Working Papers

Declining Teen Employment: Causes and Consequences with Jacob Wright 

Teen employment in the United States has fallen by more than 50\% over the last 30 years. We provide causal evidence attributing the majority of this decline to crowding out by adults. To determine the macroeconomic consequences of this decline, we begin by causally estimating the returns to teen employment. We find that teens who worked while in high school and did not attend university earn significantly higher wages and face lower unemployment rates later in life. Next, we develop a general equilibrium model and calibrate it to match our causal estimates. The model features adolescents choosing between accumulating human capital on-the-job or in school, and adults choosing teen vs. non-teen occupations. Using this framework, we simulate a shock to adult occupations that displaces teen workers. Teens crowded out by adults experience significant welfare losses, mostly due to a loss of work experience. Increased college attendance mitigates these negative effects. A decomposition exercise reveals that minimum wage levels play a key role in transmitting the impact of increased adult competition into falling teen employment. Finally, we show that education policies, such as optional vocational training are effective at reducing adverse effects for teens who have been crowded out of the labor market.

Automation, Worker Reallocation, and Welfare Implications 

The last 40 years have seen the emergence of labor replacing technologies, mostly displacing work in “routine-task” intensive occupations. Routine occupations typically lie in the middle of the wage distribution and make up a large part of the US labor force. This has led to public discussions about appropriate policies meant to help the adversely affected. To evaluate the macroeconomic implications of these policies, I develop a general equilibrium heterogeneous agent model that incorporates the empirically relevant margins of adjustment for workers: education, occupation and labor force participation choice. The model predicts heterogeneous welfare effects of automation, with workers that remain employed in routine jobs throughout the automation period suffering the biggest welfare losses. The model also emphasizes that welfare inequality is rising over time due to automation. Additionally, I contribute novel observations about the timing of worker reallocation. It takes new cohorts of workers to move labor from routine work to non-automated occupations (low skill and high skill).