Vulnerable Workers: Three Essays

This section establishes the core concept of 'vulnerable workers,' defining them as individuals experiencing a recent shock impacting their labor market prospects, leading to substantial and prolonged earnings losses. The research focuses on displaced workers—those losing jobs due to firm or plant closures—as a key group within this vulnerable population. The analysis underscores that these average earnings losses conceal significant variation among individuals. Existing research, while noting the impact of national unemployment rates on post-displacement earnings, overlooks the crucial role of occupational and industrial conditions. This research aims to determine the relative impact of occupational versus industrial conditions on joblessness duration and earnings changes after job displacement. A significant portion of the analysis focuses on developing a reliable measure of occupation-specific growth rates using a shift-share method, acknowledging and addressing inherent limitations in existing data sources like the Bureau of Labor Statistics (BLS) Occupational Employment Statistics program, which uses three-year sampling cycles making short-term fluctuations difficult to track.

A key finding of the study is that the duration of joblessness for displaced workers is significantly more dependent on conditions within their specific occupation than within their industry. This implies that a worker's vulnerability is more closely linked to their possessed skills and less to the sector or type of goods previously produced. This contrasts with earlier research that emphasized industry-level factors as the primary driver of post-displacement wage losses. The research uses a more granular occupational classification (324 Census occupation categories) compared to previous studies (e.g., Carrington, 1993, which used only 10), improving the accuracy and precision of the occupation growth rate measure. The researcher addresses potential methodological concerns, such as the non-independence of employment data in adjacent years and the influence of specific industries on occupation growth rates. Through a ‘leave-one-out’ approach, the study demonstrates the robustness of its findings, showing that occupation-specific growth rates are not driven by a single dominant industry. The research challenges the efficacy of policies focused solely on declining industries, emphasizing the importance of skill-based interventions.

This section delves into the specific methodological approaches used in the analysis of displaced workers. It details the challenges posed by existing data limitations, particularly the three-year sampling cycle of the Occupational Employment Statistics (OES) program, which prevents the capture of short-term employment fluctuations. To overcome this, the study employs a shift-share approach to calculate the occupation growth rate, leveraging state-level occupation-industry compositions alongside national industry growth rates. The study acknowledges and addresses potential biases in the chosen methodology, including the use of OES data for time series analysis and the potential correlation between industry characteristics and observable factors. The researcher explains how the regression model addresses the correlation between occupation and industry growth rates, and further examines the sensitivity of the results to different measures of the occupation growth rate, demonstrating the robustness of the core findings. The impact of right-censoring of observed durations in the analysis of joblessness duration is also addressed by including workers who have not yet been re-employed, taking into account a minimum duration of joblessness based on the reported year of displacement.

The study presents its findings on the effect of pre-displacement occupation growth rates on various labor market outcomes for displaced workers. While the occupation growth rate is not found to significantly affect the probability of working for pay after displacement, the findings reveal a significant negative relationship between occupation growth rates and both the duration of joblessness and changes in log earnings. This demonstrates that adverse labor market conditions in a worker's pre-displacement occupation have lasting negative consequences. The magnitude of the effect on earnings is comparable to the short-run impact of graduating during a recession. The results highlight the greater significance of occupation-specific human capital compared to firm-level effects in explaining displaced workers' earnings losses, and underscore that workers may not readily adapt to alternative work. The research extends existing literature (such as Carrington, 1993 and Neal, 1995) by using a more comprehensive dataset and providing evidence that the challenges faced by displaced workers are more occupation-specific than previously recognized. The study’s findings are consistent with Ebenstein et al. (2014), and offers insights for improving re-employment policies in the United States.

This section investigates the causal relationship between the benefit amount offered under California's Paid Family Leave (CA-PFL) program and several key outcomes for new mothers. The study employs a regression kink (RK) design, leveraging a kink in the CA-PFL benefit schedule where the benefit amount is capped at a maximum. By comparing outcomes for mothers with pre-leave earnings just above and below this threshold, researchers can isolate the impact of benefit amounts while controlling for other factors. The primary focus is on high-earning mothers, aiming to disentangle the effect of benefit generosity from other potentially confounding variables. A key finding is the lack of a significant effect of higher weekly benefit amounts on the duration of maternity leave. This surprising result contrasts with findings from other social insurance programs, suggesting a unique characteristic of the CA-PFL program or a distinctive response by high-earning mothers. The data used is administrative data from California, which allows for a more comprehensive analysis than previous studies that relied on survey data, which suffer from issues such as small sample sizes, measurement error, and missing information.

This section focuses on the labor market outcomes for mothers after their leave period, particularly their return to employment and their likelihood of returning to their pre-leave employers. The study finds no significant effect of higher benefit amounts on the overall probability of returning to employment after leave. However, the analysis reveals a notable positive effect of higher benefit amounts on returning to the pre-leave employer, conditional on returning to work. This suggests that the more generous wage replacement offered during leave might enhance worker morale, firm loyalty, or reduce the incentive to switch employers. This effect is intriguing, as it implies the CA-PFL benefit structure may not directly affect overall employment rates but can influence employer choice post-leave. The study acknowledges that the precise mechanisms underlying this result are not fully observable from the available data, but suggests potential interpretations based on existing economic models like efficiency wage models. These models could help explain why higher benefits during leave might encourage a preference to return to the original employer.

