011 through 2013, employment in Obamacare expansion states was growing roughly 1.89 percent per year. But since those states expanded Medicaid, employment growth slowed slightly to 1.85 percent. Instead of creating the tens of thousands of new jobs promised by Obamacare advocates, employment growth has actually declined.Meanwhile, employment in non-expansion states is growing faster than in non-expansion states and has actually accelerated over the last two years.
Research from the American Action Forum (AAF) finds regulations from the Affordable Care Act (ACA) are driving up health care premiums and are costing small business employees at least $19 billion in lost wages annually. These figures varied by state, but in 2015 the ACA cost year-round workers $2,095, $2,134, and $2,260 in Ohio, New York, and North Dakota, respectively. Premium increases, a prospect regulators predicted when issuing the first ACA regulations, also significantly diminished the number of business establishments and jobs nationwide. Across the country, small businesses (20-99 workers) lost 295,030 jobs, 10,130 business establishments, and $4.7 billion in total wage earnings. Florida lost 17,950 jobs; Ohio lost 19,000; Pennsylvania lost 15,680; and Texas lost 28,010 jobs due to higher sensitivity to rising health care premiums and the ACA.
Disappearing Routine Jobs: Who, How, and Why? by Guido Matias Cortes, Nir Jaimovich, Henry Siu :: SSRNJanuary 6, 2017
We study the deterioration of employment in middle-wage, routine occupations in the United States in the last 35 years. The decline is primarily driven by changes in the propensity to work in routine jobs for individuals from a small set of demographic groups. These same groups account for a substantial fraction of both the increase in non-employment and employment in low-wage, non-routine manual occupations observed during the same time period. We analyze a general neoclassical model of the labor market featuring endogenous participation and occupation choice. We show that in response to an increase in automation technology, the model embodies an important tradeoff between reallocating employment across occupations and reallocation of workers towards non-employment. Quantitatively, we find that advances in automation technology on their own account for a relatively small portion of the joint decline in routine employment and associated rise in non-routine manual employment and non-employment.
The Affordable Care Act expanded Medicaid eligibility to adults who are below 138 percent of the federal poverty level. There is little to no evidence on the employment effects of the Medicaid expansion in 2014. This paper investigates the pre/post labor market implications of Medicaid expansion with a population near the eligibility cutoff. Using an exogenous variation at the eligibility cutoff, I find a large reduction in part-time employment (<35 Hrs) relative to full-time employment (≥35 Hrs). The reduction in part-time employment (<35 Hrs) suggests that most of the individuals drop out of the labor force, although some transition into full-time employment (≥35 Hrs) or unemployment. The employment transitions imply that labor supply is flexible after being eligible for Medicaid. The labor supply flexibility is also observed for females, middle-aged adults (49-64 years of age), never-married adults and high-school dropouts. When difference-in-differences (DD) model is used for the whole population, the estimates are similar to those in the literature that find no employment effects. The DD model, however, fails to incorporate eligibility measures and also includes adults who are less likely to have Medicaid.