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Breakfast Session: Wage Structure, Covenants Not to Compete, and Nonwage Benefits

Paper Session

Saturday, Jan. 4, 2020 8:00 AM - 10:00 AM (PDT)

Manchester Grand Hyatt, Harbor F
Hosted By: Labor and Employment Relations Association
  • Chair: Erica Groshen, Cornell University

Outside Options in the Labor Market

Oren Danieli
,
Tel Aviv University
Sydnee Caldwell
,
Microsoft Research

Abstract

This paper develops a method to estimate the outside employment opportunities available to each worker, and to assess the impact of these outside options on wage inequality. We outline a matching model with two-sided heterogeneity, from which we derive a sufficient statistic, the "outside options index" (OOI), that captures the effect of outside options on wages, holding productivity constant. This OOI uses the cross-sectional concentration of similar workers across job types to quantify the availability of outside options as a function of workers' commuting or moving costs, preferences, and skills. Higher concentration in a narrower range of job types implies lower OOI and higher dispersion across a wide variety of job types corresponds to higher OOI. We use administrative data to estimate the OOI for every worker in a representative sample of the German workforce. We estimate the elasticity between the OOI and wages using two sources of quasi-random variation in the OOI, holding workers' productivity constant: the introduction of high-speed commuter rail stations, and a shift-share ("Bartik") instrument. Using this elasticity and the observed distribution of options, we find that differences in options explain 30% of the gender wage gap, 88% of the citizen-non-citizen wage gap, and 25% of the premium for higher education. Differences in options between genders and education groups are driven mostly by differences in the implicit costs of commuting and moving.

The Long-Run Impact of Temporary Disability Insurance on Social Security Disability Insurance Claims (SSDI) in the United States

Michael Carr
,
University of Massachusetts-Boston
Randy Albelda
,
University of Massachusetts-Boston
Emily Wiemers
,
University of Massachusetts-Boston

Abstract

Workers facing illness or injury often require time off work to recover or engage in treatment before returning to work. However, access to temporary paid medical leave in the United States is limited. In 2017, only 72% of workers had access to employer-sponsored paid sick leave and 39% had access to short-term disability leave. Only five states provide access to non-employer based Temporary Disability Insurance (TDI) programs.

Workers face both short- and long-run employment consequences of adverse health conditions that are likely exacerbated by the lack of access to temporary paid medical leave for a work-limiting disability. Lack of temporary paid medical leave may also affect long-run employment outcomes through the use of the US federal disability program, Social Security Disability Insurance (SSDI), which restricts labor force participation even during the application process, and discourages returning to the labor force if awarded.

In this paper, we investigate the linkage between the availability of TDI and the likelihood of applying for and/or receiving SSDI over one's working life, in addition medium- and longer-run measures of employment and earnings stability. Our identification strategy relies on variation in access to TDI between workers in New Jersey, Rhode Island, and California versus similar workers in other states. Specifically, we propose to use difference-in-differences and synthetic control methods to compare individuals with and without work-limiting disabilities in TDI and non-TDI states. We will rely on administrative data from the Master Benefits Records and Detailed Earnings Records linked to the Survey of Income and Program Participation, which provide demographic characteristics from the SIPP survey with lifetime administrative benefits receipt and earnings histories. Together, the data allow us to link work-limiting disabilities and access to TDI in a given year, to employment outcomes and SSDI applications/receipt that may occur many years later.

Locked In? The Enforceability of Covenants Not to Compete and the Careers of High-Tech Workers

Natarajan Balasubramanian
,
Syracuse University
Jin Woo Chang
,
University of Michigan
Mariko Sakakibara
,
University of California-Los Angeles
Jagadeesh Sivadasan
,
University of Michigan
Evan Starr
,
University of Maryland

Abstract

We study the relationship between the enforceability of covenants not to compete (CNCs) and employee mobility and wages. We exploit a 2015 CNC ban for technology workers in Hawaii and find that this ban increased mobility by 11% and new-hire wages by 4%. We supplement the Hawaii evaluation with a cross-state analysis using matched employer-employee data. We find that technology workers starting a job in an average-enforceability state have about 8% fewer jobs and 4.6% lower cumulative earnings relative to equivalent workers starting in a non-enforcing state, after eight years. These results are consistent with CNC enforceability increasing monopsony power.
Discussant(s)
Ioana Elena Marinescu
,
University of Pennsylvania
Hye Jin Rho
,
Massachusetts Institute of Technology
Yulya Truskinsovsky
,
Wayne State University
JEL Classifications
  • J3 - Wages, Compensation, and Labor Costs
  • J0 - General