This subsection explores the predictive relationship between the benefit amount received during a mother's first leave and the likelihood of subsequent PFL claims. The research finds a statistically significant and positive relationship; a 10% increase in the initial benefit is linked to a 3-7% rise in the probability of another PFL claim within three years. This suggests that the generosity of the initial benefit positively influences future program use. The researchers posit two potential mechanisms for this observation. First, a higher benefit amount might lead to a greater chance of returning to the pre-leave employer, and returning to the original employer increases the likelihood of future claims as it streamlines the claim process and/or reinforces the employee's familiarity with the system. Second, a positive experience with a higher benefit level may influence subsequent program use, independent of the employer. The finding is consistent with similar patterns observed in other social insurance programs, reinforcing the idea that benefit generosity can shape future program participation.

This section addresses potential methodological concerns and biases, improving the reliability of the study's findings. The researchers investigate the potential influence of supplemental payments by employers (which might confound the results by reducing the effect of the kink in the benefit schedule) by analyzing subsamples where such payments are less likely to be prevalent: those who claimed benefits soon after implementation of CA-PFL (2005-2010) and those working in smaller firms. The results from these subsamples largely mirror the findings from the full sample, indicating that the main results are not driven by the presence of these supplemental payments. Additionally, permutation tests are conducted to address concerns about non-linearities in the relationship between outcomes and the benefit amount. These placebo kinks help ensure that the observed effects are not due to spurious relationships and that the results are robust to different model specifications. The study also compares the findings to existing research using difference-in-difference (DD) designs, which have their own limitations like small sample sizes.

This concluding section summarizes the key findings and discusses their implications for policy. The study highlights the limited access to paid family leave in the United States, contrasting the situation with that of other developed countries. The results reveal that, for high-earning mothers in California, increasing benefit amounts does not significantly extend leave duration but is positively associated with a return to the previous employer, and may increase subsequent program use. The study underscores the importance of understanding the role of monetary benefits during leave and the need for more research into the non-policy-driven factors that shape program take-up. The researchers demonstrate that while access to paid family leave programs is limited and unequal across different demographics and wage levels, firm culture and behavior play a substantial role in the ultimate take-up of such benefits. The findings suggest that fostering supportive workplace environments may be as important as adjusting benefit levels themselves in promoting equal access to paid family leave.

This section examines the connection between firm characteristics, specifically the employer earnings premium, and the utilization of short-term disability insurance (DI) and paid family leave (PFL) programs in California. The theoretical relationship is not straightforward, with potential arguments suggesting that either higher or lower premiums could be associated with greater take-up. Higher-premium firms might have workers facing higher opportunity costs of leave or greater access to private benefits, potentially crowding out public program use. Conversely, these firms might actively encourage public benefit take-up to reduce their costs or foster a more supportive workplace culture. The study uses administrative data from California to analyze the relationship, focusing on the claim rates for both DI and PFL programs in relation to the firm earnings premium. The analysis controls for firm size, industry, and year effects, as well as the percentage of female employees within each industry-year. The research directly addresses the significant gap in existing research on non-policy driven determinants of temporary social insurance take up, which is highly unequal and limited in the United States. The findings offer insights into the role of firm-specific factors beyond policy in shaping access to and use of social insurance benefits.

This section presents the empirical findings regarding the association between firm earnings premiums and claim rates for DI and PFL. A core finding is the robust positive relationship: a one-standard-deviation increase in the firm premium is linked to a 57% rise in the incidence of claims. This effect is consistent across both DI and PFL claims and applies similarly to both male and female employees. Importantly, the researchers find that the impact of the firm premium is most substantial for workers in the lower half of the firm's internal earnings distribution. This indicates that the influence of firm culture or practices on social insurance use is particularly pronounced for lower-earning employees within high-premium firms. While higher-premium firms show higher claim rates, they also display lower average leave durations and higher employee retention rates. This suggests a possible mechanism where supportive firm environments encourage benefit use without leading to significant increases in time away from work. This finding contrasts with previous research focusing primarily on the effects of policy levers (like wage replacement rates) on take-up rates, highlighting the significance of other firm characteristics.

This section addresses potential confounding factors and validates the robustness of the findings. The study acknowledges the possibility of sorting—the non-random assignment of workers to firms—which could bias the results. To mitigate this concern, the researchers conduct several tests. First, they explore the relationship between firm premiums and claims across different quantiles of the within-firm earnings distribution. The findings reveal that the firm premium's impact is strongest for lower-earning workers. This mitigates concerns that the results are driven only by the highest skilled workers taking advantage of the situation. Second, an industry-level analysis is performed to further investigate the impact of sorting. The results suggest that sorting is not driving the main findings. The analysis also examines different types of claims and acknowledges the difficulty of distinguishing effects due to firm culture from other potential mechanisms. The research further examines the effects of firm earnings premiums on leave duration and post-leave earnings, showing that the premium is positively associated with slightly higher earnings growth for those returning to the same firm, but is associated with substantial earnings losses for those who move to a different firm after taking leave. The study acknowledges the complex interrelation between firm characteristics, worker behavior, and social insurance utilization.

This section situates the study's contribution within the broader research on social insurance take-up, particularly concerning DI and PFL programs in the United States and internationally. Existing literature has primarily focused on the effects of policy changes (like benefit levels or duration) on take-up, often in the context of California's PFL program. This research expands upon this literature by highlighting the critical role of firm-specific factors, particularly the employer earnings premium. The findings challenge the notion that policy levers alone are sufficient to achieve equitable access to social insurance and underscore that firm culture and practices significantly influence benefit utilization. The strong and consistent positive association between firm earnings premiums and claim rates implies that improving access and take-up may involve interventions focused on enhancing workplace culture and information dissemination about public social insurance benefits. The study suggests that focusing on changes in firm behavior, rather than just policy levers, might offer a powerful tool for reducing inequality in the use of short-term social insurance programs. Previous work by Dahl et al. (2014) indicated that peer effects and employer information dissemination are important mechanisms, and this study corroborates those findings.